What You Need to Know about the Difference between ROI and ROAS

When you’re running an e-commerce business, there are many metrics to consider to keep your business running, making revenues, and profits.

Among these metrics are two often mixed up terms. They are: return on investment (ROI) and return on ad spend (ROAS).

Let’s focus on the difference between ROI and ROAS and how e-commerce businesses can use each of them and when they should.

What is ROI?

Return on investment (ROI) is metric that measures the performance of an investment.

Investopedia explains ROI as a metric used to “evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.”

Businesses who use ROI try to see whether the investment they made was a good one or not.

ROI is calculated by dividing the investment’s net profit (or loss) by the initial cost. The result is a percentage.

This is what the equation looks like:

ROI formula

It also looks like this:

ROI = profits-costs / costs x 100 = %

Here’s an example of ROI:

Kelly invested $1,000 in a business venture and sold it for $1,300 a year later. To calculate the ROI, we’d have to divide the net profit (the $1,300 – $1,000 = $300) by the investment ($1,000). This would result in an ROI of $300/$1,000, or 30%.

ROI can be used for a variety of things, although most businesses use it as a profitability measure. ROI was an investment measure before everything turned digital. Online businesses use it too.

However, there are some downsides to ROI. “While ROI is a simple and straightforward measure, it does not take into account the holding period or passage of time, and so it can miss opportunity costs of investing elsewhere,” notes Investopedia.

What is ROAS?

Return on ad spend (ROAS) is a metric that measures the impact of your marketing and advertising. Every dollar you spend on ads needs to translate into a return, a result.

ROAS is the metric that measures that result.

Whether you’re trying to track clicks or conversions, ROAS is what tells you if the dollars you’re spending are resulting in high value or not.

ROAS is how your business benefits from every dollar you spend on advertising messages and ads. The higher your revenue from dollars spent on ads, the better your ROAS.

The important thing about calculating ROAS is to know how much you are spending on ads and how much are you earning in return.

How to calculate ROAS

To calculate return on ad spend, you’ll need to divide your conversion value by the total amount of your advertising (or your advertising costs).

How to calculate ROAS – Image via Segment

But what is a conversion value?

The conversion value measures the revenue your business can generate from a single conversion.

This means that the ROAS formula can also look like this:

ROAS = revenue from ad campaign (divided by) cost of ad campaign = Ratio x100 = %

Let’s explain this better with an example:

If John spends $20 on advertising to sell a $100 product, then his ROAS is 5:1 or $5. That’s $5 in ROAS for every dollar spent to sell John’s product.

If your ROAS is less than one, it means you’re not making money; you’re losing money.

If your ROAS is $1, that is $1 earned for every $1 spent, it means you’re breaking even, which again isn’t a good indicator. But you’re not losing money.

But if your ROAS is above $3 for example, then for every $1 you spend, you’re getting $3 back and you’re making a profit. (That’s a 200% return on ad spend).

If your e-commerce strategy is to achieve profit, then your goal would be to achieve the highest ROAS possible for your business. You’ll need to know what the average ROAS is for your industry so you can see how you average accordingly.

However, the target ROAS benchmarks are usually between 3.0 and 4.0. Again, these can differ based on the industry and the stage where the business is at. Larger businesses can enjoy good profits at a ROAS of 3.0, while smaller businesses might need to achieve a ROAS of 5.0 or more.

The difference between ROI and ROAS

You now have a brief idea of the difference between ROI and ROAS.

Do they sound similar?

Yes.

Are they similar?

Yes. And No.

The main difference between ROI and ROAS is that ROI measures the value of an entire investment. Yes, that investment can be ads as well. But it can also be an investment in a new business, a factory expansion, a new department, and so on.

ROI is profitability measure. It takes into account other types of spending, like new software for your business.

ROAS, on the other hand, is specifically about your ad spend and its performance. It won’t tell you if your ad spend translated into profit for your business.

Here’s another example that shows the difference between ROI and ROAS on application.

XYZ company spends $25,000 in ads and generates $100,000 in revenue from its ad campaign. However, it has other expenses such as software and personnel amounting to $90,000.

To calculate the ROAS: Revenue of ad campaign – cost = ratio x 100 = %

($100,000/$25,000) x100 = 400%

To calculate the ROI: profits-costs / costs x 100 = %

Profits (loss) = $100,000 – $25,000 – $90,000 = -$15,000

Costs = $25,000 + $90,000 = $115,000

-$15,000 – $115,000 x 100 = – 13%

As you can see, the ROAS is showing stellar performance. But once it’s included alongside other expenses to calculate the ROI, we see negative performance or negative ROI.

By calculating ROI, we can see that XYZ Company is making a loss.

Another major difference between ROI and ROAS is that ROI is about the money you make after deducting all your expenses, whereas ROAS compares between how much you’re spending and how much you’re making on ads only.

The sole purpose of ROI is to determine whether the campaign is worth the investment or not. By taking the margin into account, you can quickly determine your overall profits and determine what your actual ROI is.

