If you want to improve your return on the ad spend from your ads, specifically on Facebook, you’ll need to understand the Meta Ads Algorithm first. Don’t be scared; we’ll break it down into simpler terms so your head doesn’t hurt.

Also, once you understand it, don’t try to chase it. Chasing the Meta Algorithm is a useless tactic that will get you nowhere, as it is constantly changing. Instead, try to get an understanding of what you should and shouldn’t do with your ads.

So, how does it work? Well, your ads get placed on the platform via an ads auction. So, you’ll be competing with other businesses like yours to reach your target audience. And to win the auction, you’ll need to create a higher-quality ad and submit a higher bid. 

Learning Mode

The Meta Algorithm has a learning mode or phase where the Algorithm is learning about your ads and the optimal way to place them. During the learning mode, it explores the best ways to deliver your ad set, meaning that your return on your ad spends will be worse during this time.

To exit the learning mode and use the Meta Algorithm to its full potential, you’ll need to generate at least 50 purchases per 7 days on a given ad set. And since the Meta Algorithm can’t help you much during the learning phase, you’ll need to find your own way to hit the minimum requirements to get out of the learning mode. And you can do this by watching the critical metrics on ad sets and ads that tell you how engaging the ad is and how well it converts to sales. Here are some other tips that will help you exit learning mode quickly:

• Don’t edit ads while you’re in learning mode – editing ads or ad sets in learning mode will reset the Algorithm’s progress in learning how to better distribute your ads. So, the Algorithm won’t be able to optimize its delivery system for your ads.
• Avoid high-volume ads – the more ads and ad sets you create, the harder it is for the Meta Algorithm to learn enough about them and place them properly. Instead, try to create as few ad sets as possible. Also, you can make them similar so that it is easier for the Algorithm to learn more about them.
• Set a realistic budget – the Meta Algorithm delivers your ads based on your budget. So, if you set a very high or very small budget, it won’t know who to optimize for. Also, make sure you set a budget you can cover for a while so that you don’t have to change it later, as that will cause the Algorithm to re-enter the learning phase. 

Making the Most Out of Facebook Ads On a Tight Budget

As we all know, Facebook marketing strategies are everywhere. However, what you might not know is that most Facebook gurus recommend strategies that require higher budgets, which not many companies that are just starting out can afford. 

So, if you have a budget that’s less than $500, don’t rely on such strategies because they won’t work. Instead, you need to find something less that works for smaller budgets, and you have to do everything yourself, as the Meta Algorithm can’t help you if you don’t have a big enough budget. So, what can you do? Let’s find out!

For businesses that are just starting out on Meta and don’t have the required budgets to take advantage of the Algorithm, the best advertising strategy is to start small and focused. Namely, you should focus on growing one product at a time. Once you get your first customers, you can start adding other products and increasing your budget. By doing this, you’ll ensure that the money you spend on advertising your eCommerce business on Meta is spent effectively and is actually reaching the people that you want to reach. 

Both Facebook and Instagram are excellent platforms for advertising and selling products, with an average value of $60 to $80. So, your strategy will be even more successful if you have a product within that price range. However, the more expensive the product is, the longer it’ll take to persuade people on Facebook and Instagram to buy it. Also, you’ll need to spend more money on ads. So, you’ll have to spend more money to make more money. 

This was the overall eCommerce advertising strategy that newer businesses with tighter budgets could use on Meta. Now, let’s break it down in steps so that you’ll know exactly what to do.

1. Set Realistic Expectations

Facebook is the 7th most valuable brand in the world and the third most-visited website. And Instagram isn’t far behind. So, it comes as no surprise that placing ads on either of those platforms is expensive. And as more and more businesses realize the value of placing ads on Facebook and Instagram, competition rises exponentially each year, and targeting options get a little trickier. 

If you do a good job with your Facebook ads, you can bring your ad costs down to $10 to $20 per purchase, depending on your market. So, if your average order value is $80, your return on the ad spend will be between 4x and 8x. Those are the realistic expectations you can have regarding your return on ad spend. Don’t fall for agencies or gurus promising 10x or higher returns.

