Anyone struggling to scale up their Facebook Ads should take a look at their AOV.
I jumped off a call with a brand owner who had an AOV of $25 US and was spending $1500 a day on ads. He couldn’t scale to that next level of spend and was stuck.
When we broke down the metrics the breakeven CPA was about $10. Meaning he had to spend less than $10 on his ads to acquire a customer profitably.
Anything more than a $10 CPA was unprofitable which makes it much harder to scale when your AOV is so low.
He has a few options if he wants to scale the brand.
Obviously he can improve his media buying, improve his creatives or increase his website conversion rate but a great opportunity is to improve the AOV.
This can be done with a price increase, offering to buy multiple of the same item, introducing other products as bundles to name a few.
Read More: Difference Between Cross-Selling and Upselling – Why You Should Set It Up Right Now!
Giving your customer the opportunity to spend more at checkout doesn’t mean all of them will, but a percentage will and this leads to a nice increase in AOV.
Let’s hope he implements the advice I gave him and his AOV increaseds from $25 to $35.
His breakeven CPA now increases too, allowing him to spend MORE money on advertising to acquire a customer profitably.
As Facebook Ads are essentially an auction between advertisers, the advertiser that is willing to pay the most to acquire a customer will win (we don’t want to spend the most but that is how the Facebook ad platform works)
You can try for days, weeks or even years to improve your ad account CPA by using media buying tactics to maybe drop the CPA from $8 to $6. Or by simply increasing the AOV you now improve your profit on the first touch point and you can spend more to acquire that same customer.
This will allow you to scale your ads past where you are stuck.
I could also dive into LTV and how that allows you to spend more on your Facebook ads but it’s crucial to be as profitable on the front end as possible so you can scale.
Got any thoughts on this? Would love to hear them.
Dan
