All language subtitles for 02-CPA & ROAS Analysis Tree

So how do you influence your
KPIs if you can't control them?

In this video, I'm going to
show you how the makeup of your

key metrics is made and how you
actually go about influencing them.

So first of all, most people will
be looking at cost per acquisition.

What is the makeup of
cost per acquisition?

There are only two components
that are used in the calculation

of cost per acquisition.

Really at the kind of influence, influence
level, it's the cost you are paying

per click and the conversion rate.

So just think about that.

There's just two metrics which
actually come in play when it comes to

calculating your cost per acquisition.

So the calculation here, as you can
see on the example on the right, is

your cost per click, divided by the
absolute number for your conversion rate.

So in this case, if our click, the
cost per click is two pound and three

pence, then I would do the calculation
2.03 divided by the 6% as absolute.

So 0.06.

Gives me my C p a, and in this
example is C P A is 34 pounds.

And when you kind of understand the
core of these two metrics and how

they come to play on your C P A, you
can better understand how you can

improve your cost per acquisition.

And this is what it's all about,
knowing how to actually go deeper and

influence your cost per acquisition.

So within this kind of equilibrium,
We can drop, we can try and

drop our cost per click.

We can try and increase our conversion
rate, and ideally we wanna do

both of these at the same time.

So what is the makeup
of your cost per click?

It's relevant score.

It's the competition in the
auction and competitors.

It's your bidding strategy.

It's the optimized pixel that
you're using in your website.

Conversion objective, for example.

It's the audience size and whether
you are reaching the bulk of

people or, or if there's still
lots of people to be reached.

The frequency of your ads and how
satisfied people are with your ads and how

much they're interacting, the objective
that you're actually playing with.

So the cost per click for a page post
engagement ad will generally always be

cheaper than a website conversion ad.

And also the campaign funnel and
how you've actually built that out.

Going back to the funnel section
of the training and thinking about

have I actually brought people
through the journey or not as well?

So that that's just a kind of insight in
influencing cost per click, and then you

have conversion rate on the other side.

So what influences that?

One of the major influences is
actually TR traffic quality.

Now the game isn't just about
getting the lowest cost per click,

it's getting the best value click.

You can get best value means that you
want the best customer at the best price.

Sometimes you might get a higher cost
per click, but the quality's better and

therefore they convert better as well.

So traffic quality plays
a big part in your site.

Conversion rate.

Then it's things like
the offer and the hook.

What, what's in your ad that's
gonna entice them to go ahead

and convert on your site.

So if you are, if you're pushing
a general product and it's more of

a kind of, yeah, I'm gonna have a
look at this, this product, out of

interest, people click into your site.

Your product page is quite passive.

It's not really trying to sell
them or not doing a a hard enough

job to sell them, then you're
gonna struggle to convert as well.

So the offer and hook starts in the
ad and then it's carried through

on your landing page as well.

So a lot of people who run Shopify
or a Magento site, Send traffic into

a category page or a product page.

And these systems are really limited
in the way that they can present

back a product and a proposition.

Some of the best converting funnels,
take an ad to a landing page and

actually expand out on the product or
proposition and convert that prospect

far better than a standard product page.

And so when I'm doing e-comm testing,
if I have a product that's performing

really well, And maybe we're testing
it with a standard product page.

Once we know that the product is getting
traction in, in, in our ads, then I

will want to build out a dedicated
landing page for that product or

that range of products, and work a
lot harder on a sales page to get

people to convert on that product.

Just absolutely focus in on that product.

And get them to transact as well.

So that's really where
the landing page comes in.

And then your product conversion rate.

So tracking how many people are converting
from your product page and add, actually

adding to car is another big part of
conversion rate optimization in my.

10, 15 years in marketing.

I've spent a lot of time on analyzing
conversion rate optimization, and one

of the big mistakes people make here is
to try and influence this big number.

So if your site's converting at 6%, how
do you get that to seven, eight, 9%?

You look at the micro
conversions through your funnel.

So how do I get more people from
my landing page to my product page,

my product page, to my cart page?

My cart page, to going
ahead and purchasing?

And then within that you go to
your kind of really micro level

conversions within the page itself.

So how do I get someone who's visiting
the page to scroll down, look at the

key info, add the item to their basket,
and, and then you start thinking

about small tests that you can apply
to influence that conversion rate.

So, you know, when you look at cost
per acquisition and you want to

influence that number, do understand
that there's different strategies and

tactics, tactics that come in place.

So, As a Facebook ads marketer, you
absolutely need to know about conversion

rate optimization, and you need to know
how to get your cost per click down, or

at least get the high quality customer.

And especially if you're running
an e-com store, if you're doing it

yourself, it's, it is actually a
big burden to be able to do both.

And there are tools out there, especially
on the conversion rate optimization site,

for example, visual website, optimize a
pretty quick tool to go and plug and play.