The bigger picture of ROAS and ROI

ROAS focuses on advertising and its results. It helps businesses determine if their advertising efforts are paying off or not.

By focusing on ROAS, e-commerce businesses can make better future decisions, see where they need to invest their dollars, and how to better invest them.

That said, relying on ROAS only can be misleading for a business. Why? Because ROAS is about advertising results only. Your ad campaigns may be resulting in a high conversion rate, but the cost of each conversion is quite high resulting in an overall loss for the company.

An example of this is a business selling a product for $30 but generating leads at $50 per lead. Each translates into a $20 loss for the company.

The loss doesn’t necessarily have to be in the cost of the lead in the ad campaign. The loss may come from additional aspects such as production and shipping.

This is where ROI comes in. It factors in the other expenses that aren’t just related to the ad spend.

“When you consider ROI vs. ROAS, it’s important to remember that it isn’t an either/or situation. Whereas ROI can help you understand long-term profitability, ROAS may be more suited to optimizing short-term strategy,” notes GoCardless.

Next steps

There are many differences between ROI and ROAS. As a business you can’t rely on just one metric.

We recommend using both. Using ROAS to see how your ad campaigns are performing and then using ROI to see how your overall marketing budget and other expenses fit in the equation.

This means that an effective digital marketing campaign would rely on both ROI and ROAS.

Another metric you should include in your digital marketing efforts is customer lifetime value (CLV). CLV combined with ROI can offer great results for your business.

Want to know more about the metrics and means to help your e-commerce business? Tell us what you’re struggling with in the comments and we’ll share our tips with you.

Want to read more? Discover the 9 E-Commerce Trends for 2021 You Need to Know

9 E-commerce Trends for 2021 You Need to Know

The past 12 months have had more impact on e-commerce and customer behavior than any other time in the years and decades before.

In fact, recent data from IBM’s U.S. Retail Index shows that the coronavirus pandemic has sped up the shift from physical to online stores by around 5 years.

The sudden shutdown of physical locations and the shift to online helped the global e-commerce industry grow. Consumers who were forced to stay at home had to find another route to getting their daily needs.

That route was e-commerce and online shopping.

But as these shifts took place, new trends both for e-commerce and advertising emerged.

In this article, we’ll be tackling the e-commerce trends for 2021 that you need to know to help your online store make it through the year and beyond.

How has e-commerce changed in 2020?

As buyers turned to online shops for their needs so did physical stores.

On-ground stores resorted to the internet not only to be in contact with their customers but also to stay afloat and grow their business.

Many physical businesses who launched their website or rather refurbished their websites to handle the move to online shopping reported doing well in April 2020, according data by Brightpearl.

Small and average-sized e-commerce retailers said their annual revenues grew by 15% in April 2020, the report adds.

But e-commerce wasn’t the only industry or segment that was affected by the coronavirus. Online payments witnessed leaps across the globe.

According to the Q3 2020 COVID-19 Impact on Global E-commerce and Online Payments report, US consumers said they were “willing to change their shopping behaviors to adapt to the new reality.”

e-commerce-trends-2021-online-shopping

They also said they were likely to continue using “contactless payments even when the health crisis wanes.”

A Business Insider report on digital payments projects that credit card payments will grow to $1.82 trillion in 2024 from $1.75 trillion in 2019.

“High credit appetite and robust rewards programs…will entice spending and help the segment tick up, though growth will be slower than inflation,” it said.

E-commerce statistics you need to know

E-commerce was massively impacted in 2020.

To see the e-commerce trends for 2021 clearly, let’s first look at some e-commerce statistics to denote the impact.

–         Shopify reported a 94% year-on-year surge in revenue in Q4 2020 to $977.7 million, it said in February.

–         Sales across Shopify in the Black Friday-Cyber Monday long weekend recorded $5.1 billion compared to $2.9 billion in the same period of 2019.

–         In the UK, online retail sales jumped 74% year-on-year in January 2021, marking the largest growth rate since the first lockdown in March last year.

–         The UK’s “online sales accounted for a record 35.2% of all retail in January 2021,” according to data from the ONS

–         E-commerce penetration in the US accelerated by 10 years in a 90-day period in 2020, reaching around 33%, according to data from McKinsey.

E-commerce trends 2021

2020 was a year unlike any other. But 2021 picks up where its predecessor left off – in a way.

The year 2020 laid the foundation for e-commerce and e-payment growth for the years to come.

Here’s what experts and reports predict will be the e-commerce trends of 2021 and beyond.

1. New shopping habits

It’s no surprise that shopping habits or rather ‘new shopping habits’ are at the forefront of the 2021 trends for e-commerce.

The pandemic has forced customers and consumers to shift the way they buy, whether it’s groceries or clothing or furniture. Everything has changed.

“The biggest catalyst for e-commerce growth has always been the industry’s ability to break the general consumer’s time-worn habit of physically visiting stores,” notes Kevin Zhang, e-commerce entrepreneur and creator of the Branded Niche e-commerce program, in a Forbes piece.

