[CASE STUDY] How to get $7.27 in sales for every $1 invested in Facebook advertising

Many entrepreneurs and companies struggle to breach online markets and turn profitable, so we've decided to share our recent experience with this Facebook advertising strategy. [...]

March 21, 2017

9 min reading time

Many entrepreneurs and companies struggle to breach online markets and turn profitable, so we’ve decided to share our recent experience with this Facebook advertising strategy.

Around 3 months ago I’ve met Jonathan Miller, top-notch marketer & co-founder of Breeo Industries, company that manufactures smoke-reducing fire pits.

Breeo Industries just started advertising online – their Facebook Page counted less than 200 likes.

Page Likes on Breeo's Page, Rethinking Fire

But, Jonathan’s product amazed me. Its design is just marvelous, quality is super-high and guess what else? All Breeo Industries products are 100% handcrafted in the USA.

We decided to give it a go and started preparing the campaign. 10 days later we launched a trial campaign that had 727.8% return on advertising investment.

In this case study, I’ll outline key tactics used to successfully launch a product on Facebook and turn profitable from day 1.

Understanding the basics of Facebook advertising

Throughout the years, I’ve heard many explanations of how Facebook advertising works. Most of them are complete BS based on ignorance and in 99% of cases those stories are nothing different than conspiracy theories.

Facebook is a content network and Facebook strives to serve ‘only the best’ content to people which find that content relevant. Facebook measures relevance by checking the ratio between content reach (impressions) and engagement rate (reactions, comments, and shares).

When your post or an ad is highly engaging, Facebook will mark it as relevant and give you a ‘push’ in distribution pipeline – in other words, you’ll get bigger reach for less money.

Every successful Facebook advertising campaign is contained from 2 factors – Content and Distribution.

1. Content or ad relevance

You need no more than 1000 impressions to see if your ad is working, or not. CPM (Cost-per-mille, mille=1000 impressions) is less relevant at this stage, doesn’t matter if it’s $5 or $75. Focus only on metrics that will show you how your content (ad) is performing;

  • CTR (Click-through-rate)
  • Engagement rate (Reactions, comments, shares)
  • Video view rate (Until which point (%) is your video being watched)

Through these 3 metrics, you can see if you have an ad that can drive engagement, clicks and ultimately, sales.

Note: This is not ad relevance score that Facebook displays in Ads Manager.

2. Distribution

When you have an ad that’s relevant (and working), it’s time to start investing in outreach. In this stage, you should focus on metrics that bring you closer to the desired action, such as making a sale or acquisition and overall CPA.

  • CPM (Cost-per-mille, mille=1000 impressions)
  • CPC (Cost-per-click)
  • CVR (Conversion rate)
  • CPA (Cost-per-action)

Through these metrics you can have a direct influence on your sales record, a number of leads generated or apps installed.

For instance, you have a budget for Facebook advertising which says $500/day. By lowering your CPC (Cost-per-click) by 50% (and maintaining landing page CVR of 4%) you can get your CPA down by 100% and double your sales/day.

Double the salesThat’s the way that Facebook and Facebook advertising work.

Video killed the banner star

Original Buggles famous refrain from 1979 said ‘Video killed the radio star’, which carried a deep message about emerging trend of music videos. Radio was already dying and the video was about to explode. People could enjoy not only the audio aspect of music but a visual medium as well.

The same thing happened when Facebook introduced video advertising back in 2014. From an advertising perspective, it was just amazing, especially in the terms of distribution. Cost-per-impression in video advertising was drastically lower than banners. And it still is.

But not only that, the medium of communication changed. Two-minute video can explain (and sell) more than a greatly designed banner with a 2000 word copy. For an average reader (200 words per minute), it would take 10 minutes to read and they still wouldn’t get that special feeling of your product.

I’ve heard many times that videos are ‘expensive’ to produce, which is completely false. Solid video a.k.a. the commercial will cost you around $2000 to produce in HD or full HD.

If you’re selling something simple to understand, your videos can be shorter and done in a sequence. If you decide to go with animated explainer videos, it’s going to cost you between $500-1000 for something decent. If you want to get a video produced for less than a dinner for two, visit fiverr.com (not recommended).  In other words, possibilities are merely endless.

Now let’s break the math behind the Facebook advertising with video. Imagine that your total advertising budget is around $5000. Here’s the simple math behind it;

Banner vs. video

In this imaginary case, numbers say that video production would pay off (in the terms of distribution) in around 25 days. With a video, you could reach almost 20% more people just in the first month. If you continue running for the second month, the video would get around 1 million impressions vs. a banner which would get around 500K impressions.

