How much will a Facebook ads campaign cost me?
Facebook ads are relatively cheap compared to other ad platforms, like Linkedin. They have more advanced demographic targeting than Google AdWords, and because they’re so easily measurable (unlike print ads or influencer campaigns), you can still get good results (new fans, web traffic, sales) on a limited budget. But how much should you expect to spend on a Facebook ads campaign for your e-commerce business, and what kind of results can you expect for your spend?
Business owners often ask, “How much do Facebook ads cost?” There is a simple answer to that question (they start at $1 per day if you’re being charged by the impression, and $5 per day if you’re being charged by clicks or engagement), but what people really want to know is, "What will I get as a result of spending money on Facebook ads?" To get to that answer, we need to dig a little deeper.
How to Set a Facebook ads BUDGET FOR E-COMMERCE
Even advanced Facebook advertisers don't know until they start experimenting with Facebook ads what the results will be for what cost, so a good practice is to start with a smaller budget and increase your spend as you gain more insight about what works for the audiences you're targeting.
I usually recommend that e-commerce businesses set aside around $250/month as a minimum budget for Facebook ads. (I arrive at this number starting with $5/day for 30 days as a baseline and adding a little extra so we can play with running multiple campaigns at once.) Can you spend way more? Absolutely! Can you get by spending less? Sure! Just think of your Facebook ads budget like a wedding budget: you can spend whatever you can afford — you just have to understand what elements are going to be limited on a smaller budget, and what you want to spend more on as your budget increases.
Setting your goals
What do you hope to achieve with your ad campaign? It’s usually not realistic to make immediate sales from a Facebook audience that has never heard of your products. For $250 to start in the first month, you may not make back $250 in sales. It takes a while to arrive at a return on investment (ROI) that you're happy with. Be patient! Facebook ads are a slow burn.
Here are some more achievable goals for Facebook e-commerce ads:
* Get our products seen by fans of the competitor
* Advertise a sale to people who have recently visited our website
* Announce a new product to fans of our Facebook page
Your Facebook ad spending goal will be to achieve any of these results for the lowest cost possible. To get to the lowest cost, you run ads, track them, and make tweaks.
So what should you be tracking? To start with: conversions.
UNDERSTANDING the value of a conversion
A conversion simply means that someone completed a desired action. You won't always sell products directly from a Facebook ad, so you want to think of your ads in terms of conversion costs — how much it costs you to get the desired result.
For example, let's say you're running an ad to an audience of fans of your competitor, and your goal is simply to get them to "like" your content so you can use Facebook page custom engagement audiences to market to them later. The metric you'll be measuring here is Post Engagement.
CPM (cost per thousand impressions) is an important metric here. It tells you how much it costs to reach the audience you're targeting even if you're not paying by the impression.
By running ads with the same goal to different audiences, you can start to see how much it costs to reach a specific audience and how much it costs to get results from them. Tracking your results over time will help you understand what audiences you can get cheaper results from.
In this example, we found that tracking women over 50 using Android phones resulted in a lower CPM and therefore lower cost per post engagement. In other words, we know we can get this audience "in the funnel" for about $0.20 cheaper.
Between spending the $39.88 on this ad set and $79.96 for the other, it cost us $119.84 to learn this information from this campaign so far. Did that $119.84 result in any sales? Not yet. But keep in mind we're only running this ad to broaden our pool of people to target in future advertising.
Again: slow burn! 😐 🔥
MEASURING AGAINST YOUR CUSTOMER ACQUISITION COST
For e-commerce businesses, customer acquisition cost (CAC) is everything. Your CAC is the calculation of how much you spent on marketing over a given period divided by the number of new customers that made a purchase over that same time period. Let's say you spent $750 on marketing in Q1 (that's 3 months of Facebook ads for $250) and acquired 17 new customers.