Older generations who previously preferred in-store purchases are now discovering the benefits and convenience of online shopping.

e-commerce-trends-buying-online

It is likely that these older generations will continue their e-commerce shopping behavior even after physical stores reopen at full capacity, Zhang adds.

Another trend that’s been clear in 2020 was the buy online, pick up in-store (BOPIS).

Research shows that the BOPIS e-commerce trend is likely to continue well into 2021. Data from Brightpearl shows that 41% of consumers plan to increase their BOPIS trend in 2021.

BOPIS is likely to become “a mandatory requirement” for retailers who want to grow their overall sales.

2. Marketplaces are on the rise

Although many businesses are creating websites to accommodate online shopping, consumers look at what’s more convenient for them first and foremost.

Many of the newly-created e-commerce sites are unable to keep up with increasing traffic. They also struggle to provide adequate shipping options.

That’s why many shoppers are looking at marketplaces like Amazon and Etsy.

“As shoppers realize [that] shopping in a marketplace is easier and more convenient than shopping on multiple e-commerce stores – with the mental satisfaction of 2-3 day shipping and free returns on most items and most marketplaces, consumers will expect the same from all other e-commerce sites,” RANDYS Worldwide’s Nick Hayes explains.

3. Delivery is key to success

One of the e-commerce trends of 2021 is delivery. And the way businesses deliver their products is key to their success.

However, in 2020 as many businesses were faced with a shift to online and the need to deliver and ship their products to consumers, new problems arose. One of those was unreliable delivery.

This lag in delivery resulted in a weakening confidence among consumers, many of whom were only just starting to shop online.

Nearly 40% of online shoppers suffered order delays in 2020, according to BrightPearl.

E-commerce businesses should put delivery and shipping at the top of their strategies for 2021 if they wish to succeed and grow.

They’ll need to be flexible and focus on the speed of their delivery, having various fulfillment options like home delivery and BOPIS.

4. Trust is essential for consumers

Consumers like brands they trust. When shifting to online, they’ll search for retailers who can deliver “a consistent buying experience,” according to My Total Retail.

This consistent buying experience was badly affected by the move from physical to online stores.

The top buying experience issues reported were: delivery problems, issues with returns, communications, online payment, and general poor experiences.

If you’re an e-commerce business and want to offer a memorable experience and create loyal customers, then these points should be at the top of your list.

5. More tech spend for e-commerce businesses

It’s no surprise the spending on technology will increase in 2021.

Around 68% of retailers are projected to increase their spending on technology over the next 12 months, according to Brightpearl.

The top initiatives e-commerce businesses will focus on are social media marketing, web personalization, and expanding their online payment options.

6. The need for analytics is ever-growing

One of the best tools for measuring the impact of anything online is analytics.

The need for effective analytics that support online shopping and growth will be a major e-commerce trend for 2021.

e-commerce-trends-analytics

Many e-commerce stores look at the click-through-rates (CTR) and where their sales are coming from.

E-commerce businesses will need to focus more customer segmentation and use it to better understand their customers and drive their business and marketing strategies.

2021 trends for advertising and marketing

Not only will e-commerce trends for 2021 be affected by consumer behavior but also by marketing and advertising.

Here are some trends that play a role in the e-commerce marketing and advertising sphere.

Dentsu’s Ad Spend Report 2021 expects ad spend to increase by 10.8% in India compared to 2020, which is the highest rise in ad spend globally.

The UK is expected to see the second highest rate of 10.4% in 2021 from a year earlier. Ad spend in France, Canada, and Italy are likely to “experience healthy growth” at 8.9%, 7.2% and 5.9%, respectively, the report says.

In terms of ad market share, the US dominates with 37.9%, followed by China in second place with 17.6%, and Japan and the UK at third and fourth with 9.9% and 5.1%, respectively.

7. More marketing as more people shop online

The pandemic has changed the way people shop and where they shop. It has changed both their behavior and their buying psychology.

This, in turn, has offered new and massive opportunities for small businesses.

In addition, new niches have come into play or rather niches that didn’t have much traction. An example of this is the rising need for sanitation products as people seek to keep themselves safe from the pandemic.

8. Video ads are on the rise

With more people going online and more social media platforms coming to the forefront, e-commerce businesses have an opportunity to reach more and conquer more.

Video marketing is making major headway across platforms like Snapchat, TikTok, Instagram.

The social platforms themselves are making deals and taking advantage of the growing number of video viewers worldwide. In 2020, Facebook announced the launch of Instagram Shops, while Shopify announced a partnership with TikTok.

video-marketing

The Shopify-TikTok deal allowed merchants to “create and connect their TikTok For Business account and deploy In-Feed shoppable video ads directly within Shopify. Merchants select which product they would like to feature, and video ads are automatically generated that drive to their Shopify stores for checkout,” explains Shopify.

9. Using AI for better experiences

In the past few years, there’s been a rise in artificial intelligence (AI).

