Away, a direct to consumer (DTC) luggage brand, has been advertising on Facebook to acquire new customers.
Should it continue Facebook advertising?
Before diving into any analysis, think of the information you need to make this decision. Broadly speaking we need to know the cost of advertising and the profit generated from it.
Breaking it down further, we would need the following information:
With this information we can now assess the effectiveness of ads given the monthly ad budget ($15,000) and the CPM rate ($15).
 The example is taken from Gupta, S. (2020): Quantitative Analysis in Marketing, Harvard Business School.
 CPM rates vary depending on product category. In 2020, the average CPM rate on Facebook was about $7. Facebook and Google also sell ads based on clickthrough rate or CTR. In 2020, the average cost on Facebook was $1 per click ( see webfx.com/social-media/how-much-does-facebook-advertising-cost.html).
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How many clicks do the ads receive per month?
The number of clicks per month amounts to: .
How many orders does Away receive per month through the ads?
Away receives orders per month through the ads.
What is the generated margin per order?
The margin per order amounts to $ .
What is the total margin per month?
Away’s generated total margin per month is: $ .
What is the net profitability of Away’s Facebook advertising?
Away’s net profitability of its advertising efforts on Facebook amounts to: $ .
What are Away’s ad impressions per month on Facebook?
Away’s ad impressions per month are: .