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After working on countless forecasts, we came up with a standard equation to double eCommerce revenue for an online business using Facebook Ads.

Before you start off with a revenue forecast, you need to understand the basics of the campaign structure and equations for budget change. Here’s a visual depiction of the same:

First, you need the campaign to target your existing customers, and we call it a bottom-funnel campaign. You need to target existing customers based on their purchase frequency, order value, and recency.

In the second stage, you need to target your existing visitors, Fanpage/Instagram engages, and video viewers. We call this campaign a mid-funnel campaign or warm audience campaign.

Finally, you need to attract new visitors to grow your top funnel or cold audiences. You can target lookalike audiences, interest, behavior, and demography-based audiences. Once you have the structure, you can develop a reliable forecast to increase your e-commerce revenue by 100%.

Understanding Forecast Calculations

Let’s take a look at a real-life experience we had.

When we started off, our money was divided in the following manner –

TOFU - Top Funnel

Spent

$5,000.00

Revenue

$10,000.00

RoAs

2

MOFU - Mid Funnel

Spent

$5,000.00

Revenue

$15,000.00

RoAs

3

BOFU - Bottom Funnel

Spent

$2,000.00

Revenue

$5,000.00

RoAs

2.5

And this is what the total looked like -

TOTAL

Spent (PKRR)

$12,000.00

Revenue

$30,000.00

RoAs

2.5

Seasonality Factor

1

Considering the seasonality factor(s) involved.

Seasonality refers to the fluctuation in the demand of specific products during a period of time, owing to the needs of the consumers at that particular time. For example, shorts sell much less during the winter season, while jacket sales are low during the summer months.  

TOTAL (After Seasonality Factor)

Spent (PKRR)

$12,000.00

Revenue

$30,000.00

RoAs

2.5

Implementing the equations for budget changes

Equations for budget changes

After following the above formula to gauge consumer demand and forecast our sales, here’s how we broke down our ad budgets in the next 3 months. If you notice, we broke down the funnel to address the different stages an average buyer goes through when searching for a product/ service to purchase.

TOFU - Top Funnel

Here’s what the budget allocated to entice new customers with TOFU ads looked like:

Distribution

Last Month

Month 1

Month 2

Month 3

Spent

$5,000.00

$10,000.00

$20,000.00

$5,000.00

Revenue

$10,000.00

$14,000.00

$19,600.00

$10,000.00

RoAs

2

1.4

0.98

2

MOFU - Mid Funnel

Here’s what the budget allocated to re-engage and nurture buyers who showed interest in the TOFU ads looked like:

Distribution

Last Month

Month 1

Month 2

Month 3

Spent

$5,000.00

$7,500.00

$11,250.00

$11,250.00

Revenue

$15,000.00

$22,500.00

$33,750.00

$38,812.50

RoAs

3

3

3

3.45

BOFU - Bottom Funnel

Here’s what the ad budget looked like for our bottom of the funnel campaigns, that were targeted at nudging the nurtured buyers towards conversion.

Distribution

Last Month

Month 1

Month 2

Month 3

Spent

$2,000.00

$2,000.00

$2,000.00

$2,400.00

Revenue

$5,000.00

$5,000.00

$5,000.00

$6,000.00

RoAs

2.5

2.5

2.5

2.5

Once this was done, this is what the total looked like -

TOTAL

Distribution

Last Month

Month 1

Month 2

Month 3

Spent

$12,000.00

$19,500.00

$33,250.00

$18,650.00

Revenue

$30,000.00

$41,500.00

$58,350.00

$55,812.50

RoAs

2.5

2.128205128

1.754887218

2.939008043

Seasonality Factor

1

0.8

0.9

1.1

Considering the seasonality factor(s) involved -

TOTAL (After Seasonality Factor)

Distribution

Last Month

Month 1

Month 2

Month 3

Spent

$12,000.00

$19,500.00

$33,250.00

$18,650.00

Revenue

$30,000.00

$33,200.00

$52,515.00

$60,293.75

RoAs

2.5

1.7502564103

1.579398496

3.23208847

To put the achieved results in proper numbers, here’s a look at Revenue and RoAS growth after implementing the proposed equations for revenue growth -

 

Month 1

Month 2

Month 3

Revenue Growth

11%

75%

101%

RoAs Growth

-32%

-37%

29%

Here’s a graphical representation of what we achieved; notice how we gradually worked our way upwards to focus on investing more in BOFU ads. While TOFU ads still remain crucial to an ad campaign’s strategy, the budget allocated towards an ‘unknown’ audience should be lowered over a period of time, focusing more on those who are likely to convert.

Revenue Growth

While implementing this equation, you need to try and include more audiences in the Top-Funnel (TOFU).

Remember, Facebook ads alone can’t push revenue growth. A lot of other factors get involved. This typically includes your brand awareness, organic growth, referrals, competitor growth, market demand and more.

Also read: How Love Pangolin used Alavi.ai to boost returns at every level of the marketing funnel

Optimizing your Facebook ads strategy is a continual process. As you start to learn more about your target audience, their preferences, purchase patterns and how they interact with you, you need to refine your revenue forecast accordingly.

Keeping track of your changing consumer needs is how you can drive more conversions for your business!

Ready to do this in a much smarter way, and at scale?

Developed for small and medium businesses, Alavi is a Martech application that performs predictive analytics on your customers’ behavioural data in a continual manner.  

By combining the power of AI, machine learning and automation, it gives digital marketers the cohorts and workflows they need to quickly target their most profitable audiences across the buyer funnel; making it much simpler to optimize your budgets and forecast Facebook revenue!

Use Alavi for Free Now

Developed for small and medium businesses, Alavi is a Martech application that performs predicative analytics on your customers’ behavioural data. By combining AI, machine learning and automation, it gives digital marketers the cohorts and workflows they need to quickly target their most profitable audiences and boost campaign performance.

Alavi has a proven record of helping brands in a variety industries grow their revenue online. It has a very short time to value and is easy to setup and simple to use.

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To contact us,
Please email
swethan@alavi.ai