In 2021, AI will take the e-commerce space by storm. Many apps and startups have already emerged on the scene.

The main application and use of AI in e-commerce has been machine learning and chatbots.

If you have an online store and you’re offering recommendations to your customers based on previous purchases and their search history, then you’re using AI. And kudos to you!

Did you know that Converted.in uses AI to power customer segmentation to create automated ads for businesses like you?

Make these e-commerce trends work for you

Whether it’s e-commerce or marketing trends, it’s important to make these ideas work for you and your business.

But how?

One of the top benefits of e-commerce in general, and e-commerce marketing in particular, is the presence of analytics.

Every day analytical tools emerge and offer strong opportunities to measure the impact of marketing, sales, as well as internal efforts to improve products and services.

Using analytics, like segmenting your customers and looking at where your traffic is coming from, can help you understand your customers better.

This means you can offer them better experiences and build long-term relationships which translate into higher customer lifetime value.

Seize the opportunity

The pandemic has changed many things. Some for the worse and maybe some for the better.

For one thing, it has sped up advancements and offered new opportunities in the world of e-commerce.

It has made people think, buy, shop, spend, and live differently.

As an e-commerce business, it’s your job to heed these trends and use them to your advantage.

Business is a learning process and with a pandemic there’s more opportunity to learn and experiment. Businesses who didn’t change and adapt their model and advertising to the new norm were hurt badly, while many had to close shop.

Though this year offers many obstacles for e-commerce, it also offers many opportunities.

You can start seizing one of these opportunities when you sign up with Convertedin and explore our AI software that segments your customers multiple audiences and lookalike audiences for your business.

Understanding How and When to Use Dynamic and Static Ads

As a store owner or e-commerce business, ads are an essential part of your marketing strategy. There are two main ad types you need to be aware of. Those are dynamic and static ads.

These two ad formats are in constant comparison. Which means you need to know as much as you can about them.

For the purpose of this article, we are focusing on e-commerce businesses and their use of dynamic and static ads.

We’ll explain each ad type, compare them, then see which is more suitable for your store.

So what are the differences between dynamic and static ads?

Let’s find out.

Dynamic and static ads

Before we begin, there are a few points we’d like to highlight.

When you’re about which ad type to use, you’ll need to consider your budget and audience.

You’ll also need to consider your ad frequency so not to spam current and potential customers with your ads.

In addition, the dynamic and static ads mentioned in this article primarily relate to Facebook.

Last but not least, Facebook reported that the number of people advertisers can reach on its platform stood at 2.14 billion in Q4 2020. That’s a 2.2% growth from Q3 2020.

What are static ads?

Static ads are ads that involve a static image. The earliest forms of ads were static ads.

Many businesses rely on static ads because they are less costly to make.

It’s cheaper to create a visual or even several visuals to A/B test than create a video for example.

In a dynamic vs static ads comparison, static ads can be easily used across multiple social media platforms without having to go through technical requirements – just image resizing.

Static ads are usually used to ask for something like asking for

  • Page likes
  • Page posts
  • Mobile app installs
  • Clicking a link
  • Redirecting to an external page (blog post, product…etc)

Depending on your ad placement, static ads can appear in a user’s News Feed on desktop or mobile or on the right hand side rail on desktop.

Static ads are a good option for businesses with limited ad budget.

Let’s see what their counterpart, dynamic ads have to offer.

What are dynamic ads?

Dynamic ads are ads that offer a rich experience to users. They can include video and multiple products or images.

Dynamic ads also offer a personalized and engaging experience and result in higher conversion rates for businesses.

When businesses create dynamic ads, they tend to create multiple versions to ensure that personalization. And because dynamic ads are more personalized than static ads, they tend to change based on consumer behavior.

Dynamic vs static ads

Comparing dynamic and static ads, there’s no winner. Simply, there’s no one-ad-type-fits-all-businesses.

Sad but true. You see what works for one business may not work for another.

This shouldn’t come as a surprise. However, there are 3 major determining factors for what to consider when you’re creating your ads.

what-to-consider-for-your-dynamic-and-static-ads

If your site doesn’t offer a multitude of products, then a static ad would be a better option for you. On the other hand, if you’re selling hundreds of products, then dynamic ads will offer better options for you.

You can use dynamic ads to create a carousel of products whether as suggestions for customers on social media, especially Facebook, or for retargeting purposes.

Getting started with dynamic ads

To create a dynamic ad, you need to have a dynamic audience. This in turn means you should have a Facebook Product Catalog in place.

As an online business, you have a store with multiple products. We’re talking tens and hundreds of products not 5 or even 10 pieces.

You’ll need to upload those products to your Facebook Product Catalog. From there, you can begin creating a dynamic audience and dynamic ads.

Final words

Both dynamic and static ads work well with e-commerce businesses.

However, the size of the business and the marketing budget dictate what type of ads you can run.

If you have a small business with 10 or so products, static ads would be better for you. Of course, you can test dynamic ads to see how they work out for you.

But remember they’re more expensive to make.