$750 ÷ 17 = $44.12
This puts your CAC at $44.12, meaning it cost you roughly $44 to acquire a new customer in Q1. If your products sell at an average of $80 per unit, that's a pretty dismal picture, but it's not unheard of to spend that kind of money up front in a Facebook campaign in order to acquire customers cheaper later.
In Q2, you spend the same amount, but because you've widened the funnel (more people aware of you) in Q1, you've now acquired 31 new customers. Your CAC is now $24.19.
Remember that CAC is calculated as your marketing spend across all channels, not just Facebook, and counts customers acquired online through all channels, not just Facebook. Because your Facebook ad spend will increase your CAC, you want to make sure you're balancing a Facebook ad campaign with cheaper methods of acquiring customers online, such as organic search traffic and free social traffic. Spending money upfront on Facebook ads helps you build an audience that helps you build that free traffic (though social shares, word of mouth, etc.), but again — it takes time!
What you eventually want to see, per the chart above, is your ad spend stay relatively the same while your CAC decreases.
UNDERSTANDING CAMPAIGN OBJECTIVES
DIVIDING YOUR BUDGET BETWEEN MULTIPLE FACEBOOK AD CAMPAIGNS
As you grow your audience through a combination of paid and organic marketing, more people will visit your website and engage with your Facebook content, which means you're widening the pool of people you can target with Facebook ads.
Eventually you should divide your Facebook ads budget into two buckets: spending to acquire new audiences and spending to drive sales.
- For people who have never heard of you, you're spending money to get them "in the funnel" so you can market to them later. This increases your CAC.
- For people who are already familiar with your products, you're spending your ad budget in an attempt to get them to the website to make a purchase. This could increase or decrease your CAC depending on your campaign's success rate.
It makes sense to separate your campaigns into two buckets: one to reach new audiences, and one to try and convert familiar audiences into customers.
Above, we've split our $250 monthly budget into two campaigns. One with a $90 budget for acquiring new audiences (with a goal of post engagement, not website conversions), and one with a $160 budget for driving customers who are aware of us to a sale offer (goal of website conversion). For a total cost of $250, we made 13 sales (for a cost per acquisition of $19.23 across both campaigns), but we also got 149 new people into our funnel, meaning we've now widened the pool of customers who are familiar with us.
IS PAYING FOR LIKES WORTH IT?
Some e-commerce advertisers on Facebook decide that "paying for likes," as you're essentially doing with the Best Travel Pants campaign above, isn't worth it. This may be true if you have a strong organic social game on another channel, like Pinterest or Instagram, or you already have a significant amount of web traffic, meaning you have a wide pool of people who are familiar with your brand to target with ads where website conversions (sales) is the goal. I still argue that Facebook is one of the cheapest and most effective ways to grab new audiences and make them aware of your brand if you can afford to do so, so you should pay for likes, as long as you're being deliberate about it and understand that, like a branding campaign, you're spending marketing money on something that can't deliver an immediate ROI.
WHAT'S THE BEST WAY TO SPEND MY FACEBOOK ADS BUDGET?
We used the example of a $250/month budget in this post, but you could easily dial that spend up to $1,000 if you can afford it, meaning you could reach more people to fill your funnel and drive more sales. You could also limit your monthly spend to $150 and still get meaningful data, build your audience, and drive sales.
No matter what your monthly spend, the key is consistency — meaning you advertise frequently — and tracking the data you collect to tweak your campaigns and make them better. It does you almost no good at all to occasionally post an ad to Facebook because you'll never learn from it. If you only have $750/year to spend on Facebook ads, you're better off spending it as a $62.50/month ad budget so you can experiment and learn than you are spending it in one big push.
If you budget for the long term and don't obsess over the one-to-one relationship between ad spend and sales in the beginning, you will be more successful in the long term with Facebook ads for your e-commerce business. Be prepared to spend money consistently each month and spend time tracking and analyzing your ad performance based on your goals. Balance your Facebook ad spend against your overall marketing spend and cost to acquire new customers over a given period, and you'll see that eventually your Facebook ads spend yields lasting results.