2. Start With One Product Only

You’re a small business that has only recently started to engage in online ads. So, don’t compete or compare yourself with international companies that have a broad and well-known portfolio of products. The key to reaching 7 figures and growing your business to someday be like those international companies is to start small and focus. A large portion of the companies we all know today started out by selling one product, and you should too. And if you have a product that is well received and loved by your clients, you’ll sell it like hotcakes. Just look at Apple’s AirPods as an example. 

But before you start selling, make sure to choose your product wisely. Even if you have more than one, choose the one you think will attract the most attention and only advertise that one. And you don’t have to remove your other products from your store. Having more than one is fine. The key is to only promote and run ads for one product, as it is much easier and cheaper to find customers for one single product. And if people eventually like your other products, well, that’s even better for you as you’ll kill two birds with one stone or with one budget in this case. 

3. Start Small and Scale Slowly at First

When breaking into a market, it is imperative that you deliver excellent value to your customers. This is where you turn strangers into loyal clients and cement a lasting relationship. To do so, you need to build up excitement for your product and overdeliver to customers. 

For instance, you can add small details like personal communication and packaging. You need to pay attention to every single customer and make them feel seen, which is something big brands can do and won’t be able to compete with. 

Treat every individual like a king and ensure that they have your undivided attention. Doing this will inevitably boost your sales, and it only takes 35 orders per day for a product that costs $80 to hit the $1 million sales landmark!

4. Focus Your Marketing Efforts On One Product and One Customer Persona

Trying to reach a broad audience with a generic product when you’re starting out is like picking a needle from a haystack. It simply won’t work. So, avoid selling a generic product to a generic audience at first. 

Instead, sell your product to a more targeted audience, as Black Riffle Coffee did. This brand didn’t try to sell great coffee to coffee lovers. On the contrary, it started out by targeting military veterans, which is a niche market with one customer persona. After a while of targeting this specific niche, the brand managed to grow and spread out, reaching $300 million in yearly revenue and $100 million in profit! 

So, in the beginning, if you understand the audience you’re trying to reach and personalize your ads and ad sets to them, you can grow your business and make it much more profitable. You’ll create a loyal customer base, which will pave the way for you to start branching out into other niches more easily and successfully.

5. Build Winning Ads for the Complete Marketing Funnel

One of the most essential parts of any marketing strategy is building brand recognition. Brands that are just starting out need to make themselves known to their target audience before they even try to sell them something. So, first, you need to let people know that you exist.

Also, selling a product takes more than just one touch point. Have you heard of AIDA? Awareness – Interest – Desire – Action. AIDA is a marketing model that has become an essential part of every marketing campaign. As you can see, it involves four stages. You can use it as a checklist to ensure that your strategy is sound and to identify any weaknesses. During AIDA, your goal is to attract attention, generate interest, create desire, and inspire customers to take action, or in other words, buy your product. 

And to do that, you need to create winning ads for all four stages. First, focus on creating an attention-grabbing ad that’ll tell people why they should care about your product. Then, create ads that show what your product can do for your customers so that you can pique their interest. Then, you can share how your product will make people’s lives better to spark desire. 

Lastly, you can add special offers and deals to incentive people to spring into action. However, you need to add those offers and deals at the right time and test which of them works best. Usually, a promo or a deal is the last piece of the puzzle that pushes people forward and makes them take the plunge and buy. 

No matter which stage of the AIDA model you’re at, you need to make your ads fun, short, and interactive. Of course, you can’t be expected to have a whole marketing team behind you to do that now when you’re just starting your business. 

And that’s why we’ve built Groost. Groost is a platform that will help you create all the ads you need for all four AIDA stages at the speed of light using your eCommerce data. So, it’ll help you create ads specifically catering to your needs with unique designs and eye-catching layouts that will turn heads. 

6. Optimize Your Ad Spend

It might sound like the hardest thing in the world, but we can assure you that optimizing your ad spend and ad budget is no rocket science. Actually, the whole process is pretty straightforward.

