TLDR;
- Your Click-Through Rate (CTR) is a distraction. A high CTR from the wrong people is worthless. The only metrics that matter are Cost Per Acquisition (CPA) and Return On Ad Spend (ROAS).
- Stop targeting broad demographics. You need to define your Ideal Customer Profile (ICP) based on their specific, urgent, and expensive 'nightmare' problem that you solve. This is how you write ads that attract actual buyers.
- The biggest reason your ads are probably failing isn't the creative, it's your offer. A high-friction, low-value offer like "Request a Demo" will kill your results. You must provide instant value for free to earn the right to sell.
- You're likely using the wrong campaign objective. Setting your goal to 'Reach' or 'Awareness' tells Facebook to find you the cheapest, least-likely-to-buy audience. You must optimise for conversions (Leads, Sales, etc.).
- This letter includes an interactive calculator to help you figure out your customer Lifetime Value (LTV), which is the number you need to know to scale your ads profitably.
Hi there,
Thanks for reaching out!
Saw your question about CTRs for image and reel ads. It's a common one, but tbh, it’s probably the wrong question to be asking. Your 1-2%+ CTR might be good, it might be bad... but it doesn't really matter. It's a vanity metric that tells you very little about the health of your business.
A high CTR just means lots of people are clicking. It doesn't mean the *right* people are clicking, and it certainly doesn't mean you're making any money. You can have a 10% CTR and go broke if none of those clicks turn into customers.
So, instead of giving you some generic benchmark, I'm going to walk you through what actually drives profitable advertising. It's about shifting your focus from getting cheap clicks to acquiring valuable customers. It's a bit of a longer read, but it's the stuff that actually makes a difference.
We'll need to look at... Why Your CTR is a Distraction
Let's get this out of the way first. Obsessing over your Click-Through Rate is one of the fastest ways to burn through your ad budget with nothing to show for it. It's like judging a restaurant by how many people look at the menu outside instead of how many come in, eat, and pay the bill.
An ad campaign has one job: to generate a profitable return. That's it. Everything else is just noise. The metrics that truly matter are the ones that connect directly to your bank account:
- Cost Per Acquisition (CPA) or Cost Per Lead (CPL): How much does it cost you to get one paying customer or one qualified lead?
- Return On Ad Spend (ROAS): For every pound you put into ads, how many pounds in revenue do you get back?
Your CTR is just one tiny piece of a much larger puzzle. It measures the effectiveness of your ad at getting a click, but says nothing about what happens next. A click is just the start of the journey; the conversion is the destination.
Think about it like this. You're paying for attention. But attention from the wrong people is worse than useless, its expensive. You're better off with a 0.5% CTR from an audience of highly qualified, ready-to-buy prospects than a 5% CTR from a broad audience of tyre-kickers who were just curious about your fancy ad creative.
Here's a look at the typical customer journey from an ad. As you can see, the click is just the first, and arguably least important, step.
The rest of this letter will focus on the things that influence stages 3 and 4, because that's where you actually build a profitable business.
I'd say you need to... Define Your Customer's Nightmare
Before you write a single line of ad copy or choose one targeting interest, you have to know, with absolute clarity, who you're talking to. And I don't mean "women aged 25-45 who live in London and like yoga". That's a demographic. It's useless.
You need to define your Ideal Customer Profile (ICP) not by who they are, but by the problem they have. What is the specific, urgent, expensive, career-threatening nightmare that keeps them awake at night? Your product or service needs to be the aspirin for that headache.
Your ICP isn't a person; it's a problem state. Once you nail this, your targeting and your ad copy write themselves. You stop selling features and you start selling a solution to their pain. That's what gets the *right* people to click.
Let's look at an example. Say you sell a project management software for creative agencies.
| Approach | Profile Description | Resulting Ad Headline |
|---|---|---|
| The Wrong Way(Demographic) | "Creative agencies in the UK with 10-50 employees. Targeting job title: Project Manager." | "The Best Project Management Tool for Agencies" |
| The Right Way(Nightmare-Based) | "Agency PMs terrified of client projects going over budget again. They spend hours manually chasing updates and profitability is a black box. They fear being blamed for shrinking margins." | "Stop Guessing Your Project Profitability. See Real-Time Margins on Every Job." |
See the difference? The first headline is generic. It speaks to everyone and therefore no one. It will get you clicks from people who are just browsing. The second headline speaks directly to a burning pain. It agitates the problem and hints at a solution. It will only get clicks from people who are feeling that exact pain, which are the people who are actually likely to buy your software.
This is the foundation. Do this work first, or you have no business spending a single pound on ads. Your ads need to speak directly to this nightmare. A couple of simple frameworks we use:
- Problem-Agitate-Solve: You don't sell "fractional CFO services"; you sell a good night's sleep. Your ad would say, "Are your cash flow projections just a shot in the dark? Are you one bad month away from a payroll crisis? Get expert financial strategy that turns uncertainty into predictable growth."
