Understanding Facebook Ads and Advertising Spend Attribution with Consumer Packaged Goods
Facebook Marketers for eCommerce
2020 - 2021
Facebook is an incredibly powerful tool to power your business, particularly when it comes to reaching large numbers of target customer prospectsthat resemble your existing set of loyal buyers. However, challenges can emerge in many areas. One of the most vexing challenges is being a victim of your own success! Too much success with a Facebook campaign can rapidly exhaust current levels of inventory. Depending on the length of your supply chain and restocking ability, it can be a real challenge to profitably grow your company while staggering from one large inventory purchase to the next. Facebook is also a fickle advertising marketplace. While today's buyers continue to purchase tomorrow? How can the risk of fading trends and fads be modelled and understood?
We believe the best approach to these challenges is a comprehensive business intelligence and financial forecasting function. Prerequisites include high quality monthly bookkeeping, and a strong relational database functionality connecting the disparate parts of your business - from warehousing, inventory, cash flow and predictive analytics capability - to name just a few. Success is possible, but it takes an investment in capacity building up front.
Attribution analysis is the key to understanding that all important "Return on Advertising Spend" ratio. While Facebook's business performance tools are quite powerful, there are often gaps that may exist with respect to campaign setup and understanding the data that is being generated. Moreover, it is often difficult to understand and independently verify how Facebook is coming up with its ROAS numbers. Even if transparency and data integrity were not issues, there can be real challenges to understand full attribution in all its complexity. For example, imagine that a consumer is shown a Facebook ad eight times over eight weeks. Finally, they make a purchase. They do so without clicking on a Facebook ad prior to the purchase, however. How can we understand the ROAS that applies in this instance? How much did each of the ad exposures influence that final purchase decision?
Often eCommerce entrepreneurs are interested in high ROAS numbers right off the bat. However, this can be a dangerous approach and lead to volatile sales performance. Consumers may fall in and out of favour with a particular product rather quickly, and without a roster of "lower ROAS" inventory items that are percolating at all times, a company can be left with a collapsed sales funnel. Overreliance on a few best sellers is dangerous.