Namely, you’ll want to create multiple ads and see which one brings the best results. Of course, since you’re only starting out, your ads won’t really bring tangible results. So, you can focus on the ad that is the most promising to bring sales based on key metrics, including the following:

• Average click-through rate (CTR);
• Cost per click (CPC);
• Number of impressions;
• Post engagement (specifically for Facebook);

Once you find the ad that looks most promising, you can optimize your ad spend by putting more money behind that ad. And by doing so, you’ll cut off the ads that aren’t performing well. You can also turn them off completely. The decision between cutting off and turning off an ad entirely can be a head-scratcher, as you’ll always be unsure if the ad you turned off could have performed better if you’ve given it a chance. Luckily, our platform will give you recommendations on which ads to cut and which to turn off, which will make your decision much easier.

Now that you have a winning ad, you need to take your marketing strategy a step further. Namely, you take the winner and challenge it with a new ad. If the new is better, you stick with that one, and so on and so on. By doing this, you’ll constantly improve your ads and ensure that you optimize your ad spend as much as possible. 

Optimizing your ad spend will directly affect your ad spend returns. So, it is a key strategy that will help you improve your ad spend return. With that said, let’s dive deeper into ad spend optimization!

As we mentioned, optimizing your ad spend involves picking which ad or ads perform best and look most promising. And to do that, you need to analyze your ads using a few key metrics. Then, you need to compare the ads in terms of the metrics, and the answer will present itself to you. 

But which metrics should you look out for to decide when to increase the budget, decrease it (cut off the ad) or even turn the ad off? Well, it mostly depends on your marketing funnel and your goal.

For instance, in the top funnel, you want to generate sales, but your goal is to introduce your product to the people who should be willing and ready to buy it. And in order to do both successfully, you need to understand your target audience very well. And this can be very hard in the beginning. 

In an effort to understand their audience, many businesses and entrepreneurs invent products that they personally miss and need. And by doing so, they understand their audience’s pain very well and know how to market the product better. 

Navigating the metrics of a successful ad campaign can be difficult at first. But with some experience, you’ll be able to quickly pluck out the ads that are working for your goals and turn off the ones that aren’t. 

In the following section of this blog post, we will explain the metrics you need to look out for when introducing your product to the market in more detail, showing you what they mean and where you can find them. Also, we’ll show you how you can create them and add them to reports in your ads manager. 

Video Ads 

If you’re doing video ads to make your product known and generate sales, there are the metrics that you’ll need to focus on:

1. Thumb-stop ratio – The thumb-stop ratio is a metric showing which video ad grabs people’s attention the most. A good thumb-stop ratio is 20% or above. 

To create a thumb-stop ratio or any other custom metric and add it to your report, go to Ads Manager, select the “Columns icon” to open the Columns dropdown menu, choose “Customize Columns”and select “Create Custom Metric.” Then, enter the formula (3-second video plays/impression) * 100 for the thumb-stop ratio, and click “Create metric.” 

The process is the same for all metrics except for the formula part, which differs from metric to metric.

2. Hold ratio – The hold ratio shows you how long users engage with your video ads. Via this ratio, you can see if people find your videos fun and worth watching. A high hold ratio indicates that users like the video ad they’re seeing, meaning that your ad is working and you should keep using it. The formula for this metric is: ThruPlays/3-second video plays. 

3. CPM – The CPM (Cost per Mille or Cost per Thousand) ratio shows the cost that you need to pay per 1,000 ad impressions on your video. To create a CPM ratio, you need to use the following formula – (total cost of the ad campaign/number of impressions) * 1,000. 

4. Outbound CTR – Outbound CTR (click-through rate) shows what percentage of people that see your ad actually click on it and open your store or landing page. To calculate it, use the following formula: outbound clicks/impressions. A good outbound CTR is anything above 1%. To get the result as a percent directly, simply multiply the formula by 100. 

5. Cost per click – Cost per click is a metric that shows you how much you pay for the ads you place on Facebook based on the number of clicks your ads receive. The formula you need to use to track this metric is the total cost of your clicks/the total number of clicks. Also, you can simply add this metric by going to “Customize Columns” and checking the CPC box. No need to create it from scratch. 

6. Cost per content view (product landing page visit) – This metric is similar to cost per click. However, it differs in that it is charged whenever someone clicks an ad and lands on a page. On the other hand, CPC is charged when a user clicks your ad but doesn’t wait for the landing page to load. So, the cost per content view (product landing page visit) shows how much you pay for the ads you place on Facebook based on the number of landing page visits you get. The formula for estimating this metric is – the total cost of an ad/total number of views. 

