Read what we learned from a specific sales case.
As an example of good practice in analyzing advertising campaigns, we will highlight an example from our own practice, the sale of compression socks, which are sold on the online sales page and advertised on various online platforms, including the Facebook community. Compared to other advertising space providers - both local advertising networks and global ones (Google Ads, etc.), Facebook proved to be the most effective.
Based on the experience of selling such products online, the main focus of the sales was on the social network Facebook, where, through targeted advertising, the number of potential customers was reduced to a narrower target group.
On Facebook, the target group of several hundred million users was narrowed down to people living in the target country, and then to adults. The other filters (interests, connections) were not used because they did not narrow the audience significantly (an example from our own practice).
Interpretation of Advertising Campaign Results
The figures below are rounded and serve to illustrate the method, not as measured data. The conclusions of the advertising campaign showed that the average cost per click was about fifteen cents. The cost per click is not uniform as it changes daily. It depends on the CTR (Click-through Rate) ratio between ad impressions and clicks. The more interest there is in the ad, the higher the CTR, so we can confidently say that the cost of the ad depends on how interesting the ad is to the target audience and how much competition there is.
The conversion rate of the online store is approximately three percent. This means that for every hundred visitors, we receive an average of three orders.
To successfully manage advertising, we calculate the CPO (Cost per Order). This figure reveals the amount of money spent per individual order. In this specific case, we pay fifteen euros for one hundred clicks. For these fifteen euros, we get three orders. The average cost of each obtained order is five euros.
The average order value is about thirty euros (some site visitors order only one pair of socks, while others order four pairs, with an average total expenditure of thirty euros).
With an average purchase value of thirty euros, spending five euros is a relatively high percentage, so a one-time purchase is not enough for satisfactory profitability.
The key question is not revenue but margin (the difference between selling and purchase price; all values are excluding VAT). With a 20% margin, an order worth €30 leaves €6, of which €5 goes to advertising, leaving a single euro for shipping, packaging, payment fees, returns and work. That is why we track return on ad spend (ROAS): revenue divided by advertising cost, in our case 30 ÷ 5 = 6. The lower limit at which advertising still does not make a loss is 1 divided by the margin: 5 at 20%, and 2.5 at 40%.
To ensure long-term success of such advertising, we must:
- reduce the cost per click or get cheaper traffic,
- increase conversion (the ratio between visits and purchases),
- increase the average order value, and
- ensure that we not only acquire one-time purchases but retain customers.
Conclusions or actions based on the analysis of results
We removed the option to purchase only one pair of socks. This "forced" customers who used to buy only one pair of socks to purchase at least two pairs, thus increasing the average order value. We tested this measure with an A/B-Split test before making a final decision, and from the results, we could see that despite removing the option to order only one pair, there was no significant drop in orders.
By regularly changing ads, the ads remained "fresh" and interesting, thereby maintaining lower click costs.
We ensured regular communication with customers via email and other channels. We found that customers are less likely to make repeat purchases if we do not communicate with them regularly. Sending emails and communicating through social media with existing customers is practically free or very cost-effective, making our customer profitable over the course of a year, making multiple purchases.
By appearing regularly on social networks and writing useful and interesting posts on the blog or blog linking with Facebook, we managed to attract a steady stream of website visitors, for which we do not have to pay directly (organic traffic).
Frequently asked questions
We compare actual results with set goals. Illustrative example: if you spent 500 EUR on ads and the campaign brought 2,500 EUR in revenue, ROAS is 5. We look at broken-down data by ad groups, keywords, and time periods to identify exactly what brings results.
High CPC and low conversion (landing page or relevance problem), low CTR (creative or headline problem), high bounce rate on the landing page (wrong targeting or misaligned landing page), high CPA above the profitability threshold.
Benchmarking is comparing your results with industry averages. If the average CTR for your industry is much higher than yours, you know the creative or targeting is the problem. Without comparison to a standard, it is hard to assess whether we are successful.
Key report elements: total spend, generated revenue, ROAS, number of purchases, CPA, comparison with previous period, and descriptions of key findings with an action plan for the next period. The report must be clear and without unnecessary technical jargon.
We recommend monthly meetings for reviewing results and next steps. In the first month of a campaign, more frequent (weekly) meetings are recommended to quickly detect potential issues and adjustments. Communication is key for long-term partnership.
My name is Anže, I am a certified Magento solution expert and the maker of several award-winning online stores. I am the architect of all Degriz projects.
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