How to Set An Effective Budget For Facebook Ads
Are you a new business trying to venture into the realm of Facebook ads? If so, this is just the post for you! We understand that for newbies, the whole working of Facebook ads can be somewhat intimidating and confusing. But fret not, because we’ve broken down everything into simpler terms for your easy understanding. Not only for newbies, but this article is also for every other individual who is looking for a good strategy for managing the cost of their advertisements.
No matter you’re going to make a strategy for Social media marketing of some established business or a start-up, this piece of writing will be helpful to you.
Read on to find out more!
Image by Gerd Altmann from Pixabay
What Are The Pricing Options On Facebook?
There’s no straightforward answer to the above question. Some people spend thousands of dollars every single day while others spend less than the amount they spend on a coffee. The exact answer depends on several variables, the most important of which are:
- Your ad bid: Facebook offers two options for bidding—manual and automatic. The latter is meant to make the most out of your budget by keeping the costs per clicks/actions the lowest that they can possibly be. The former, on the other hand, works to help you achieve your desired cost per click/action.
The type of bid strategy that you choose, combined with your bid amount, has a direct effect on your costs. The bid amount depends upon the competition as well. However, one thing to keep in mind here is that Facebook determines the ranking of an ad based on its quality score and not just the auctioned amount.
- Ad objective: Facebook gives you the option of choosing between the following three ad objectives:
- Conversions
- Consideration
- Awareness
The objectives are named very well according to their role.
Awareness is for making people aware of your brand, product, or service.
Consideration is about creating the interest of people in your promoted stuff.
Conversions refer to a specific action performed by the targeted users in response to the advertised stuff. It may be signing up for some event, filling a survey form, Installing an application, or making a purchase.
Once you’ve selected your ad objective, you’ll need to further narrow it down by choosing one of the more specific options that each of the above objectives offers. The more valuable of these choices, the ones that usually result in immediate value for your business, are the ones that will end up costing you more. However, getting a good ROI should be a priority.
- Audience: the more specified your selected target audience is, the lower your costs will be. On the other hand, if you’re targeting customer attributes that are relatively vague and broad, then you’re more likely to incur higher costs. If you’re selling Christmas gifts in South Carolina, you don’t need to target Pennsylvania as well because your audience is in SC.
- Ad quality: Facebook rates your ads on the criteria of relevance and quality. The higher the quality and relevance, the lower your costs will be. Facebook calculates the relevancy score by keeping an eye on the number of users interacting with the post. More engagements or interactions mean that more people are interested in the advertised product.
- Your industry: the industry you’re operating in has a direct consequence on your Facebook ad prices. The cost will definitely be higher if it’s a more high end, lucrative business industry. Competition in your industry also has a direct impact on the budget.
How To Set An Effective Budget
Creating a strategy before running an ad campaign can not only help to save a lot of bucks, but it also makes things clear before they go live. Setting an effective budget for an ad campaign is a very crucial step for the success of that campaign. A good advertisement blueprint contains a very near to accurate estimated spending chart.
A valid question here is that, where can we find that estimated budget to add in our strategy. Well, this can be done in several ways. We can either run a low budget ad campaign and test if the set matrices work for us or not; this is what we call a trial and error method.
The other way is to find your competitors and follow their ad campaigns for budget optimization in your own plan. If you’re thinking that how can we know about the budget someone else is using for their ads, you’re right! It’s near to impossible to know their spending per campaign or ad set unless you ask the competitors which is not going to happen in case of thousands of competitors. But worry not! Advertisement intelligence tools like SocialPeta can easily do it for you. The tool contains intelligently extracted data from millions of ads.
All you need is to create a SocialPeta’s account and enter the dashboard. Although SocialPeta is a very diverse tool with a lot of insights, for the sake of this article, we’ll only consider the function of cost intelligence.
The tool currently supports Facebook and all its associated ad publishing hubs like Facebook App, Instagram, Audience Network, and Messenger. Filters are available to narrow down and find the best estimation for a given category. You can select either you want to perform the analysis for web ads, app ads, or page promotions. Additionally, the filter for ad placement, target country, and call to action is available to find the analysis for each Placement, Country, and CTA button.
To understand the above facts, let’s first have a look at the basics.
Placement: We can use the term ad slot for this as well. A Placement refers to the position where the potential ad will be displayed to your designated audience. It can be in the feeds, stories, in-stream, search, messages, In-article, or external apps and websites. All these placements affect the budget differently. When choosing a placement, the interest and saturation of the audience should be kept in mind. For instance, if you have creative image-based content, you may consider going for the Instagram feed as a display point for your ads. Similarly, video ads work best for Facebook.
Country: The selection of the target country is essential in budget estimation. A product or an app that has less competition or saturation in the USA may have a higher competition in Pakistan or vice versa. As an example, we can consider an app that is made for the mortgage brokers in South Carolina, can this app be promoted to an Asian country? Certainly not! So, we need to select the target country for a good estimation.
CTA: Call to action button or CTA is the button that links to the target page of a particular advertisement. This button can include the link to a specific landing page, app, form, or anything that you’re promoting with Facebook ads. Some names for the call to action button include Learn More, SignUp, Register Now, Listen Now, Apply Now, etc. For a good budget estimation, one should indeed take CTA in the account.
Now coming to the other matrices that are available in the results. CPC is the cost per click, the amount of money required for one click. CTR is the click-through rate, the ratio of the number of people who clicked on your ad compared with the number of people who viewed the ad. CPM is the cost per mille; it is usually the cost per thousand impressions.
Refine Your Strategy
No matter you’re going to launch a campaign for some big brand or small business, you definitely need a strategy. Competitors can help you in this by providing all the required data. However, you need to explore tools like SocialPeta for a detailed analysis.
Small businesses don’t have thousands of dollars just lying around to spend on their Facebook ad campaigns. Having limited resources means that they need to make sure that the money spent on their Facebook marketing counts and brings about the results they were looking for. Small businesses can’t afford do-overs—every penny matters.
You create an ad and submit it to Facebook’s ad auction, where you set your maximum budget and bid. Moreover, you get to choose the objectives you want to achieve (such as impressions, engagements, conversions, etc.) and spend your budget only on those desired objectives.
The budget that you set can be changed anytime. It’s vital to allocate just the right budget for your ad campaigns. The best way to do this is to decide for yourself what your desired objective (be it a click or conversion) is worth to you. You shouldn’t be overspending on an action that won’t be contributing a high ROI.
If you’re unsure of the above information, the best way to find out is to adopt a test and trial approach, but only at a very minimal budget that won’t create a dent in your overall budget. Doing so will help you get useful insights that will guide you on setting the most productive budget for your future ad campaigns.
We hope this article proved useful to you. If you’ve any queries, please don’t hesitate to ask in the comments section.