How do you know if your Facebook ad campaigns are really effective?
To efficiently gauge performance, you need to measure your return on ad spend (ROAS).
What exactly is ROAS?
It’s similar to a return on investment (ROI) but is based on online performance.
By measuring your return on ad spend you can accurately determine your Facebook advertising level of success and whether or not your marketing dollars are being put to good use.
Breaking Down Facebook ROAS
In a recent social media marketing industry report, it was found that just 10 percent of respondents strongly believed that they could measure the ROI of their efforts made in organic social media.
The report also found that 56 percent disagreed or were uncertain.
As ROAS for Facebook ads are directly linked to your Facebook conversion tracking and pixel, you are able to obtain data directly from the source.
Here is the ROAS Calculation:
In Dropshipping: Break-even ROAS Formula Selling Price/ Selling Price – product and Shipping cost, so, for example, Selling Price of $29.99, cost of goods sold with shipping, etc = $9.99
$29.99/$20 = 1.4995 Breakeven Roas
With this information, you can determine just how well your ads are performing and how your ads are impacting your business overall.
ROAS refers to the total amount of revenue that has been generated from Facebook ads, minus the total amount spent on ads.
For example, if you spend $15,000 per month on Facebook advertising and generate $45,000 in new sales, you have achieved a 3X ROAS.
Facebook advertisements provide marketers with more certainty compared to organic social media marketing, making it a popular option for businesses.
Measuring ROAS Based on Business Type
There are two main types of businesses that use Facebook for advertising purposes.
The first includes businesses that offer a product or service online.
Customers pay for this product or service on the business’s website immediately.
The second type of business consists of service providers that work to generate leads and convert potential customers from Facebook through email or phone.
If you’re the type of business that offers a product or service online, measuring ROAS is fairly straightforward as everything is tracked through your Facebook pixel and the purchase conversion.
If you are a service provider, it can be slightly harder to measure your ROAS as you will need to track leads and manually cross-reference them with data from Facebook.
There are a number of ways to measure ROAS for both business types, including:
Establish Pixel and Conversion Tracking
Before ROAS can be accurately measured, you will need to install and setup Facebook pixel and conversion tracking on your website.
If you are an e-commerce business that uses Facebook advertising to make sales, you will need to set up e-commerce event actions, such as add to cart.
If you are a service business that is generating leads, you will need to install the lead event action.
Make a Custom Reporting Column
The next step includes creating a custom reporting column in Facebook Ads Manager.
This column will display important metrics, such as the number of purchases made and the ROAS.
To do this, you will want to go to the Ads Manager dashboard on Facebook and click on the ‘Columns: Performance’ menu and click Customize Columns.
Calculate ROAS for Purchases
When analyzing the ROAS and Purchase metrics in the new column, you’ll discover that the first column provides results for 28 days click and 1-day view.
The other shows results for a 28-day view.
To accurately measure how your Facebook advertisements are performing, set your data range to the last month to calculate your monthly ROAS.
Determine ROAS for Lead Generation
If you use Facebook to generate leads, you will still need to install a pixel and conversion tracking on your website.
However, instead of e-commerce and purchase events, you will need to set up a lead conversion event for certain contact points on your website, such as your contact form confirmation.
Also, take the time to create a reporting column and custom conversions.
It is not always easy to measure your return on ad spend on Facebook, especially if you are new to online advertising.
However, by learning how to measure ROAS, you can better understand how your business is performing and the impact of your advertising efforts.