Solved: Lowering High CPMs for Profitable Ad Campaigns

Hi there,

Thanks for reaching out!

Happy to give you some initial thoughts on your problem with high CPMs. It's a really common frustration, and I see a lot of people get stuck on it. Tbh, the fact you're struggling with profitability despite good metrics and high margins tells me you're probably focusing on the wrong number. High CPM isn't the disease; it's a symptom of a deeper issue, and fixating on it is likely stopping you from finding the real cure.

We're going to completely reframe how you look at your ad spend, moving away from chasing cheap impressions and towards a model that lets you confidently outspend your competition while staying profitable. Let's get into it.

We'll need to look at why CPM is the wrong fight to pick...

Right, let's get this out of the way first. Chasing a low Cost Per Mille (CPM), or cost per 1,000 impressions, is one of the most common and destructive habits in paid advertising. It feels intuitive, right? If I pay less for eyeballs, my ads must be cheaper and therefore more profitable. This is almost always wrong, and it shows a fundamental misunderstanding of how ad platforms like Meta actually work.

When you set up a campaign, especially with an objective like "Reach" or "Brand Awareness," you're giving the algorithm a simple command: "Find me the cheapest 1,000 impressions you can, within this audience I've defined." The algorithm is incredibly good at its job. It goes out and finds the users whose attention is least in demand. These are the people who endlessly scroll but rarely click, almost never engage, and certainly don't pull out their credit cards. Their attention is cheap for a reason. So you get what you asked for: a wonderfully low CPM and a campaign that produces absolutely nothing of value. You're effectively paying Facebook to find you non-customers.

Think of it like this: would you rather set up a market stall on a deserted backstreet for £10 a day, or on Oxford Street for £1,000 a day? The backstreet has a much lower "cost per view," but you'll sell nothing. The prime spot costs a fortune, but it's filled with people actively looking to buy. Your CPM is just the rent for your digital real estate. A high CPM often means you're competing for a high-value audience—people who are known to buy, who fit the profile of your competitors' best customers, and who are actively being targeted by other smart advertisers. A high CPM, when paired with the right strategy, is not a problem; it's a confirmation that you're in the right place.

The real issue is that your ads aren't converting that expensive traffic effectively enough to justify the cost. Your margins are 90%, which is fantastic. It means you have a huge amount of room to play with. But if your Customer Acquisition Cost (CAC) is eating up all that margin, it doesn't matter if your CPM is £5 or £50. The problem isn't the cost of the impression; it's the total cost to get a paying customer. And to understand that, you need to get your head out of the ad platform's dashboard and into your own buisness finances.

I'd say you need to master your business maths first...

This is where we separate the amateurs from the pros. The question you should be asking isn't "How do I lower my CPM?" but "How high a Customer Acquistion Cost can I afford and still be wildly profitable?" The answer to that question is found in one metric: Customer Lifetime Value (LTV).

Your LTV is the total 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 else falls into place. It becomes your north star for every marketing decision. If you know a customer is worth £5,000 to you over their lifetime, does spending £500 to acquire them still seem expensive? Of course not. It's a money-printing machine.

So, how do you calculate it? It's simpler than you think. You need three pieces of data:

1. Average Revenue Per Account (ARPA): How much does a typical customer pay you per month or per year? Let's stick with monthly for this example.
2. Gross Margin %: You've said your margins are 90%, so that's 0.90. This is the percentage of revenue that's left after you've paid for the cost of goods sold (COGS).
3. Monthly Churn Rate %: What percentage of your customers do you lose each month? If you lose 2 out of every 100 customers each month, your churn rate is 2%.

The formula is straightforward:

LTV = (ARPA * Gross Margin %) / Monthly Churn Rate %

Let's run an example. Say your average customer pays you £100 per month, your gross margin is 90%, and you lose 4% of your customers each month.

LTV = (£100 * 0.90) / 0.04

LTV = £90 / 0.04

LTV = £2,250

In this scenario, every single customer you acquire is worth £2,250 in pure profit to your business. Now, let's put that number to work with an interactive calculator so you can find your own LTV.

