Ah, return on ad spend. It’s the metric that every e-commerce brand pays close attention to and can’t get enough of. Measuring return on ad spend (ROAS) is essential for maximizing your Facebook ad budget and revenue. However, what is a good ROAS on Facebook? How can you improve it? Keep reading today’s article to find out!
What does return on ad spend (ROAS) mean?
ROAS is an ad metric that shows the relationship between return and spend. ROAS can be calculated by dividing your revenue from ads by the total cost of those ads.
For example, if you spent $100 on Facebook Ads to make a profit of $200, then your ROAS would be 200%. This tells us we are getting twice our money back in profits with each dollar invested. As a result, there are many marketers who aim for this benchmark when running their campaigns which will put them at ease knowing they have optimized their campaign spending.
Why does return on ad spend (ROAS) matter with Facebook Ads?
You want to make sales and retain satisfied customers in the long term, right? If so, the return on ad spend you generate from Facebook Ads is critical. Measuring ROAS allows you to determine if your campaigns are driving results, working properly, or if there’s something wrong.
How to calculate Facebook Ads ROAS
Calculating return on ad spend is pretty easy with Facebook Ads and major advertising platforms for one reason: they do it for you! Navigate to any ad campaign and you will be able to see the number of sales you generated relative to how much you spent.
How to improve Facebook Ads ROAS
Next, let’s move onto the fun stuff: improving your Facebook Ads ROAS. From our years of experience helping brands generate millions of dollars, these are some of the biggest priorities you need to focus on.
Improve your ad targeting
You can have the best product … brand … website … you name it. However, if you’re not targeting the right people, your ads won’t convert.
There are many methods of targeting customers, but the following are some of the most common and effective.
- Location: You can target ad viewers by state, locality, zip code, country, etc. As you get more specific in your targeting choices around home vs. work addresses for example, you increase the potential to uncover highly qualified prospects.
- Demographics: The keyword in demographics is population, which can be narrowed down by age, sex, income level, marital status. Facebook offers a huge selection of demographics to choose from.
- Interests: Facebook and Google’s ad networks allow you to target specific demographics of users, which can be extremely helpful. Let’s say you run an online store that sells vinyl records from the 1980s; your goal would be to find people who like vintage record player pages, music pages, jazz artists, or R&B artists on Facebook and/or YouTube.
- Behaviors: Behaviors are the most profitable way to target potential customers because they display ads to people who behave in certain ways. For example, you might show ads to people who have recently visited your website’s pricing page or subscribed to your blog.
- Engagement: Engagement is when someone comments, likes or follows you on social media. If someone recently liked one of your Facebook posts, ads will show for them because they are engaged with you.
- Partner Connections: This method of advertising shows ads based on what other sites a user has recently visited. For example, if you’re a car dealership, you might target users who have looked at new cars in the past week.
- Automatic Optimization: Facebook will offer optimizations on your ad campaign based on the information you input.
Write better sales copy
There are tons of components that go into creating high-converting Facebook Ads. One of the most important? Your sales copy. After all, it’s the words people read that push them to take action. Here are some strategies you must try if you’re a brand running FB Ads:
- AIDA (Attention, Interest, Desire, Action): Grab their attention, create interest in the product, form an emotional desire, and use a strong call to action.
- PAS (Pain, Agitate, Solve): Target the customer’s pain point, agitate it, and provide a solution (your product.)
- Make it emotional: Talk about the emotions and experiences your product will create. This is why people truly buy things.
- Hit their pain points: What problems are they experiencing and how can you help them?
- Calls to action: Tell them to click, buy, shop, etc. to promote engagement.
- Value proposition: Explain how your product is one-of-a-kind and better than anything else they can get.
Split test the heck out of ads
Split testing is essential for running successful Facebook Ads campaigns. You should always be running at least two ads for a specific campaign and ideally four or more.
For example, if one of your campaigns is focusing on increasing website visitors (CTR) you might want to have an ad that focuses on adding products to cart with another ad focused on getting people into the checkout process.
You can also split test sales copy, creatives, and landing pages. Don’t get comfortable. You may find that some ads are making you money but some tweaks could make them perform even better!
Facebook Ads ROAS benchmarks
Let’s dive into benchmarks for Facebook Ads ROAS and other metrics you need to be measuring as an e-commerce brand.
Average Facebook Ads ROAS
Return on ad spend can be very different depending on the individual brand, product, target audience, and other factors. So, let’s dig into some data.
Databox performed a study where they found that most marketers achieve a 6-10x return on ad spend. That means if they invest $10,000, they generate anywhere from $60,000-$100,000.
The upper echelon of marketers (approximately 5%) is able to achieve up to an 80x return on ad spend! Read the Profitable Ads case studies to see how we achieve these types of results for our media buying clients.
Average Facebook Ads click-through rate
The click-through rate is the number of people that click your ad compared to how many people view it. The more people that click, the higher chance you have of generating a sale. Plain and simple.
But, what if your CTR is low? If you follow what we outlined before regarding increasing ROAS, you’ll see improvements. Nonetheless, the average Facebook Ads click-through rate across all industries is 0.90%.
Average Facebook Ads conversion rate
The conversion rate is the number of people that convert on your ad based off of an action they took. It’s imperative to track this because it’ll tell you how many leads and sales are coming in from Facebook Ads.
And even if conversions or ROAS seem low, remember: patience will pay off. All good things take time!
The average Facebook Ads conversion rate for all industries according to a WordStream study is 9.21%. That’s amazing!
Like with any metric and benchmark, some industries achieve other numbers than others. For example, fitness brands can achieve up to a 14.29% conversion rate.
Average Facebook Ads cost per action
Knowing how much each conversion costs is crucial as an e-commerce brand. It enables you to calculate how much revenue you need to be generating from each action to remain profitable. A lot of businesses make the mistake of not running the numbers and wasting budget.
With that being said, the average cost per action for Facebook Ads is $18.68. Some industries like apparel have a lower CPA at $10.98 or education at $7.85. Once again, it depends on the industry, product, audience, and many other factors.
Average Facebook Ads cost per click
If people don’t click your ad, you can’t make money. That’s a problem! Naturally, cost per click is important to measure. The lower you can get your CPC, the more profit you can generate from ads. The cheapest clicks are normally found in apparel, travel, and other retail industries. The average cost per click for Facebook Ads is $1.72.
Wrapping up Facebook Ads ROAS benchmarks
If you’re running Facebook Ads, it’s important to understand benchmarks so you know if you’re campaigns are running as intended. If you’re below industry benchmarks, this is a sign that you have to improve your targeting, sales copy, creatives, and landing pages. Brands that are at or above benchmarks should focus on continuing existing strategies while split testing.
Want to skyrocket your revenue and take your brand to the next level? Apply to join the Profitable Ads waitlist and become one of our future media buying clients. You can also check out our case studies to see the results we’ve generated for clients.