How much to spend on Facebook (& instagram) ads is a question we get asked a lot and the answer obviously will depend on your industry, your audience and your margins.
Here’s a 6 step approach to help you understand what your Facebook & Instagram ad spend could be:
Step 1: What are your objectives?
Before you start any advertising, you need to know why you are doing it. What is the purpose of Facebook Ads, what do you want to achieve from it? If your objective is to increase awareness, your strategy and costs may be very different to an objective of generating sales.
Step 2: What are your existing costs?
Here are some important numbers you need to know:
- Current cost per lead/sale/event – what is the current cost to get your customer? You might even want to split this out between a cost per unique sale, cost per customer, cost per event (e.g newsletter sign up, contact form etc). This will help you understand what your current costs are so that when you start advertising, you have something to aim for.
- Website conversion rate? What is your current website conversion rate from different channels? This will help in understanding how many website visitors you need in order for a user to convert (e.g sign up to a newsletter, make a purchase, contact you etc)
Step 3: Who is your audience?
Nope, it’s not everyone! Come up with personas of your target audience, who are they, what do they do, what are their interests? This is going to help you build audiences and discover the size of potential prospects in the Facebook audiences tool. Your budget is going to impact how big your Facebook audiences are, for example if your budget £5 a day, you’re not going to effectively be able to go after millions of people.
There is a metric called ‘frequency’ on social ads and this is the average times someone has seen your ad and this directly correlates to your budget and your audience size. You’re going to want someone to see your ad at least a couple of times for them to take an action, in order for this to happen, you need enough budget for the size of the audience. When building your audience, Facebook will give you estimates of reach and you can start doing some modelling on how much budget you think you will need to get a desired frequency.
Step 4: What is your existing marketing budget?
When it comes to Facebook advertising, you could spend £1 a day if you wanted to right up to millions of pounds so you need a rough idea of what your budget will be.
To help with this, you may have some targets to aim for. Let’s say your aim was to generate at least 150 sales from Facebook advertising.
Although it’s difficult to know exactly what your CPA’s will be if you have not advertised on the platform before, by having some figures from step 2, you can come up with some rough costs to start with.
Here’s an example:
- Sales target is 150 units
- Current website conversion rate is 3% from paid activity
- Current average cost per click is £0.50 (if you don’t know this, research some industry averages)
- In order to get 100 sales you therefore need 5,000 visitors (Visitors/conversion rate = sales)
- Ad spend = £2,500 (£0.50 x 5,000)
- CPA = £16.60 (£2,500/150)
The above figures are a very rough guide, but it will help you if you’re struggling to know what to start with. Facebook advertising fluctuates depending on the time of year and your costs will differ depending on quality of creative and overall product.
Step 5: Don’t expect results straight away
You shouldn’t expect results straight away, it will take time to test different creatives, audiences and objectives to get your desired result. You shouldn’t edit a campaign in the first 7 days of it launching, this is when Facebook ‘learns’ so don’t panic after the first 24 hours. Give it time.
You also need to consider your frequency levels – if your campaign is struggling to get a frequency higher of 1 and you wanted at least 2, perhaps give it more budget or reduce the audience size.
It’s also important to note that your remarketing audiences (e.g. people that have been to your website, people that know you or have purchased from you before) will have a lower CPA than prospecting audiences.
Our advice is always to split these audiences out. Have separate campaigns for remarketing and prospecting. This will allow you to monitor the cost per sale for each type of audience.
Step 6: It’s not that straight forward
Attribution – every advertisers nightmare! It’s rare that a user will see a Facebook Ad, click on it and buy off you straight away. There are many different touch points now, as highlighted in Jaye’s blog here.
Additionally, with the recent IOS privacy changes, discussed here, Facebook attribution could become even harder to analyse so remember to not look at social advertising on its own, it’s part of a bigger picture, working together with your other channels.