It will allow you to do
AB testing on your site.

Or even with landing pages, there's
tools like Unbounce Lead Pages, Insta

Page, ClickFunnels, that allow you
to just create really quick landing

pages and start testing those as well.

Combining that with something like visual
website optimizer, you could take a single

ad and then split that into two landing
pages and see which one performs best.

Or you can take two identical ads in your
ad set and give them their own landing

pages to test it that way as well.

If you are gonna take that route,
then the best thing to do is to

split your ad set in half so you
make a duplicate of your ad set.

And run one ad in one and
run one ad in the other.

Or you use the Facebook split test of, um,
tool, which allows you to take an audience

and split it in half completely, which
is the more scientific way of testing.

So you can take an audience, cut
it in 50, um, cut it in 50% each,

and Facebook will ensure that.

One half of the audience will only ever
see one creative that you're running in

one ad set, and the other half would only
only ever see the ad in the other ad set.

It's a cleaner way of ab testing when you
wanna test with the audiences, but that's

something to bear in mind when you are
doing your testing, is thinking about how

you want to do your split testing as well.

One big, big caveat to bear in
mind when you're doing conversion

rate testing on your website.

Is that the Facebook algorithm is super,
super sensitive to change of performance.

So let's say you've got a really,
really good performing ad set and you

have a separate team doing conversion
rate optimization or a separate person

on the site, and that person takes
your really, really good landing

page and starts AB testing that.

With or without your knowledge.

Now, if you end up splitting the traffic
50 50 from your really, really good ad

set, what can happen is that 50% of your
traffic goes to a bad performing ad set.

The data that goes back to Facebook is
therefore, Not as good as it was before.

Facebook sees a drop in conversion rate
and the algorithm starts to change.

Its targeting.

This is a disaster because when you
are doing AB testing on the site,

you are obviously controlling it.

So you know that, for example, if.

Conversion is bad on a
variant, you're gonna pause it.

You're not gonna continue working with
that, but Facebook doesn't know it.

As far as Facebook is concerned.

All of a sudden, you know, you're,
you're spending two pound per

click or whatever it is, and your
site conversion has dropped from

6% to 4% or even 3% in that day.

Facebook thinks that it's the problem.

It will then try and find better
quality customers having no knowledge

whatsoever that you've actually
been testing on the website.

And it could be that it was targeting
a great subset of your audience and all

of a sudden the website changes has made
it go ahead and change its targeting.

So that's a, a real big gotcha to
keep an eye on that when you are doing

AB testing, keep in mind that any
changes in your conversion rate here

will impact the algorithm as well.

So that's a big chunk
about c p a optimization.

Then for anyone doing e-commerce, we
will all, we will also be looking at

return on ad set, uh, ad ad spend.

And again, in a similar way, ROAS
is made up of two key metrics.

The cost per acquisition,
which we've already discussed,

and the average order value.

And again, just like with conversion
rate, a o V is completely site dependent.

So one of the challenges here is
as you are developing your e-comm

proposition, you're gonna be
playing around with offers, bundles,

promotions, um, and, and trying to
get people, uh, In at various levels.

You know, you might be taking the kind
of free ship, free plus shipping route

or using the loss leader route, or you
might be trying to get people in on one

category and then upselling to another,
or cross-selling to different areas.

They all play a big part in your A O V,
so your A O V is made up of your price.

Now I've done e-comm testing in
the past and I've gotten some

great traction from my ads.

Brought them to the site, and actually
one of the key root key reasons why

they haven't converted is price.

I.

It it for anyone that's running an
e-commerce store, price is all about

testing and finding out what people are
prepared to pay, but it's also about the

presentation of your site, how trustworthy
is it, the social proof, et cetera.

And so they all play a big part in
whether people are actually gonna buy

your higher end items or not as well.

And then your promotions, your upsells
cross sells, your one-time offers

through your cart, for example.

Now this is something
I do want to highlight.

If you go back two, three,
maybe even four years, the.

Facebook ecosystem was nowhere
near competitive, and as an e-comm

advertiser, you were able to
drive big profits from Facebook.

So going back to 2014, for example,
I, I would see three, four, 500%

return on ad spends, on cold audiences
and going fairly broad and niche.

And it was, it was a great
time to be on Facebook.

Nowadays with the rise in cost per
thousand impressions, your c p m, the rise

in the number of competitors and also the
rise in, um, lots of kind of e-commerce

and dropship and things like that.

Um, and the kind of challenge with
Amazon and eBay, et cetera, it's

made it even harder to get high
ROAS return from Facebook ads.

And this is where I absolutely
encourage people to look at.

Post purchase transactions to
reduce your cost per acquisition and

increase your return on ad spend.

So there's a few different
ways of doing this.

For example, if you bring people in on
a lower price product into your purchase

fund, also they go ahead and purchase,
let's say a $10 item or a 15 item.