Now you have your target CAC. This is your new god metric. It's the maximum amount you can spend to acquire a customer. All your advertising decisions should now be judged against this number. Suddenly, a high CPM is irrelevant. A £50 cost per lead is irrelevant. All that matters is whether your final cost to acquire a paying customer is below your target CAC. This mindset shift is everything. It frees you from the tyranny of cheap, useless metrics and empowers you to make intelligent, aggressive investments in growth. We have clients who happily pay over $20 per click on Google Ads, because they know their LTV is massive and their sales process is dialed in. They're not scared of high costs; they're scared of missing opportunities.

You probably should rethink who you're talking to...

So if the problem isn't the CPM, what is it? More often than not, it's a combination of two things: your audience targetting and your message. If you're paying a premium for impressions but your ads aren't converting, it means you're either talking to the wrong people, or you're saying the wrong thing to the right people.

Let's start with the audience. Forget the lazy, demographic-based Ideal Customer Profile (ICP) you've seen a million times. "Marketing managers aged 30-45 at SaaS companies with 50-200 employees" is utterly useless. It tells you nothing about their motivations, their fears, or their day-to-day reality. It leads to generic ads that speak to no one.

Your ICP is not a person; it's a problem state. It's a nightmare. Your job is to become the world's leading expert on that nightmare. What is the specific, urgent, and expensive problem that keeps your ideal customer awake at night? What is the career-threatening disaster they are desperate to avoid?

• For a B2B SaaS company selling a FinOps platform, the nightmare isn't 'needing to manage cloud costs'. It's the CFO breathing down the Head of Engineering's neck because the AWS bill just jumped 30% for the third month in a row, and no one knows why.
• For a service business offering fractional CFO services, the nightmare isn't 'needing financial advice'. It's a founder terrified of missing payroll in two weeks because their cash flow projections are pure guesswork.
• For an e-commerce brand selling high-end running shoes, the nightmare isn't 'wanting new shoes'. It's a dedicated marathon runner who just got injured again because their cheap shoes gave them shin splints, and they're terrified of missing their goal race.

Once you've identified this core pain, your targeting strategy becomes crystal clear. You stop targeting broad interests like "business" or "markering" and you start looking for signals of that pain. Where do people in this state of pain hang out online? What podcasts do they listen to (e.g., 'Acquired')? What newsletters do they read (e.g., 'Stratechery')? What software do they already pay for (e.g., HubSpot, Salesforce, Xero)? What influencers do they follow on LinkedIn or Twitter (e.g., Jason Lemkin)? What specific subreddits or Facebook Groups do they join to ask for help?

This is the work. This intelligence gathering is the foundation of any successful ad campaign. When you target based on these signals, you're not just reaching a demographic; you're reaching a mindset. Yes, the CPM to reach these niche, highly-specific audiences will be higher. But the conversion rate will be exponentially better, because your message will land with the force of a revelation. Your CAC will plummet, even as your CPM climbs.

You'll need a message they can't ignore...

Once you're confident you're in front of the right audience, you have to deliver a message that resonates with their specific pain. Generic, feature-led ad copy is the fastest way to burn money. Nobody cares that your software has "AI-powered synergy" or that your service is "best-in-class." They only care about what it does for them—how it solves their nightmare.

There are proven copywriting frameworks that work exceptionally well for this. You don't need to be a creative genius; you just need to be empathetic and structured.

For a B2B SaaS Product: The Before-After-Bridge Framework

• Before: Describe their current world, full of pain and frustration. Paint a vivid picture of the nightmare.
• After: Describe the new world, where their problem is solved. Paint a picture of relief, success, and confidence.
• Bridge: Introduce your product as the bridge that gets them from the 'Before' state to the 'After' state.

For a High-Touch Service Business: The Problem-Agitate-Solve Framework

• Problem: State the problem directly and clearly, in their own language.
• Agitate: Pour salt in the wound. Remind them of all the negative consequences and frustrations that stem from this problem.
• Solve: Present your service as the clear, simple solution to their pain.

