# Making Facebook Ads Profitable for your SaaS – Dave Churchville – MicroConf Growth 2017 Channel: Rob Walling Video: https://www.youtube.com/watch?v=i8gBhEtNFRY Duration: 13 min Language: English Words: 2403 Transcript page: https://viewrankai.com/tools/youtube-transcript/i8gBhEtNFRY --- [0:00] [Music] [Music] [0:15] hey guys I'm Dave quick show of hands who is running Facebook ads right now okay good bit of you and keep your hand up keep and up and then of you how many are making money with them not as many okay so that's what this talk is basically about is kind of what I learned the hard way through I've probably had four or five different SAS businesses I've been involved in so I've run a lot of ads tried a lot of things and failed it many of them but this is what I put together over a long period of time that helped me kind of get over [0:49] the hump as far as making my ads profitable okay so I want to talk about this first of all so those of you who didn't raise your hands it probably means you don't have a Facebook pixel on your site so if you don't I'm gonna tell you to do that right now and I really think that's important I'll explain why later but just doing this is it's like adding leads to your mailing list just by doing nothing so just do that it's free doesn't cost you anything it doesn't slow your site down if you're not doing it do it now okay so this is what I usually hear from people when I [1:23] ask them to a few people yesterday and you know oh yeah I tried Facebook ads and I spent a bunch of money and nothing happened I didn't convert anything so that's the same experience I had and I think the big thing is the first time you do it you don't really know what you're doing and even if you do it takes some time and it takes some iteration to get it right so it's not a it's not an immediate thing so the big question I'm we're gonna answer today is can Facebook Ads work for my business and so the way I answer that is basically for most of [1:52] you yeah it probably can in the right if you do it the right way so first is your market reachable now Facebook has about 1.8 billion users daily on average chances are your markets in there somewhere so unless you have a very small market you know maybe you have 3000 people total addressable market okay they might not be in Facebook and you might not be able to get to them but if you have you know fifty thousand a hundred thousand people there in there it's possible to get to them the second point is you know can you charge enough to actually make these ads profitable and again that's more of a if your [2:26] product is $9 it's going to be tough through a Facebook Ads I'm not gonna you're not gonna kid you about that but for again for most people with let's say you have a fifty dollar price point or an you know average value that's that's enough you can kind of get there without too much trouble and finally if you apply what I'm gonna explain to you is the map formula which is my fancy acronym for something really stupid and you iterate on that you can actually get there over time with by testing your way through okay so you're ready for the big reveal and what the map formula is all [3:05] right okay there's more okay so this is the simple formula it's it's basically simple math and what it basically refers to your average order value I'll get into that and that being more than twice what your cost per acquisition is so let's break that down a little bit okay average order value so how much you make on your initial customer sale and there's a reason I'm talking about this and not you'll often hear people talk about customer lifetime value I'm explicitly not talking about that yet so your initial customer sales so what's that look like for you someone comes to your site maybe they start a trial at some point they convert [3:45] if you have a fifteen dollar you know entry point for your trial your initial customer sale is fifteen dollars so for most of you here's a sort of an example if you have multiple plans you need to do a little bit of third grade math to figure this out but it's basically you you see what plans you have what percentage of people are on each of your plans and for for this hypothetical example of a SAS with 20 50 and $100 price points and let's with 50 percent on plan a 30 on plan B 20 on Plan C you wind up right around 45 dollars as your [4:18] average order value all right second piece of this is your cost for acquisition so how much do you spend to get each customer and in this case we're going to talk about how much you spend specifically through Facebook Ads not through other means and so let's break that down a little bit your components are basically how much does it cost you for each click you're getting what kind of conversion rates you have on your landing page and this is initially for sign up and then later in your funnel what kind of conversion rate do you have from trial to paid again so back to our example let's say [4:55] you start out with Facebook Ads like like moat like I did certainly you have a pretty high cost per click something around $2 and let's say your trial signup rate is something around 10% and finally you convert of those trials you convert them at about a 20% clip okay so is that gonna work for Facebook Ads so here you can see in this case it takes you about 10 clicks to get a trial signup about 50 clicks to get every conversion you're paying $2 a click so you're looking at about $100 for your cost per acquisition and the question is am I gonna be profitable there well you [5:30] know the answer already not really we already know your your average order value is around $45 so you're gonna pay about $100 to get $45 not really good deal there so how do we do better this is what I mentioned before so again you go back to the yes I know I sold a $15 subscription but that person's gonna stay for nine months it's gonna be great and my question is how do you know that this person's coming for Facebook Ads if you haven't done it before do you know they're gonna be just like your other customers not really so you want to be a little careful here and give [6:03] yourself some margin you can certainly test and experiment this I'm not saying don't I'm just saying if you're really just trying to test whether Facebook Ads is a viable thing let's leave the whole lifetime value thing for a little bit later okay so we tried our first experiment it didn't work out how can we start to optimize