Don’t let your Facebook ads look like – ads

No matter if you’re using banners or videos, your ad copy shouldn’t sound like an ad copy. Rather, make your ads feel natural. When people scroll through their newsfeed, they’re being bombarded with ads. Nobody likes that. People don’t like being manipulated or pushed to do something.

Gary Halbert autor of The Boron LettersDon’t believe me? Just pick up the phone, type in the random number and start blabbing about the greatness of your product to a random person. In 9 out of 10 cases, they’re going to hang up. Your ads aren’t going to do any better than that, trust me.

Call-to-action (CTA) is very important part of every ad. That doesn’t mean that you should include it in the headline. Tell your story first and then ask for the money. The converse will not work.

Also, try to avoid buzzwords like FREE, new, the best, etc. in your first interaction with the target audience. Don’t bring the big guns to the game too early. You don’t want to sell them something just once – aim to build a relationship which will result in high customer retention rate. Just liked Rand Fishkin said;

Take a look at what we did with Breeo – ad did its job perfectly.

All the credit for the video production goes to Jonathan and the team from Breeo.

Start with split testing

Split testing isn’t about getting 100s of ads out and seeing which works the best. That’s not split testing, that’s not a scientific approach for long-term results – that’s guesswork.

I’ve heard people talking about scaling in the same manner. Scaling campaigns is not just ramping up a budget from $10/day to $1,000/day, or even worse, $10,000.

In 99.9% of cases, it’s just a recipe for a financial disaster.
and it's gone

One simple, yet effective strategy we use for video advertising on Facebook is contained in 3 simple steps and performs marvellously every single time.

Before you start split testing, do the research to get a feeling of your target audience. Male or female? Both? 18-35 or maybe 36-50? Go with something similar and don’t fear to go to broad. You’ll go more specific once you have an ad that’s working.

Step 1 – Test video

We won’t start from the fact that you have a good video. You probably don’t. Your video isn’t finished when the editor says so – it’s finished when you achieve decent view rates.

Average video view rate can easily tell you to which point is your video being watched and when it actually becomes boring and people stop watching it.

For products with mass market potential you should aim for 20-25% average view rate, everything below 10% is unacceptable. For B2B and niche high-end products, everything between 10-15% is ok, below 5% is unacceptable. Why? Because both business and niche high-end products are understood by smaller groups of people – even though you’re targeting well-defined audiences, most of the people are going to find your ad boring.

Video view rates

Also, track how much people are actually clicking on the ad and going to your website. Before you decide that your video isn’t working and you need a new one, make sure that you try strong call-to-action at the end of the video.

Step 2 – Test copy

Once you have a video that’s being watched and click you’re halfway there. Now it’s time to create a compelling message. In most cases copy on top of the video doesn’t have to be written by professional copywriter – it just has to catch the attention or briefly describe the problem or the solution in the video to the potential watcher. Including a question often does the job. Get the engagement going.

The best thing about Facebook advertising is social proof. Not just on Facebook, but on every social network. People tend to trust other people (even if they don’t know them). Having an ad with high engagement, especially if the engagement is positive, sells.

Engagement rates and social proofHigh engagement results in instant brand awareness and instant sales.

Step 3 – Targeting

Here’s one trick that works marvelously on mass market products. It worked on Breeo.

Instead of having 10 different ad sets containing slightly different or same ads, try pointing 10 different ad sets to a single PPE (Page-post-engagement) ad.

PPE campaign structureThat way you don’t have to build up the social proof on 10 different ads, but just on one, which is for the start more cost effective. More engagement brings, of course, more engagement – which leads to the ad going ‘viral’ and you getting filthy rich (or not).

Ramp up the number of different demographics, see which lead to the desired action and which score higher engagement. Optimize. Scale.

Note: This strategy works extremely well on cold traffic and product launches, but fails to deliver results on retargeting and retention campaigns.

Next steps

Sticking to strategical points I’ve outlined above helped us to serve almost a half a billion impressions (498 million) to more than 200 million people across the globe for our clients, just in 2016. I’m quite sure that you can apply it to your business too, so get out there and start testing.

Facebook advertising - What's science?
Note: Number of served impressions represent combined effort of all clients that Udonis Agency served in 2016, across multiple ad exchanges, and not just Facebook.

Comment below on what would you like to read next or book a free strategy session with us.

Udonis Inc. conducts 300+ split tests every day. We share top insights only on our monthly newsletter.

Mihovil Grguric

Managing director of Udonis Inc. Results-driven & tech savvy. Startup enthusiast. "In God we trust, all others bring data."