Don't blindly optimize your Meta ads for lowest cost conversions

One of the biggest decisions you have to make in your Meta Ad account if you're running ads for a DTC brand is around the optimization goal of your conversion campaigns.

Meta's default optimization goal is going to be lowest cost optimized, meaning that you're telling the Meta algorithm to go and chase conversions with the lowest possible CPA.

But this can lead you astray sometimes.

👉🏼 [YouTube Explainer] - Don't blindly optimize your Meta ads for lowest cost conversions

The Problem with Lowest Cost Optimization

Let me show you a real example of how this plays out.

Say this Meta Ad set has two different products:

Product A:

• Selling price: $90
• Cost + delivery: $20
• CPA: $32
• Contribution margin per unit sale: $38

Product B:

• Selling price: $140
• Cost + delivery: $30
• CPA: $60
• Contribution margin per unit sale: $50

When we do the unit economic breakdown here, you can see that Product B is actually driving more contribution margin than Product A.

But what's going to happen if you are running your Meta Ads on lowest cost optimization? What you're telling it to do is to go and chase the conversions with the lowest CPA.

So all of your spend is actually going to go to Product A instead of Product B, even though Product B is actually driving more contribution dollars for your business.

What Do You Actually Do About This?

There's a few different solutions:

Solution 1: Group Products by Margin Profile

Run lowest cost optimized campaigns where products have the same margin profile in the ad set. So you're not so worried about this phenomenon.

Solution 2: SKU-Specific Campaigns with Targets

Run SKU-specific campaigns with a target CPA or a target ROAS in line with whatever margin profile that product has.

Solution 3: Optimize for Highest Value

Use Meta's other optimization goal, which is around highest value to chase the highest value carts.

This is really a business decision based on the particulars of what's going on in your ad program, but it's worth thinking about.