If you have a larger business with a variety of products, dynamic offer personalization which translates into a higher conversion rate for your brand.

At Convertedin, we offer both ad types. In fact, we offer a step further into creating those ads and getting them running. That is: ads automation.

The Convertedin ads automation system helps store owners and businesses like you run ads on autopilot. This means you don’t have to worry about creating multiple ads for various product categories.

Find out what Convertedin can do for your e-commerce store with dynamic ads automation.

What Is Marketing Automation? How Does It Work?

When you’re running a large business or managing marketing campaigns across multiple audience segments, creating individual campaigns becomes a bore, not to mention terribly tiring. That’s why marketing automation was born.

What Is Marketing Automation?

Marketing automation is a software or technology that allows marketers to conduct their marketing processes and campaigns across various channels automatically, or as we say in Convertedin, on autopilot.

Using marketing automation, or automated marketing, marketers and businesses can target and reach customers using automated messages via email, websites, social media, or even text.

Marketers and salespeople can also use automation to create online marketing and sales campaigns automatically so they can drive more business, revenue, and enhance overall efficiency of their ads.

Used effectively, marketing automation can easily reduce the load for repetitive tasks, such as social media posting, email marketing, and ad campaigns, allowing marketers and employees to focus on other problems and processes within the business.

Moreover, automation reduces the risk of human error and is not only efficient but also allows businesses to create “a more personalized experience for their customers” and facilitates the overall process, according to HubSpot.

“Marketing automation helps with lead generation, nurturing, and scoring, as well as with measuring overall [return on investment (ROI)] on campaigns,” notes SalesForce.

It adds that the benefits of automated marketing such as time-saving and cost-cutting become clearer as an organization or company “grows in size and complexity.”

“Good marketing automation systems are designed to scale alongside your business,” SalesForce says. 

At Convertedin, we not only offer marketing automation and automated ads, but we help businesses create customer segments on autopilot.

According to data by The Annuitas Group, businesses that use marketing automation to nurture prospect enjoy a stellar 451% growth in qualified leads.

How Does Marketing Automation Work?

Put simply, this form of marketing allows business to collect customer data through a variety of sources and customer interactions.

These include, but are not limited to, website visits (including actions taken on the site), email marketing, social media, and mobile app usage (if available).

In other words, these actions form data which help a business form a 360-degree customer view, offering businesses better customer insights.

After that, the marketing automation software takes charge of creating customer segments and targeting to reach the right audiences on a large scale.

Which Platforms Allow Automated Ads?

As you can expect, the top social media platforms offer marketers the chance to automate their ads. You can find these options on Facebook, Twitter, and Google.

Still, there are downsides to using the platforms’ automated ads. For one, you still have to do a lot of legwork to get the ads done right.

At Convertedin, we take out the hassle of that legwork and allow you to automate across both platforms with the same customer segments you have created.

As your business grows and adds more customer segments, Convertedin automatically adds them in your segments and targets them across several platforms.

Understanding the 360-degree View of Your Customer

When working in marketing, there are many aspects that come to light that need to be addressed. On top of this list is anything to do with your customers, particularly their data. Hence, the 360-Degree Customer View was born.

Having customer data is of utmost importance to businesses nowadays. But the problem is that most of this data is scattered as customers interact with brands and with each other across multiple platforms: social media, mobile apps, in-store, on-ground, via websites, and more.

So how do you combine all of this and reach your customer? That’s the focus of today’s topic: the 360-Degree Customer View.

What Is a 360-Degree Customer View?

A 360-Degree Customer View is being able to collect all of your customers’ data in a single place. This data can include, but is not limited to, basic information such as names, telephone numbers, email…etc.

It also includes past and present billing information, purchasing activity, their interactions with your customer service representatives, and last but certainly not least, their social media behavior.

With the never-ending increase in online apps, people are getting drawn to personalized experiences that tailor to their needs. That’s why integrated approaches like the 360-degree customer view have become a hot topic now.

What does a 360-Degree View of a Customer Do?

It helps you, as a business, not only collect data but get a better understanding of your customers. Once you do, you can serve them better and reach them better.

In other words, a 360-Degree Customer View helps you build long-term relationships with customers and supports your business growth.

A 360-degree customer view can also be described as the foundation that makes an organization’s relationship with customers an experience-based relationship rather than a transaction-based one.

In other words, it’s a view that acts as a melting pot that syncs all customer data together.

With this unified knowledge, your business can acquire more precise customer insights and build unique customer experiences.

360 degrees is a relationship cycle that consists of many touchpoints where a customer meets the brand. Be it through purchases or marketing communications, via customer service or on social media,” explains SuperOffice.

A great product isn’t enough to drive customers, but having a great customer service experience can help.

If your customer service representatives have all the info they need on customers, they can easily respond to them, answer their complaints and queries – without having to request background information – and support their needs.