7. Cost per add-to-cart – The cost per add-to-cart metric shows how much it costs you every time someone adds your product to their cart. You can calculate it with the following formula – total amount spent during a specific time period/number of “adds to cart” that occurred in the same period. 

8. Cost per initiate-check-out – This metric shows the average cost of each separate checkout initiated. To add it to your report, use the following formula: total amount spent on ads/number of unique checkouts made.

9. Cost per add-payment-info – Cost per add-payment-info shows you how much you pay whenever someone adds their payment information before purchasing your product. It can be calculated with the following formula – total amount spent for ads during a certain period/adds of payment info that happened in the same period.

10. Cost per purchase – This metric shows your cost of acquiring a new buyer. You can calculate it with the following formula – total amount spent on your ad campaign/total number of purchases.

11. ROAS – ROAS (Return on Ad Spend) shows how efficient your ad campaign is. In other words, it shows how much revenue you earn for every dollar you spend on advertising. To calculate it, use revenue from ads/cost of ads. 

Static Ads

Now, we’ll see which key metrics you need to look out for if you’re using regular, static ads in your ad campaign. Before we get into it, remember that creating and adding a metric to your report is done the following way:

Go to Ads Manager, select the “Columns icon” to open the Columns dropdown menu, choose “Customize Columns,” and select “Create Custom Metric.” Then, enter the formula and click “Create metric.”

1. CPM – CPM (Cost per Mille or Cost per Thousand) shows the price of 1,000 ad impressions on one Facebook profile or web page. To create a CPM ratio, you need to use the following formula – (total cost of the ad campaign/number of impressions) * 1,000. 

2. Cost per engagement – Cost per engagement, or CPE for short, is an ad campaign model where you, as a business, only pay when users actively engage with your ads. So, it shows how much you pay per ad engagement. To calculate and add it to your report, use the formula: total advertising cost/total engagements.

3. Outbound CTR – Outbound CTR (click-through rate) shows how many people that see your ad click on it and open your store or landing page. It is measured in percentage with the formula – (outbound clicks/impressions) * 100.

4. Cost per outbound click – This metric shows the average amount of money you spend on the links in your ads for every outbound click. It’s calculated with the following formula: total advertising costs/number of outbound clicks. 

5. Cost per content view (product landing page visit) – Cost per content view (product landing page visit) shows how much you pay for the ads you place on Facebook based on the number of landing page visits you get. The formula for estimating this metric is – the total cost of an ad/total number of views. 

6. Cost per add-to-cart – This metric shows how much you pay every time someone adds your product to their cart. You can calculate it with the following formula – total amount spent during a specific time period/number of “adds to cart” that occurred in the same period. 

7. Cost per initiate-check-out – The cost per initiate-check-out shows the average cost of each separate checkout initiated by Facebook or other social media (and website) users. To add it to your report, use the following formula: total amount spent on ads/number of unique checkouts made.

8. Cost per add-payment-info – This shows you how much you pay whenever someone adds their payment information before purchasing your product. It can be calculated with the following formula – total amount spent for ads during a certain period/adds of payment info that happened in the same period.

9. Cost per purchase – This metric shows how much you pay to get a new buyer. You can calculate it with the following formula – total amount spent on your ad campaign/total number of purchases.

10. ROAS – With ROAS (Return on Ad Spend), you can see how efficient your ad campaign is. In other words, you can see how much revenue you earn for every dollar you spend on advertising. To calculate it, use revenue from ads/cost of ads.

Improving the ad spend from your ads can be a lengthy process, especially if you’re a new business that’s just starting out. Namely, if you don’t have enough sales and a tighter budget, you’ll still be in the learning phase of the Meta Algorithm and unable to utilize it to its full potential.

So, at first, you need to create a sound marketing strategy that’ll get you out of the learning phase and compete with the bigger players. Using the strategy we described above will not only help you use Meta’s full potential, but it’ll also get you closer to that 7-figure sales mark that every business desires. 

Whether you want to break out of the Meta-learning phase, get to that 7-figure sales mark as fast as possible, or both, Groost is here to help. We can help you create winning marketing campaigns and ads that’ll put you on the map, teach you how to use tools like Ads Manager, and much more!