- Before-After-Bridge: You don't sell a "FinOps platform"; you sell relief. "Your AWS bill just arrived. It’s 30% higher than last month, and your engineers have no idea why. Imagine opening your cloud bill and smiling. Our platform is the bridge that gets you there."
This is how you get a *quality* CTR. It might even be lower than your current 2%, but the clicks you do get will be from people who are pre-qualified because your message resonated with their specific problem.
You probably should... Calculate What a Customer is Actually Worth
Okay, so we've established that the goal isn't cheap clicks, it's profitable customers. But how do you know what's profitable? How much can you actually afford to spend to get a new customer?
Most businesses have no idea. They just try to get their cost per lead as low as possible, without knowing if a £5 lead is a bargain or a £50 lead is a steal. The answer lies in calculating your Customer Lifetime Value (LTV).
Your LTV is the total amount of profit you can expect to make from a single customer over the entire time they do business with you. Once you know this number, everything changes. It tells you exactly how much you can afford to pay to acquire a customer (your Customer Acquisition Cost, or CAC) and still be wildly profitable.
A healthy business typically aims for an LTV to CAC ratio of at least 3:1. That means for every £1 you spend to get a customer, you get £3 back in lifetime profit.
Here’s the basic maths to figure it out:
- Average Revenue Per Account (ARPA): What do you make per customer, per month?
- Gross Margin %: What's your profit margin on that revenue?
- Monthly Churn Rate: What percentage of customers do you lose each month?
The calculation is: LTV = (ARPA * Gross Margin %) / Monthly Churn Rate
Let's say you run a SaaS company. A customer pays you £100/month (ARPA). Your gross margin is 80%. And you lose 5% of your customers each month (Churn).
LTV = (£100 * 0.80) / 0.05 = £80 / 0.05 = £1,600.
Each customer is worth £1,600 to you. With a 3:1 LTV:CAC ratio, you can afford to spend up to £533 to acquire a single customer. Suddenly that £50 per trial signup from a Meta ad doesn't seem so expensive, does it?
Use this calculator to get a feel for your own numbers. Play around with the sliders and see how small improvements in retention (lower churn) or pricing (higher ARPA) can massively increase what you can afford to spend on ads.
£1,600
£533
This is the maths that unlocks aggressive, intelligent growth. It frees you from the tyranny of trying to get the lowest possible cost per click or cost per lead.
You'll need to... Fix Your Offer (Because It's Probably Broken)
Now we get to the most common point of failure in almost every ad account I've ever audited: the offer.
You can have the best ad creative in the world, perfect targeting, and a killer landing page, but if your offer is weak, your campaign will fail. Full stop. The number one reason ads don't convert is that what you're asking people to do is too much work for too little perceived value.
The classic example of a terrible offer is the "Request a Demo" button. It's the most arrogant Call to Action ever invented. It presumes your prospect, who is probably a busy decision-maker, has nothing better to do than book a 45-minute slot in their calendar to be sold to by your junior sales rep. It's high-friction and low-value. It positions you as just another commodity vendor begging for their time.
Your offer's only job is to deliver a moment of undeniable value—an "aha!" moment that makes the prospect sell themselves on your solution. You must solve a small, real problem for them for free to earn the right to solve the whole thing for money.
What this looks like depends on your business:
- For a SaaS product: The gold standard is a free trial (no credit card) or a freemium plan. Let them use the actual product. Let them feel the transformation. The product itself becomes your best salesperson. I remember one campaign for a medical job matching software client where we managed to reduce their Cost Per User Acquisition from a staggering £100 all the way down to just £7.
- For a service business/agency: You are not exempt. You must bottle your expertise into an asset. This could be a free, automated website audit, a free 15-minute strategy session where you solve one specific problem for them, a free template, or a checklist. For us, it's a free ad account review where we find opportunities for potential clients.
- For an eCommerce store: It's often a compelling discount on the first purchase (e.g., 20% off), a free gift with purchase, or a bundled offer that provides overwhelming value.
Think about your offer in terms of friction vs. value. You want to be in the low-friction, high-value quadrant. "Request a Demo" is the exact opposite.
High Friction, Low Value
- "Request a Demo"
- "Book a Sales Call"
- "Download our Brochure"
Low Friction, Low Value
- "Read our Blog Post"
- "Follow Us on Socials"
High Friction, High Value
- "Buy Now" (for high ticket)
- "Start Paid Plan"
Low Friction, High Value
- "Start Free Trial"
- "Get Free Audit"
- "Download Template"
If your ads are getting clicks but no one is converting on your landing page, the first place to look isn't your page design or your button colour. It's your offer. Is it a no-brainer for your ideal customer? If not, fix it.
We'll need to look at... Structuring Your Campaigns for Profit, Not Clicks
Finally, let's talk about the actual campaign setup on a platform like Meta (Facebook/Instagram). How you structure things can make or break your performance, and there are a couple of huge mistakes people make that are related to your original question about CTR.