You can then immediately offer
them a kind of one-time special

exclusive on your higher end product.

Maybe it's a 50, 60, $70 item,
reduce it down to 25, maybe 30% off.

And say, look, today only
we have this special offer.

If you're interested, you can
buy it now and save X percent.

If you can get the product and pitch and
kind of relevance to that product, right,

it's a great opportunity to get a second
sailing quickly and bulk up your average

order value in that particular transaction
and make your Facebook acquisition

activity work a lot harder as well.

So if, for example, let's say
our standard A O V is 40 pounds.

And the cost per acquisition is 20 pounds.

Great.

The return on ad spend is 200%.

So, um, if you think about average
e-commerce margins and 50%, if our 40

pound cart, um, cost 20 pounds for us to
actually purchase the cost of goods sold.

It would mean that this isn't
a profitable campaign for us.

So that 20 pounds to acquire that one
customer is literally just broke even.

So that's the cost of your goods
and the kind of advertising cost

has gone into the rest of it.

Um, and you know, in this kind of
example, what you might want to do is,

Have a look at how you can bulk up that
value and get more out of that customer.

So if after they've made this 40
pound purchase, there's another sell

that you can make, even if it's less.

So let's say it's a 20 pound on top,
what you're then doing is having two

purchases on that one acquisition.

And your basket value has all of a sudden
gone up to 60 pounds on the same c p

A, so now the profit is now increased.

There's other ways to do upsells.

Um, there's been some studies on when
the best times are to actually hit

people up with the additional sell.

So first of all, there's a
peak in excitement that occurs

when people purchase an item.

So there's that kind of
excitement of great, you know,

I've, I've now bought this item.

Then there's the anticipation waiting for
that item to arrive when the item arrives

and they've got it physically in the hand.

That's another key excitement point.

And if you can time your
promotions right, that's a great

point to capture them again.

And also the kind of first two to four
weeks after having that product as well.

And then it dies out and the
product becomes normal for them.

So thinking about hitting them up,
whether through Facebook ads or

through email, or even Messenger bot.

A great example here is once someone has
transacted with you on the website to

connect up your shipment information with
your bot to get them opted into your bot.

And that gives you another sales
channel to hit them up with marketing

as well and to try and get them to make
a subsequent purchase down the line.

So then you have email, you
have s uh, have Messenger bot.

SS m s is another option as well.

So if you want to, again, offer
them an SSS m s route for shipping

notification, you can then use
another channel to hit them up.

SMS is not as, Responsive as
messenger bots are right now.

Um, and especially when you're
using Messenger bots plus email

to serve up your kind of marketing
and upsell messages post purchase.

And then you can also follow them up
with Facebook ads and really work on

improving your ROAS based on acquiring
one customer, but multiple purchases.

And really, for e-comm to be
successful, there are two ingredients

of scaling to, you know, millions.

Number one is lifetime value.

You know, the game within Facebook
and e-commerce is not just about

getting as, as much profit from
that first sale as possible.

It's getting as much profit from
that one customer as possible.

So if you get one purchase and you're
breaking even, because you know your

average order value is 40 pounds of profit
is 20 pounds, um, and you're spending 20.

You, you, you're gonna
suffer with e-com game.

But if you're thinking about lifetime
value, and let's say for example this

customer purchase is three times, even
just three times in a year, and they

spend 120 pounds over a 12 month period,
your cost per acquisition is 20 pounds.

And you know, therefore your
profit continues to rise.

And this is where you then start
bringing in email and Facebook.

And post-purchase to bulk
up your lifetime value.

The second part of a successful
e-commerce and sustainable business

through e-commerce is through branding.

And branding actually is
something which really starts

right from the front to back.

So I.

From your ads, your landing
page, your whole experience, your

customer service, don't discount.

How important customer service is to
bulking up your lifetime value and

getting people to buy back again.

There's a reason Amazon Place so much
emphasis on customer service because

that's the thing that people remember
when things are either going well or

not is how well you're making them feel.

And, you know, the attachment with a brand
and a product comes down to that feeling.

How do do they, do they look after me?

Do they make, um, me feel
important, et cetera?

And I know, for example, when you're
scaling up with e-commerce, it can be

quite easy to be overwhelmed with so many
support questions and messages coming in.

But put the investment in it really
is worth the time of treating your

customers as friends and making them
feel like you actually care about them.

Um, and you, you, you have their
interests best in mind as well.

So, kind of quick recap, the focus here
is your ultimate goal is to profit,

but in order to profit, you need a
good cost per acquisition in a o v.

In order to get a good cost per
acquisition, you need a good cost per

click and conversion rate, and being
clear that there are multiple strategies

on improving all of those as well.

It's, it's important to be able to
break down the key metrics into the

smaller segments and being able to
create an action plan for those as well.