This isn't just about text. Your ad creative—the image or video—needs to stop the scroll and visually represent this transformation. For a SaaS product, it could be a short screen recording showing the "aha!" moment in your software. For a service business, it could be a powerful testimonial video from a client who was in their exact shoes. We've seen SaaS clients get amazing results with simple, authentic User-Generated Content (UGC) style videos because they feel more real and trustworthy than slick, corporate productions.

Better creative and copy directly leads to a higher Click-Through Rate (CTR) and a higher on-page conversion rate. This has a dramatic effect on your final Customer Acquisition Cost, making your CPM almost irrelevant. A high CPM with a 3% CTR is infinitely better than a low CPM with a 0.5% CTR.

And an offer that actually works...

Finally, we arrive at the most common point of failure in all of B2B and high-ticket advertising: the offer. You can have the perfect audience and the perfect message, but if you send them to a landing page with a weak, high-friction offer, you will fail.

Please, I beg you, delete the "Request a Demo" button. It is the most arrogant Call to Action in marketing. It presumes your prospect, a busy, important person, has nothing better to do than schedule a meeting to be sold to. It screams "I want your time, but I'm offering nothing of value in return." It's high friction, low value, and instantly commoditises you.

Your offer's only job is to provide a moment of undeniable value. An "aha!" moment that makes the prospect sell themselves on your solution. It must solve a small, real problem for them, for free, to earn you the right to solve the bigger problem for money.

• If you're a SaaS company, the gold standard is a free trial or a freemium plan (with no credit card required). Let them use the actual product. Let them experience the transformation firsthand. A Product Qualified Lead (PQL) who has already seen the value is a thousand times better than a Marketing Qualified Lead (MQL) who just downloaded a whitepaper.
• If you're a service company, you need to bottle your expertise into a tangible asset. For an agency like us, it’s a free 20-minute strategy session where we audit failing ad campaigns. For a corporate training company, it could be a free 15-minute interactive video module on 'Handling Difficult Conversations'. For a data analytics platform, a free 'Data Health Check'. Solve a small problem for free.

This also ties directly back to your campaign setup. You should ALWAYS be optimising your campaigns for a meaningful conversion event, like a lead, a trial sign-up, or a sale. Never for awareness or traffic. When you optimise for conversions, you tell the algorithm, "I don't care about cheap impressions. Go and find me the people within my target audience who are most likely to take this specific, valuable action, and I will pay you what it takes." The algorithm then goes to work for you, not against you. The CPM will be higher, but the final cost per *result* will be far, far lower.

This is the main advice I have for you:

We've covered a lot of ground, and it's a complete shift in thinking from where you started. To make it clear, I've detailed my main recommendations for you below. This is the roadmap to get you from being frustrated by a single metric to profitably scaling your buisness.

As you can see, this is a deep, strategic process. It requires a level of expertise that goes far beyond just setting up an ad campaign. It involves a thorough understanding of your business model, your customer psychology, and the intricate workings of the ad platforms themselves.

Getting this right is the difference between burning through your budget with nothing to show for it and building a predictable, scalable customer acquisition engine. While the principles here are universal, applying them effectively to your specific business, niche, and customer base is where the real work begins. It involves constant testing, analysis, and optimisation—of audiences, creatives, landing pages, and offers.

If this all seems a bit overwhelming, that's perfectly normal. This is what we do all day, every day. We've helped dozens of businesses, from B2B SaaS companies to e-commerce stores, make this exact transition. I remember one software client who came to us with a £100 CPA that was crippling them; by applying these principles, we reduced it to just £7. That's not a typo. It's the result of a strategic, disciplined process.

If you'd like to have a chat about how this could apply to your business in more detail, we offer a completely free, no-obligation initial strategy session. We can take a look at your current setup and give you some more specific, actionable advice. Feel free to book a time that works for you.

Hope this helps!

Regards,

Team @ Lukas Holschuh