Mistake #1: The Wrong Campaign Objective
Here is the uncomfortable truth. When you set your campaign objective to "Reach" or "Brand Awareness," you are giving the algorithm a very specific command: "Find me the largest number of people for the lowest possible price."
The algorithm, in its infinite wisdom, does exactly what you asked. It seeks out the users inside your targeting who are least likely to click, least likely to engage, and absolutely, positively least likely to ever buy anything. Why? Because those users are not in demand. Their attention is cheap. You are actively paying Meta to find you the worst possible audience for your product.
Unless you have a multi-million-pound budget like Coca-Cola, you have no business using these objectives. You must always, always choose an objective that aligns with your business goal. If you want leads, choose the "Leads" objective. If you want sales, choose "Sales". This tells the algorithm to find people within your target audience who have a history of performing that action. Your cost per impression (CPM) will be higher, but the quality of the person seeing the ad will be exponentially better. This is how you find customers, not just eyeballs.
Mistake #2: A Messy Audience Strategy
The other issue is not having a clear structure for who you're targeting. You shouldn't just throw a bunch of interests into one ad set and hope for the best. A proper funnel structure is needed to guide people from being unaware of you to becoming a paying customer.
Here's the prioritisation I use for Meta ads audiences, from coldest to warmest. The further down the list, the better they tend to perform because they're more familiar with you.
Top of Funnel (ToFu) - Prospecting Cold Audiences:
- Detailed Targeting: Interests, behaviours, and demographics related to the "nightmare" you identified earlier. This is where you start for new accounts.
- Lookalike Audiences: Once you have data, create audiences that look like your best customers. Start with lookalikes of:
- Highest value previous customers
- All previous customers
- People who have added payment info
- People who have initiated checkout
- All website visitors
- Broad Targeting: Only use this once your pixel has thousands of conversion events. You let the algorithm do the work based on its data.
Middle of Funnel (MoFu) - Engaging Warm Audiences:
- Website Visitors (excluding recent converters)
- People who watched a percentage of your video ads (e.g., 50%)
- People who engaged with your Facebook or Instagram page
Bottom of Funnel (BoFu) - Closing Hot Audiences:
- People who have added a product to their cart but didn't buy
- People who initiated checkout but didn't complete
- Retargeting your existing customer list for repeat purchases or upsells
You should have separate campaigns for each stage of this funnel. ToFu campaigns to find new people, and MoFu/BoFu campaigns to retarget and convert them. This structure allows you to control your messaging and budget properly, and it's how you build a reliable system for acquiring customers, rather than just getting random clicks.
I've detailed my main recommendations for you below:
This is a lot to take in, I know. So here’s a simple table that summarises the key mindset shifts and actions you need to take. This is the main advice I have for you:
| Area of Focus | The Common Mistake (Your Current Focus) | The Expert Approach (Your New Focus) | Your First Action Step |
|---|---|---|---|
| Metrics | Obsessing over CTR and other vanity metrics. | Focusing relentlessly on Cost Per Acquisition (CPA) and Return On Ad Spend (ROAS). | Go into your ads manager and add columns for CPA/ROAS. Make these the main numbers you check daily. |
| Audience | Targeting broad, generic demographics like age and location. | Defining your customer by their specific, urgent "nightmare" problem. | Sit down and write a one-paragraph description of your ideal customer's biggest frustration, in their own words. |
| Ad Copy | Listing features and using generic headlines. | Using frameworks like Problem-Agitate-Solve to speak directly to your audience's pain. | Rewrite one of your current ads to lead with the problem, not your solution. |
| The Offer | Using a high-friction, low-value CTA like "Request a Demo" or "Learn More". | Creating an irresistible, low-friction offer that provides instant value for free. | Brainstorm a "value-first" offer for your business (e.g., a free trial, a free audit, a valuable template). |
| Campaign Goal | Using "Reach" or "Brand Awareness" objectives, hoping for sales. | Using "Sales" or "Leads" objectives to let the algorithm find actual buyers. | Check your current campaigns. If any are set to "Awareness," duplicate them and switch the objective to "Sales/Leads". |
As you can see, a "good CTR" is the result of getting all these other, more important things right. When you target the right person with the right message about their biggest problem and present them with an irresistible offer, the right people will click. And more importantly, they'll convert.
Building a system like this takes work and expertise. It's not just about setting up an ad and hoping for the best. It's about deep customer understanding, strategic testing, and a ruthless focus on the numbers that actually matter. That's where working with a professional can make a huge difference, helping you avoid costly mistakes and get to profitability much faster.
Hopefully this has given you a completely new way to think about your ad performance. If you'd like to chat through your specific situation and have us take a look at your ad account, we offer a completely free, no-obligation strategy review. We can often find opportunities to improve performance in just a 20-minute call.
Either way, I hope this helps you get on the right track.
Regards,
Team @ Lukas Holschuh
