Improve Your Advertising with Psychology → Shipping Strategy →
In this video we discuss my three benchmarks for deciding when I should let my ads continue or cut them. I do all of this evaluation at the ad set level, as it is the most useful place to gather information, based off the setup of the ad sets and ads that we did in a previous video.
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In the past, I followed a simple system of three golden rules. Rule 1: at the end of day 1 if your ad set has no clicks or cost per click is over $1, cut your ad set. Rule 2: at the end of day 2, if you had no add to carts, cut. Rule 3: at the end of day 3, if you have no sales, cut. Those were simpler times. When ad sets each got the attention I personally thought they deserved. Now, we have a little more control being exerted through the guise of CBO.
Working within the confines of CBO, I have redeveloped these golden rules into more friendly benchmarks that take an objective look at ad spend at the adset level instead of cut off by day. While it isn't much different than my previous set of rules that I followed, this one allows for a prolonged testing if the CBO only allows $1 a day to that particular ad set based off their calculations for a conversion in that interest.
Before continuing with the video or the description, please note this system is designed for beginner's in an ecommerce environment selling products with a profit margin of roughly $10-$20. While you can manipulate this to accommodate a different budget, it is likely that a different strategy should be employed for a high ticket product. Please understand that no one strategy is a catchall for Facebook (as most things in life).
Benchmark 1 focuses on your cost per click, just as your previous rule 1 did. Instead of looking at the end of the day, you can focus instead on amount spent! If you reach $5 spent on an ad set and your cost per click is over $1, you should cut that ad set. I go over in the video the math behind that, just know that at the $1 cost per click, with solid retargeting, you should be making a sale every $9.25 in ad spend, leaving very slim margins at the low end and making scaling difficult.
Benchmark 2 focuses on add to cart, just as Rule 2 used to. $10 in ad spend without an add to cart, you should cut your ad set. This rule is a little bit more lax as not every add to cart will happen in a linear way. Sometimes you will get 10 add to carts in a day and other days you may only get 1 or even 0. For this reason, I wait until $10 in ad spend without a purchase to see if I have even received an add to cart. If I did not, I cut the ad set.
Finally, Benchmark 3. Instead of being a day, it is all about Break Even Points. If you Break Even Point (or BEP) has been spent without getting a sale, cut the adset. If you make a sale within your BEP, reset your internal counter to $0 ad spend and cut if you reach BEP in ad spend after the sale. It is important not cut an ad set that made a sale just because it became unprofitable after making one single sale. Testing is the most precious time for a product and an ad campaign, anything that makes a sale should be given the chance to make a second or third sale.
BEP Equation:
Sales Price + Shipping Upsell Average ($2.88) – (Sales Price * 0.029)-0.30 – Cost of Item – Cost of Shipping = Break Even Point
Thanks for watching this video, I hope you learned something from it. If you did, please give it a like and subscribe for more daily Advertising, Marketing, Shopify, and Dropshipping Training.
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