by If you are interested in learning a method which will help you sign up thousands of Subscribers, this post will help you.
I have been meaning to write this article for a while as I keep seeing this miss conception time and time again when people are discussing Facebook ads or paid traffic in general.
The information I am about to share here is one of the factors which have helped us scale up to 10,000 Subscribers in BusterBox.
The majority of advice on the Internet will recommend that you manage your ads in such a way that when an ad set turns unprofitable you should kill it.
Now I completely understand where this advice is coming from as every business is going to have a CPA which will work for them and they don’t want to burn money if the costs are too high and the ad prices no longer make sense.
I am afraid though, when you are looking to scale your subscription box business that kind of thinking won’t do you any favours and is actually wrong.
Let me explain to you exactly what I mean.
In an ideal world every single ad set and every single ad are going to he profitable and the costs of each of them will never exceed the target CPA you have set.
I am afraid we are not in an ideal world, though especially now with all the privacy changes and the increased volatility of Facebook and other ad platforms. This means it is possible that some of the ad sets you launch will not reach the target CPA and may be a bit more expensive.
Now there is something that you have to bear in mind with this. When you are really looking to grow your subscription box business, there are actually two metrics you need to pay attention to.
1. CPA (Cost per acquisition)
2. Volume (Number of new subscribers)
The CPA is really important, but so is the volume you are getting. What good is reaching the target CPA if you only sign up a handful of new subscribers each month?
The aim of the game is to keep the overall CPA on target but also sign up a LOT of new subscribers each month and to achieve this you may have to run some ad sets that aren’t profitable.
Let me show you an example
Just imagine you had a target CPA of $25 and LTV of $350 and these were the ad sets you were running.
Ad set A – $20 CPA – 500 Subs Signed up – $10,000 spent
Ad set B – $34 CPA – 200 Subs signed up – $6800 spent
Ad set C – $25 CPA – 100 Subs Signed Up – $2500 spent
Ad set D – $38 CPA – 50 subs signed up – $1900 – spent
Ad set E – $120 CPA – 10 subs signed up – $1200 spent
Now the first thing I notice when I look at this is out of the 5 Ad sets there are only two of them which are coming in on the $25 CPA Target.
All of them are bringing in a bit of volume though, and only Ad set E is absolutely terrible. So the first thing I will do is turn off Ad set E.
Now I am going to take a step back and look at the bigger picture here.
In total between Ad set A and Ad set D we have spent a total of $21,200 and we have signed up a total of 850 new subscribers.
Which means our overall CPA is $21,200 / 850 = $24.94 which is on target.
Now the mistake a lot of people are doing is not working out the overall CPA and doing it on a per ad set basis, which means they can’t reach volume and they are leaving money on the table.
If I did that with my calculation, I would have turned off every single ad set apart from Ad set A and Ad set C.
The results would have looked like this.
In total with Ad set A and Ad set C we would have spent $12500 and got 600 new subs signed up.
Which means the overall CPA is $12500 / 600 = $20.83 which is cheaper than above but the only problem is you are missing an extra 250 subscribers.
Now we have already mentioned the LTV of each subscription is $350. So let’s work out how much money you have left on the table by turning off those ad sets.
250 subscriber’s x $350 LTV = $87500.
By turning off those ad sets you cost your company $87500 in extra revenue.
Now let’s take a look at the full results of both calculations.
- You spent $21,200 and you got 850 subscribers signed up. This has brought in total revenue of $297,500 over the lifetime of the subscriptions.
- You spent $12500 and got 600 signed up. This has brought in total revenue of $210,000 over the lifetime of the subscription.
Now I know exactly what I would prefer:
I would much prefer the first scenario where I spend an additional $8700 in marketing costs, but sign up an extra 250 subs and earn an additional $87,500 in revenue.
Basically the moral of the story is you should look at the bigger picture when running ads. The only thing that really matters is the overall CPA you are paying and you shouldn’t really be worrying about it on a per ad set basis.
Now obviously there will be times when the performance is really bad on a particular one and it will need to be turned off, but a lot of the time to reach your goals, you may need to leave some “unprofitable ones running” to get the volume you need.
That was a very rough example, I have above, but I hope you get the idea. The more money you spend on Facebook and different channels the more difficult it can be to keep every single ad set on target and if you want to really start ramping up this is the approach you may need to take.
I hope you found this helpful. If you have any questions about advertising or subscription boxes in general, please comment below.
