This post assumes that you already know how to set up Facebook Ads.  If not, visit their site for more information.

ROI CALCULATOR

You don’t need to know a lot of complex equations to calculate ROI.  I really like Marketing Today’s ROI Calculator for things like this:

To use the ROI Calculator, you need five key pieces of information:

1. The number of pieces
2. Total program costs
3. Response Rate
4. Conversion Rate
5. Average profit per sale

The first three are easily correlated to a standard Facebook Ad metric:

1. Number of pieces = Total impressions on the ad. Facebook will give you this info.
2. Totals program costs = What Facebook charges you (plus if you wanted to add in a calculation for the staff hours it took you to create the ads, you could do that too)
3. Response Rate = The click rate on the ads. Facebook will give you this too.

The next metric, conversion rate, takes a bit more work.  For this, you need to integrate Google Analytics with your Facebook ads, by using a campaign URL and a Goal that you have set up in Google Analytics.  Let’s take these one at a time:

GOALS

The Goal feature in Google Analytics allows you to measure how many of your users complete a specific task, such as completing an online application, registering for an event, or making an online donation. You are allowed up to four goals for each Google Analytics profile (if you want to track more simultaneously, just create duplicate profiles). To create it, go into the profile settings section and select “edit” beside a goal that has not been configured.  It will take you here:

From here, you set the “Goal URL” as the thank you page your users will land on when they have completed your call to action, as well as give the goal a name for easy identification.

You can also set up a “goal value” for non e-commerce goals (if you’re tracking fundraising, that’s e-commerce so you don’t need to worry about that), which will correlate to the number you’re going to assign for the average profit per sale.  More on that in a second.

CAMPAIGN URLS

The next thing you need to do is create a campaign URL, which will be used as the URL in your Facebook Ad.  To make it easy, you can use Google Analytic’s URL Builder:

First, you enter the website URL you ultimate want your users to end up at.  Next, enter a source, medium and name for your campaign.

• Source is like a general category, so that if you run multiple Facebook ads, you can use “facebookad” as your source for all of them and Google Analytics will aggregate that information together in your reports
• Medium in this case will be “cpc” since they are pay per click ads
• Name is the most important, and should be really specific and unique to the ad that you are running.  In this case, we’ve selected “facebook_event_registration_09″, but it could get even more specific than that (say, if you were running a test on conversion rates using different pictures in your ads).

Hit “generate URL” and then use that URL in your ads.

CONVERSION RATE

So once you  have your goal set up and your URL built (having done this all, of course, BEFORE you launch your ad), you can see which conversions came directly from you Facebook Ad.  Go into Google Analytics and, under “Traffic Sources”, click on “campaigns”:

(click for full size)

Then drill down further by clicking on the “goal conversion” tab, and then clicking on the URL of the specific campaign you are interested in.  Once you’re there, it will tell you the percent of users who came into your website via that campaign URL that completed the specific goal.  A little bit of math will give you your conversion rate.

AVERAGE PROFIT PER SALE

The last field you need for the calculator is the average profit per sale.  Basically, this is a dollar value that you assign to a specific call-to-action. How much is it worth to you that your users take a specific action?  With something like registering for an event, it might be a small number, like $50-100. For something big like an online application, you might assign that value as a few thousand dollars, since an application is a huge milestone. It’s an arbitrary number…but not really.  What you’re trying to do is get an apples to apples comparison between the amount of money you spent on a particular marketing initiative and the amount value brought back into your institution as a result.

You should always assign this number BEFORE you actually start running the numbers to figure out ROI.  Otherwise, you might decide that the ROI you’re seeing just isn’t high enough, and therefore you’re going to increase your average profit per sale to make it look better.  Be honest.  If the numbers aren’t as high as you’d like them to be, that gives you good information about how well your particular tactic is working (or not!).

GOOD TO GO

Once you have all your values, plug the numbers in and hit the submit button:

So in this case, the ad had 30,580 impressions and cost $42.55.  Of the 30,580 who saw the ad, .03% (or 9) clicked on it for the response rate.  Of those 9 who clicked on it, 30% (or 3) completed your call to action, for your conversion rate.  We assigned an average profit per sale of $100.  Based on all that, we’ve calculated a marketing ROI of 605.05%.  Not too shabby.

Think that’s a lot of information for something labeled as “easy ROI”?  Trust me, it’s easier than it sounds.  Once you get the hang of it, ROI on Facebook Ads will take you next to no time to calculate.

Photo Credit: dullhunk

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