this and do better so there's three three things to consider first can I get lower clicks so that that's the whole category of optimizing your ads second can I get better conversion rates you guys probably know a lot about that so how do i optimize my funnel and then finally [6:36] you can just somehow get a higher average order value certainly you could raise your prices or do something like that all right so let's look at the sort of starting point here what can you actually afford to pay per click so that's that's really a good starting point for face so you actually know what your numbers are before you start running the ads so here in this in our example here if my cost per acquisition is $45 or sorry my average order value is $45 you just run my map formula backwards and you and here we wind up with a cost per click of about 45 cents that's what I can target [7:14] and actually get profitable sales there all right so let's talk about optimizing your ad so it's the second part of this so I have lower clicks now how do i optimize my ads so for Facebook I'm gonna give you a few simple rules I'm gonna say use news feed ads which can be either mobile or desktop don't use the other kind at least for now make sure your audience is big enough when you're targeting so I'd say at least 50 K to start with and Facebook has this concept of campaign goals you can you can ask for page likes you can ask for all sorts of things but Facebook is actually [7:52] really good at this so if you ask for page likes you'll get page likes you won't get clicks to your website you won't get conversions you'll get page likes so the goal to pick is actually website conversions and that's that's really what you want cuz you want people to go to your website you want them to sign up for trials so that's really what you want to focus on okay so to optimize your ABS you've got sort of four interesting factors so we talked about targeting a little bit that's really how you choose your audience I'll drill down into that a little bit and then there's [8:21] your offer itself what is your ads saying what are you trying to get people to do and on Facebook certain kinds of offers work better people are looking at pictures of cats and babies so you really when you put your offer in there it can't be buy my thing buy my thing right so it's how do you how do you put your offer in there in a way that they'll actually get them to look up from a cat picture and take action click the rate is will help with your cost per click and you can really influence that by picking good images so you really want to test images [8:49] and that's that's the biggest impact on click-through rate actually in facebook and certainly headlines are a factor too and finally they have an idea of relevant score in Facebook and that's Facebook's internal magic calculation that says whether or not they should show your ads because what you do you target a certain audience and they click your ads or they don't and they also can get feedback on your ads so if you have bad feedback you have a bad relevant score so you want to work on that okay so targeting really quick you can go for more specific audiences you can target different interests in facebook and the more specific you get usually [9:28] that helps your your click-through rate in your conversion you can also target anyone who's visited your site and that's what that pixel I told you about before was for anyone who's visited your site before you can in Facebook you can later target specific ads to them and you can also they have an idea of look-alike audiences where if you have people have already converted you can take that group and Facebook will find others like them I'm gonna skip over this but you're a simple process basically I'm gonna jump straight to optimizing your funnel so once you've got your ads set up you've got a good offer and a call to action really the [10:11] offers you want to start looking at on Facebook that work look at doing things like free or gated content and bruss touched on that a little bit before that's what a free content would look like driving traffic to a relevant high-value article and then retargeting those people gated content you know about so that would be using something like a lead magnet a cheat sheet a template a checklist or something running some sort of contest so you get the email address and then you can follow up with them by email and then the other you know your free trial it should be pretty much the last thing you [10:44] offer and I would mainly say focus on using retargeting for free trial offers versus having that be your top of funnel offer so again that's it's a little bit too sudden you there's no trust yet on the relationship so if you just go straight for the free trial it's a little harder to get people to take action on Facebook this is just some quick examples from dripped and Infusionsoft of what some gated content offers look like and basically they're saying we've got a free video course if you sign up for our trial now and the landing page for that okay so assuming you do all of those things this [11:22] is just our example again let's assume we improved our cost per click we got it down to a dollar we got our conversion rates a little bit improved and so now you're back in the sweet spot and that's kind of what it takes iterating over these different aspects to try to get to the sweet spot but it starts with knowing your numbers if you're fully optimized already and things are looking good I talked before you could add an enterprise plan raise your prices do other things that would also increase your lifetime value and finally really focus on conversion and the way I like to think of it and this is true was true [11:57] in my business if you get all these trials but you know nine out of ten of them don't actually convert to paid customers it's a huge opportunity to just grab just one or more of those and that really would double the effectiveness of what you're doing that's a good place to focus okay wrapping up I actually made a calculator for you guys if you want to run some of these numbers without doing all the math at user mentor com Facebook Ads and if you got any questions let me know um it's my info there thanks for sticking around for the talk [Applause] you --- About this transcript Read from YouTube's own caption track and laid out by ViewRank AI (https://viewrankai.com). 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