Creating a Facebook ad budget can be daunting. With the platform having a vast majority of the world’s population, it is easy to say that not using it for digital marketing is not intelligent. However, the question of how to spend, when to spend, and how much to spend is another important question. Look at small businesses and how they are capturing the right market just with the right marketing tactics for Facebook.
A recent report has proved that Facebook has over 25 million small businesses with active company pages. Social networks have over one million active advertisers, which is roughly 4% of the total. This is the percentage of companies that use Facebook to interact with their customers. It is safe to say that there is a lot of potential for small businesses.
According to Dan Levy who is the Director of Small Business for Facebook states that Facebook advertising is difficult. It is especially a complicated process for small-sized businesses.
Such companies only have one or two products to advertise while sometimes, the product itself could be half-finished. Adjusting time for advertising or looking for resources can be an issue.
However, bigger companies can make great Facebook adverts but the issue of skills and better understanding comes in the way. No matter how big a digital marketing team is, finding the right advertising strategy with ideal budgets is the only way to get the job well done.
The fact that spending money on Facebook ads is important is sometimes difficult to digest. This is due to the reason that while small businesses may be lacking it, bigger companies demand immediate results. The thing about digital marketing is not direct sales but leads that begin the customer journey. Making a sale that converts into big dollars comes at a later stage.
Facebook ads are beautiful in a way that it supports both small and big businesses. There are Facebook ad budgets that are affordable and would get the expected results. Now come to the question of how to evaluate what amount should be spent?
This article is a guide to budgeting Facebook ads and reaching a good revenue goal. Furthermore, we will also discuss some mistakes that should be avoided.
There is no doubt in how much a business can spend on ads and get the desired results. You may end up asking yourself how much I should spend on Facebook ads. And rightly so, the question is important and if not given the right amount of attention, it may backfire.
The more you spend, the better the results. However, for as little as $1 per day, your ads can make a real difference in the revenue. According to Moz, a Facebook ad expert, if you spend $1 a day on Facebook, it will give you a reach of 4000 people. These 4000 people would not have seen your ad at all if not for this ad. Additionally, if you are offering something more than your competitor, targeting accurately to your audience, you can make a big difference.
Businesses should be able to spend on Facebook ads as little as $30 a month no matter what stage of the business it is in. If your business stage is a start-up, set a minimum budget of $30, otherwise consider your options of doing business. The average cost per 1000 impressions on Facebook is the lowest as compared to any other platform. The Facebook cost per 1000 impressions is only $0.25 and you can throw a little amount every month.
The best way of setting a Facebook ads budget is by first looking at the numbers related to sales and marketing of your business. These will vary according to the size of your business as some numbers will be bigger while others smaller. The ultimate goal of every business is to make money so the main focus is on making sales or getting leads.
Usually, like a standard, a range between 5 to 12% of the business revenue is kept as a budget. Companies that are at their initial stage of business should ideally spend something on the upper side of the budget. This helps the business to grow aggressively bringing customers’ attention to the brand. However, if a company is in the middle stages of business with an average customer loyalty already present and a steady revenue generation, a high budget is not required.
On the other hand, some companies wish to grow incrementally while they focus on maintaining and breakeven, a marketing budget of 5% would be a good decision. Sometimes, business owners depend largely on word-of-mouth marketing and wish to go the traditional way. In such scenarios, the company will have to invest heavily in research.
Seeking additional information will benefit the business growth and it can be done through extensive industry research. Looking for numbers can be messy and overwhelming. The best way to look at the numbers is to first understand what Facebook advertising is made of. The following information can help you understand numbers and terminology better.
The first thing you need to find out is what will be the cost per lead to your business. Remember that a lead is not a sale but what eventually prompts the customer to look at it. A lead is a high potential for sale but not a sale itself.
For Facebook ads to be successful, cost per core event is essential. If you are in a business that requires a conversion before a successful sale is possible, consider how much you are willing to pay for it? This event that eventually leads to conversion has its cost and is called an event.