“If you, as a company, are present at and collect information on each stop in this 360-degrees relationship cycle, then you truly know your customers. It helps you better understand your customers’ priorities and preferences. Which, in turn, means you can position yourself to better predict their current and future needs,” adds SuperOffice.

Everything under one roof

Imagine an unmotivated salesman going to work and having to call around four or five people to get customer data.

Now, imagine another person having the same information all on their desk.

Who is more likely to take relevant quick action?

Having strategies that shorten the chain and give us a multifaceted view of our customers is exactly what businesses should be looking for. Or maybe they are but don’t know what this strategy or tactic is called.

The 360-degree customer view provides this single yet comprehensive view of your customer even if that customer’s data is scattered across different applications and platforms.

Conclusion

Data shows that under 10% of companies use a 360-degree view of their customers, while only 5% use the 360-degree view to support and grow their businesses, says research firm Gartner.

So it’s no wonder companies are struggling. They are missing out on a major source of help when it comes to customer data.

What You Need to Know About Facebook’s Dynamic Ads and Static Ads

In the world of advertising, there many forms an ad can take. Each social media platform comes with its various ad options.

In this article, we will be talking about Dynamic ads and Static ads.

Main Criteria for Any Ad

When conducting ads, whether on Facebook or any other platform, there are a few basic rules you need to remember. Think of them as a 3-point checklist.

  1. Your branding needs to be the same across all ad formats, even if you’re targeting different audiences. Experiment with different text, images, and calls-to-action (CTAs).
  2. Run campaigns for at least two weeks, with minor changes if needed, so you can find out what works and what doesn’t.
  3. Refresh your ads regularly to avoid being repetitive, since many Facebook users log in daily.

Ad Formats

Depending on your choice of platform and where your audience are, you’ll notice that different platforms have similar ad options.

For today, we’ll be focusing on Facebook ads, particularly the differences between the Dynamic Ad and the Static Ad.

Each of these Facebook ad types offers “a different set of risks and rewards,” explains Adquadrant.

Let’s go into detail and see what each is about.

But First Some Data

On average, Facebook enjoys roughly 1.79 billion active daily users, according to June 2020 data by Zephoria.

Moreover, like any ad format, it’s important to segment your users carefully to ensure your ads are well-targeted and avoid wasting ad spend.

The amount of content a Facebook user can see in their News Feed could reach or exceed 1,500 updates. This includes likes, shares, stories, and page updates.

Facebook’s algorithms then attempt to reduce that number to 300 updates. This is based on a user’s likes, hides, and their scrolling activity, explains Nanigans.com.

Static Ads

Static Ads involve page posts, page likes, mobile app installs, and directing users to a landing page.

This ad type normally appears either in a user’s News Feed or on the right hand-side of the page if they are using desktop, or on a mobile’s News Feed.

Static ads work best with seasonal and regional topics, as well as major local or international events.

This makes your ads less intrusive because your target audience and their friends and family may be talking about these topics.

If you’re using a video ad, then “the goal is to raise brand awareness and word of mouth. In contrast, static ads are aimed at directing consumers somewhere else, so make sure your landing page or app is ready to receive visitors,” says Nanigans.com.

Dynamic Ads

Dynamic ads are used to promote your business’s inventory “to people who have expressed interest on your website, in your app or elsewhere on the Internet,” explains Facebook.

These ads “look exactly like other single image ads, carousel ads or collection ads on Facebook, Instagram and Audience Network.”

The difference is, instead of having to create an individual ad for each product or item in your inventory, dynamic ads allow you to create “an ad template that automatically uses images and details from your catalogue for items you’d like to advertise,” Facebook says.

You can use dynamic audience and dynamic ads to retarget customers who took an action on your website or app.

You can even use broad audience targeting and reach people who “may not have visited your website or app before.”

If you’re using a broad Facebook audience, you’ll need to install the Facebook Pixel on your website and create a Facebook Product Catalogue to create dynamic ads.

The dynamic ads show relevant products from your Facebook Product Catalog to people when they visit Facebook, Instagram, the Audience Network or Messenger, offering product recommendations.

If there’s a type of ad you’d like to learn about, leave us a comment below.

A Quick Guide to Online User Segmentation

When conducting your marketing efforts, the first thing you need to focus on is customer or user segmentation.

Why? Because it defines all of your future efforts and helps you determine if you are achieving a return on your investment (ROI) and indicates the success of your campaigns.

But first let’s explain what user segmentation is.

What Is User Segmentation?

Segmentation is a kind of division. You divide or categorize your users, customers, buyers, readers…etc into groups. These groups are called segments.

By understanding the different categories of your users, you can then take the next step which is to target them.

How to Use User Segmentation?

People are naturally different, even people in the same age range can act differently or have varying interests.

In other words, it won’t be fair to you or your marketing budget if you target people aged 15 to 60 at the same time.

This also applies if you try targeting males aged 18 to 25 from the Middle East and North America. Yes, their ages are close but their interests are far and wide.

Types of Segmentation

To divide your target audience, you need to understand the types of segmentation you can use.

