Facebook advertising has become a standard part of many modern marketing plans. With Facebook’s enormous user base, high member engagement, and impressive potential reach, your clients can find their ideal customers on Facebook. However, it’s important to ensure your Facebook ad resources are being properly used. Facebook is merely one possible marketing avenue. Just as with traditional methods, you should regularly track your Facebook return on investment (ROI) and other targets. Learn about Facebook ROI as well as return on ad spend, break-even customer acquisition costs, and how these measures should drive your clients’ campaigns.
Calculating Your Facebook ROI
Return on investment, or ROI, is an established business term used to measure how much benefit your clients see after using a certain strategy. You should already be familiar with ROI in a variety of other business contexts, such as staff development, the hiring process, traditional marketing campaigns, logistics upgrades, and more. ROI can also be considered for your entire organization over a set time, such as a quarterly or annual ROI.
ROI compares the amount you spent on a product or campaign with the amount of investment you received. The complete, organization-wide investment is considered in ROI. For example, your clients may have spent $17,500 on their most recent campaign, then earned $53,000 from that campaign.
To calculate the ROI, you divide the profit by the investment and transform this into a percentage.
((Earnings – investment) / investment) x 100 = ROI
Take a look at our example numbers in this ROI formula:
((53,000 – 17,500) / 17,500) x 100 = ROI
(35,500 / 17,500) X 100 = ROI
2.0286 X 100 = ROI
202.86% = ROI
In this case, your clients saw more than a 200% return on their investment.
Calculating Your Facebook ROAS
ROI is typically a broad measure, encompassing the full force of a brand’s investment into a certain campaign or time. Diverse considerations such as facility renovations, new software suites, expanded color offerings, or additional staffing should all be considered in ROI. To take a closer look at a client’s Facebook success and how that is impacting their performance, you should determine their return on ad spend, or ROAS.
ROAS is a similar calculation to ROI, but this measure focuses entirely on the money invested in Facebook ads. When you track both ROI and ROAS, you’ll uncover how your Facebook campaigns are impacting your clients.
To calculate the ROAS, you’ll use the same formula as calculating ROI. Simply use the amount of investment spent on Facebook ads, and the amount earned directly through Facebook.
((Earnings through Facebook – Investment in Facebook Ads) / investment in Facebook Ads) x 100 = ROAS
You can track your Facebook earnings through the following methods:
- Enable Facebook Pixels on your website to track usage
- Monitor campaigns through the Facebook Ads Manager
- Point Facebook ads to unique URLs and compare web analytics with the rest of a client’s site
Whenever your clients use a Facebook ad campaign as part of a larger strategy, you should always compare the overall ROI with the Facebook ROAS. This allows you to determine if your Facebook campaigns are more, less, or equally effective as your other tracks.
Calculating Your Facebook Break-Even CAC
When considering ROI and ROAS, you should also examine your clients’ break-even customer acquisition costs, or CAC. This measure tracks the amount of money your clients need to receive to make a profit on their customer acquisitions.
The CAC adds another layer to your understanding of a campaign. If ROI and ROAS look impressive, with high positive values, it may seem like a campaign is successful. Examining the CAC takes a more holistic view. A campaign with a large ROI but a low CAC is ultimately struggling to acquire customers, despite their other successes.
You’ll use your client’s profit margins to calculate their CAC.
(1 / Profit Margin) X 100 = Break-Even CAC
For example, if a client has a profit margin of 20%, their CAC is 500%. They’ll need to earn $5 for each $1 spent on customer acquisition for their campaign to bring in a profit.
Frequently Asked Questions About ROI, ROAS, and CAC
Which measure is most important for my clients?
ROI might be the most well-known measure, but that doesn’t mean it’s most important. Each of these calculations considers a different aspect of your client campaigns. For a truly comprehensive view, you should consider ROI, ROAS, and CAC for each campaign.
Does ROI consider other growth on Facebook besides profit?
The ROI calculation is a financial tool that was designed to measure earnings and profit. However, there are other ways to measure your success on Facebook than pure profit. Engagement, likes, shares, comments, and follower growth are all other ways your clients can build a community on Facebook. You can consider these elements separately from ROI.
What’s the difference between ROI and ROAS?
ROI considers the full investment your clients have made in a campaign, or during a set time. This includes everything from salary to logistics costs to overhead and more. Facebook ROAS, on the other hand, only takes into account the resources and investment seen through Facebook. You can track other ad methods for their own ROAS to see how Facebook compares with your other streams. For example, is Facebook advertising more profitable for your clients than traditional print marketing? ROAS will help you find out.
What if one measure is much higher than the others?
When one measure outperforms the others regarding a certain campaign, it shows that this element was highly successful when perhaps the rest of the campaign struggled. If your clients see a low overall ROI but a high Facebook ROAS, that implies that their Facebook advertising performed very well, but the project, in general, saw low ROI. In this case, the Facebook ad strategy seems to be the standout element of the entire campaign. Likewise, if the overall ROI is high but Facebook ROAS is low, that implies that the Facebook strategy was a weak point in the general plan.