Customer acquisition is exactly what the name suggests. Companies need to determine who much money they have to spend to acquire a new customer. A strong cost per acquisition means that the revenue generated is worth the cost. Keep in mind that cost per customer acquisition will vary according to the product or service offered.
The conversion rate is the basic metric used by companies for digital marketing. If there is a sales team or the business is selling something directly online, the conversion rate should be determined nonetheless. The company needs to focus on how many phone calls or appointments are required to make a sale.
The ad spend depends on the company’s goals and expectations. Setting a simple goal of growing to a $100,000 business can help. A great way to reach this goal is by looking at the industry trends and going backward. Determine what the conversion rate should be, what the cost per core event will be, and how much you can spend to gain one customer.
An appropriate answer to how much should I spend on Facebook ads is to understand what you wish to achieve. Facebook ads have an aim and they differ for small and big businesses. For example, if a small business only wishes to get more email subscribers, the budget will be different as compared to a business that wishes to sell high-end furniture.
Several ways can help you set and achieve these objectives. Advertising management platforms like AdEspresso is one such tool that can help you target the right customers. You can optimize your ads and set accurate demographics which will help you analyze the performance. Platforms like AdEspresso also help in changing ads for different occasions set to achieve different objectives.
After concluding on your Facebook ads objectives and completing a monthly budget, it is time to distribute this amount. The spending breakdown can be done into the following three categories:
Bringing the three pieces together will maximize the Facebook ad budget with a high impact on your business.
The best way to break through the white noise with Facebook ads is to come up with creative ads. Everything from the copy, the graphic images, and the message portrayed will play an integral part in conversions. This is especially a great opportunity for small businesses since their ads do not need to follow a set of SOPs of big businesses.
The more creative an ad is the higher chances of conversion. Small businesses have nothing to lose since they are at the initial stages of business. This brings us back to the question of exactly how much should you spend? The answer is again how creative can you get for an ad to go viral?
There are a few mistakes that are commonly made by small and big business owners. If avoided while creating a campaign for Facebook ads can help increase the impact on the audience.
For ad campaigns to be successful, you need to give it due time. If an ad campaign is given enough time, you can get the initial data and analyze it to understand what needs changing. A good idea at this stage is to go back, look at the customer buying cycle, and analyze the time it takes for someone to convert from a lead to an actual sale.
A short buying cycle is ideal for all types of businesses. Budgets can be adjusted according to what the data has shown. For example, if your product or service is of a nature that requires a customer at least six months to convert into a sale, you need data for six months.
Being a business owner; it is important to understand that the size of the audience will determine the cost of the product or service. If you underspend, Facebook will distribute your budget into a thin line that will not get you any new leads for months. Increasing the budget on the other hand will give you better results.
Facebook makes it easy for its business pages to choose campaigns that align with their business objectives. Owners, however, make the mistake of choosing the wrong campaign type.
The spread of the budget is done for a reason. If you are in the initial business stages, do not focus on campaigns that lead to sales. However, focus on ad campaigns that create brand awareness so your objectives are in line with the ad campaign you are running.
The Ads Manager on Facebook helps businesses analyze the data present. However, most companies do not read this data correctly. A new feature allows you to rearrange and organize the columns of your report as you wish them to be. You can do this simply by selecting the Customise Columns option present on the Ads Manager.
This allows you to see data that is critical for your business. This will allow you to analyze which campaigns worked well and produced high conversion rates. You will also see which campaigns did not work so you can make changes next time.
Once you have determined the Facebook ad budget and created engaging ads it is time to put them to the test. An option allows you to run ad tests but more often than not, businesses ignore this important step. If skipped, it can result in wasted time and money.
Spending the right amount on Facebook ads depends entirely on your business. Understanding the goals, industry data, and conversion rate are crucial factors that determine your ad spend budget.