You can segment your audience based on:

  • Demographics: This involves dividing users based on their language, age, and gender.
  • Geographic: This is where you segment customers based on location, whether it’s continent, country, city, or even a specific neighborhood.
  • Psychographics: The division is based on habits; this is the ‘why’ behind your users’ buying decisions.
  • Behavior: Here you segment customers based on their behaviors such as how they act and what they do. It’s the ‘what’ behind their decisions. This is section is also known as interests.

Lesser Known Types of User Segmentation

There are three more types of segmentation that are often forgotten or not focused on. They primarily rely on what you as a business offer and to whom.

These are:

  • Firmographic segmentation: This is used in B2B marketing; that’s when your target customers are other businesses.
  • Cultural segmentation:  Understanding your customers’ culture can also help you in your targeting. It offers some insight on how customers of a certain culture make their decisions.
  • Occasional segmentation: This is a form of seasonal segmentation where certain words, terms, or products appear at certain times of the year versus others.

“This [occasional] segmentation focuses on specific events that are completely independent of the customer. It divides the market into categories based on the various occasions when the customer plans to buy the product, actually buys the product or uses the product,” explains marketing strategist Paul Shepherd.

He goes on to say that occasional segmentation can be further sub-divided into:

  • Universal occasions
  • Regular personal occasions
  • Rare personal occasions

Understanding Your Users via Segmentation

By segmenting your customers into groups, whether through one or more of the above options, you can begin to create a clear picture of who you are talking to.

According to data compiled by Accenture, around 81% of consumers wish brands understood them better, knew when to approach them and when not to.

Moreover, roughly 66% of marketers “struggle to personalize content in real time,” says Adobe, which adds that 77% of marketers “believe real-time personalization is crucial.”

This means that the better you segment your customers or users, the better you can target them through ads and content.

Creating a Segmentation Strategy

Last but not least, when you’ve understood the various types of segmentation, it’s time to move on to creating your customer segmentation strategy and use it to drive better sales.

What You Need to Know About the Facebook Product Catalog

One of the best ways online sellers and shops can advertise their products and generate sales is through Facebook. Specifically, through the Facebook Product Catalog.

Whether you are an e-commerce business, ticketing agent, or even a hotel offering rooms and suites, the Facebook Catalog can help your business.

Here’s what you need to know about this sales option from Facebook.

What is the Facebook Product Catalog?

As its name suggests, it’s a catalog where businesses can showcase their products and services.

Remember when customers bought catalogs for their favorite brands and went through them to pick out what they wanted to buy?

IKEA is still one of those brands who publishes product catalogs with price tags for each their products.

That said, most customers and businesses are now online, specifically on Facebook, which has garnered over 2.6 billion daily active users.

With figures like that, it’s no wonder businesses are taking unprecedented steps to be on the social platform.

How Does the Facebook Product Catalog Work?

Like the published catalogs, the Facebook Catalog allows companies and sellers to display their products on its platform. Customers can then access these products and purchase them via the company’s catalog on Facebook and Instagram.

“You can create catalogs for different types of inventory, such as products (e-commerce), hotels, flights, destinations, home listings or vehicles,” Facebook explains.

The tool used to manage a brand’s catalogs is called the Catalog Manager. You will need to upload your products one by one to the product catalog.

What Can I Do with Facebook Catalog?

Once your Facebook Product Catalog is ready, which can be used both for Facebook and Instagram, you can:

  1. Add and manage information for your inventory. This includes titles, images, product descriptions, prices, and other options.
  2. Share access to your catalog, which allows your team to work on it collectively on your catalog.
  3. Create one catalog or multiple catalogs for your products and services.

Facebook also notes that you can “set up a localized catalog for multiple languages and countries.”

Can I Use Ads for the Product Catalog?

The obvious answer is yes. It’s no secret that Facebook would like to create ads for anything and everything on its platform.

These are the types of ads you can create once you’ve created your company’s Facebook Product Catalog.

Instagram Shopping

This option is only available for products. In other words, non-tangible services don’t qualify.

Using Instagram Shopping, you can include your products in both Instagram posts and stories.

In the United States, Facebook allows customers to purchase products directly from Instagram and check out from the platform.

Facebook Page Shop

Like its predecessor, this ad type is only applicable to products.

In this case, the shop on your business page acts like a storefront, while the catalog acts as a warehouse that stores your shop’s inventory.

“If you already have a Page shop with at least one product in it, [then Facebook has] automatically created a catalog for you in Catalog Manager that’s connected to your shop,” the social media platform explains.

The Facebook Page Shop allows you to manage your inventory either in your shop or in the Catalog Manager.

You can create the Facebook Page Shop from your catalog.

Dynamic Ads

Available for all types of inventory, Dynamic ads display products or items from your catalog to people who have looked for them online.

According to Facebook, Dynamic ads “match items from your catalog with events from a Facebook Pixel or SDK, a piece of code installed on your website or app.”

To create a dynamic ad, you need to know and have a dynamic audience.

Collection ads

Applicable to all types of inventory, this ad format shows customers a collection of four items from your catalog. Customers can then tap the items to learn more or browse similar products.

What Is Facebook Dynamic Audience?

As part of this series on Facebook audiences and ads, we’ve tackled different types of audience. Today, we’re taking on Facebook’s Dynamic Audience.

If you’re wondering how you’ve never heard of this audience type or why it doesn’t appear often, you’re not alone.

Here’s what you need to know.

What is Facebook Dynamic Audience?

Unlike Facebook’s Custom Audiences and Lookalike Audiences, the Dynamic Audience is for companies, who have and use a Facebook Product Catalog to sell their products and services.

In other words, if your Facebook page doesn’t have a catalog you won’t be using dynamics audiences or dynamic ads in the near future.

It’s an audience that relies on engagement and interactions between customers and your products.

How Do Dynamic Audiences Work?

Put simply, if you have a product catalog on Facebook, once customers engage with it, then you have a dynamic audience.

Whether these users or customers have clicked on one or more of your products, bought an item from you, or simply added a product to their cart, this counts as an interaction with your shop and catalog and goes into to generate  a Facebook Dynamic Audience.

That said, there’s an important aspect to remember before you can start searching for your dynamic audience.

Your store needs to have the Facebook tracking pixel integrated in order to track your customers’ actions, says Nicolas Vibet, chief product officer at MakeMeReach.com.

How Is this Audience Dynamic?

The answer is since this audience type relies on interactions, it’s ever-growing.

Today you can have 10 users engage with your products, tomorrow that number can be 100.

Regardless of the number, whether it increases or decreases, the audience keeps forming and growing, making it a dynamic audience.

“Any interaction from users with your products, website or content will be tracked, and will design the Dynamic Audience further, reaching more people in the future,” says Vibet.

How Do I Use Facebook Dynamic Audiences?

Facebook doesn’t leave anything to chance. For the dynamic audience, Facebook has created an ad type called Dynamic Ads.

In brief, dynamic ads use items from your product catalog and display them to people who have “looked at or searched for” your products online.

Dynamic ads “match items from your catalog with events from a Facebook Pixel or [software development kit (SDK)], a piece of code installed on your website or app,” Facebook explains.

More on Facebook’s Dynamic Ads in our next blog post!

Here’s What You Need to Know about Customer Lifetime Value

One of the most important terms in business is the customer lifetime value (CLV), sometimes written as CLTV, and sometimes referred to as lifetime value of a customer.

Simply put, it’s a metric companies use to grow their business and learn more about customers.

Defining Customer Lifetime Value

Companies use CLV to measure the time they would need to generate money they invested in earning or getting a new customer.

CLV also helps companies understand how much revenue a single customer can generate for them during the span of their business relationship.

Imagine a company that wants to acquire a new customer. The CLV would be the metric it uses to forecast how much it would need to spend to acquire that customer and how much that customer would be worth for a given number of years, or the length of time the company determines.

Image from Pexels

If your company is looking to acquire long-term revenue-generating customers, then customer lifetime value would be an essential part of your process.

“The longer a customer continues to purchase from a company, the greater their lifetime value becomes,” HubSpot explains.

Why Is CLV Important?

CLV is an important metric “because it helps you make decisions about how much money to invest in acquiring new customers and retaining existing ones,” explains Shopify.

If your company maintains a good customer support and customer success team, it can enjoy a long-term relationship with customers and turn them into loyal buyers. A lack may result in higher churn.

Companies need to understand what CLV is because it’s how they can associate profit to customer relationships.

customer lifetime value guides companies into calculating how much they need to invest to maintain a relationship with their customers.

For example, if your company estimates CLV at $200 for a single customer relationship, then you shouldn’t spend more than $200 to maintain that relationship. Otherwise, you would be making losses.

Calculating Customer Lifetime Value

So how do companies measure CLV? There’s a way to calculate it.

Shopify explains the equation as being:

“CLV = average value of a purchase X number of times the customer will buy each year X average length of the customer relationship (in years)”

Let’s put this into an example. If you own a shoe store, an athlete or marathon runner who buys 4 pairs of shoes from you per year for eight years, would have their CLV equation looking like this:

$100 per pair of shoes X 4 pairs per year X 8 years = $100x4x8= $3,200

On the other hand, a mother buying shoes for her two-year-old daughter would be purchasing at $20 a pair. Her purchases would differ year after year and her CLV would look like this:

$20 per pair X 5 pairs per year X 3 years = $20x5x3 = $300

In other words, the athlete would have a higher CLV than the mother, from a business perspective.

Benefits of Knowing Your Customer Lifetime Value

By calculating the customer lifetime value for various customers, you can make many important business decisions.

According to Shopify, these are the top four reasons you need to know your CLV:

  • How much money do you need to spend to acquire similar customers and have a profitable relationship
  • What kinds of products do customers with the highest CLV want
  • Which of your business’s products have the highest profitability
  • Which of your clients or which types of your clients are the most profitable for your business