How to Optimize Your Facebook Ad Budget

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Wondering how much budget you should put aside for your next Facebook ads campaign?

If you answered "yes", or just want to learn how to make the most of your ad budget on Facebook, this article is for you!

Budget management is one of the most important parts of any Facebook Ads strategy  but it's often overlooked as many teams rush to get their campaigns up and running. 

Investing time into polishing your budget and setting guidelines for campaigns can be an effective exercise for teams looking to fine-tune their campaigns and create successful ads. 

Let's jump right in... 

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1. Set objectives and goals   

The first step to successful budget management is knowing what you want to achieve. 

Assigning each Facebook ads campaign you run its very own set of targets and goals is very important — a campaign without goals and defined targets won’t deliver the best returns

Think about why you're setting up the campaign. Do you want to:

  • Grow your email marketing list
  • Boost awareness of a local event
  • Increase sales of a new product line?

Understanding the overall objective of your campaign will help the performance of the campaign—not only when it comes to choosing the ad type on Facebook but also when it comes to the messaging and creative you use in your ads.

The objectives might also affect how much you want to spend on your campaigns. For example:

A campaign focused on brand awareness might be assigned less budget than a campaign focused on sales as impressions and engagement tends to be cheaper than clicks and conversions. 

Starting off with a clear objective is essential to creating a great campaign and not wasting your Facebook ad budget.

Setting campaign metrics 

So you have your objectives set... now we need to think about how you measure those objectives.

Making sure to be as detailed as you can, to help outline what success looks like. An example for a car dealership could be:

“Our goal is to get 45 test drive bookings from new prospects.”

You might even want to be more specific and include a timeframe:

“Our goal is to get 45 test drive bookings from new prospects in the next two weeks.”

Pro tip: As you progress with campaigns, you might benefit from stretch goals too. For example, for this campaign, you might have a stretch goal of 60 test drive bookings. This gives your team something to push for even if your campaigns are hitting your initial targets. 

Here's how your campaign metrics might look: 

Ad Campaign Objective: Test drive bookings
Ad Campaign Metric Goals: 45 test drives
+/- Metric Stretch Target: 60 test drives
Assigned Budget: $1,000/week

You might noticed we haven't discussed how to come up with the budget yet. Well, here goes... 

2. Decide your budget

Budgets will vary across each team and company.

You might have limited resources to spend on Facebook ads, but enough to assign monthly ads, or you may have a set one-off budget for a new product launch. So making sure you have an idea of how much you have to spend will help out massively.

For example, you might set aside $750 for ads each month with $1,500 being used for each new product launch. 

But sometimes, you might want to be a little more scientific with how you calculate budgets. Here are two ways to set your Facebook ad budgets:

Customer LTV

Lifetime value (or LTV) tells you how much the average customer spends with your business. 

To calculate a LTV, you need to first bring together your customer data. You will need  the following figures to calculate LTV:

  • Average purchase value - this is the company’s revenue across the last year, divided by the number of purchases across the year.

  • Purchase frequency rate - this is the number of purchases over the last year dividing by the number of unique purchasing customers.

  • Average customer value - This is the purchase value multiplied by the frequency rate. This will give you how much each customer is worth over that time period.

  • Average customer lifespan - This is the average amount of years each customer purchases with you.

Lifetime value is then the average customer lifespan multiplied by the average customer value. This will give you the figure each customer generates for you on average.

So for this example, let’s say you have the following data:

Average Purchase Value: $100,000 revenue / 300 orders = $333.33
Purchase Frequency Rate: 300 orders / 120 paying customers = 2.5
Average Customer Value: $333.33 x 2.5 = $833.325
Average customer lifespan: 1.5 years
LTV:  $833.325 x 1.5 years = $1,249.98

The LTV for the above example is $1,249.98.

This means that the average customer your business attracts will spend $1,249.98. So to run a successful ads campaign you need to acquire them for less than that figure, minus your profit margins and expenses. 

Average CPMs

With this approach, you're essentially reverse engineering the results based on existing data. You can either use: 

  1. Your own data from previous campaigns
  2. Industry averages shared online 

Let's say you've run a few Facebook campaigns before and the average cost per lead generated is $5. If your budget is $700, you could expect 150 leads from that campaign. 

If you don't yet have data of your own...

Firstly, get in touch and we'd love to discuss campaigns based on our experience.

And secondly, there is a ton of data out there on the average costs of Facebook ad campaigns. One of the best posts is this one from AdEspresso, which shares the average costs of a bunch of Facebook ad objectives. 

3. Create a first ad-set

With your budgets and objectives set, it's now time to get started with your campaign. 

To get going, choose the most relevant objective for your campaign:

facebook ad objectives

Next, you'll be asked to choose your audience and ad placements (where your ad will appear on Facebook and Instagram), before you select your budget. 

When it comes to adding your budget, you have two options: 

  • Daily budget: This is how much you'll spend each day on your ad campaign. That exact amount won't be spent every but, but on average, Facebook will spend close to your daily budget each day between the start and end of your campaign.
  • Lifetime budget: The overall amount you'd like to spend throughout the campaign. This budget will be spent between the start and end dates of your campaign. 

ad-budget

Once you've set your creative, placements and budget your campaign is ready to go live. 

4. Measure results

There's an old saying in the advertising world: 

"What's not measured cannot be improved."

And if you want to optimize your campaigns and get the most out of your Facebook ad budget you need to measure the results of your campaigns. 

Your post-ad campaign efforts are as important as your ad campaign itself. Taking the time, as a team, to review how the campaign went and what results it returned will help massively in investing for future campaigns.

Exporting all the Facebook ad data into a CSV or Excel document will help you to pick out the best graphs and charts that matter to you the most. Evaluating whether the campaign had the right budget and how it performed day-to-day will help you to fine-tune each ad campaign in the next batch.

Here are some example analytics from a Facebook video ad campaign: 

facebook-ads-results

Pro tip: Create a knowledge sharing document for each campaign you run. This will help everyone across the company learn from your previous campaigns and give each new campaign the best chance of success. One of the most overlooked aspects of continued optimization with Facebook ads is knowledge sharing, so if you can invest time into passing on this information, you’ll improve ad campaigns in the years to come.

5. Optimize your ads

No advertiser will ever get their first campaign 100% spot on—and even experienced advertisers will need to experiment and optimize campaigns to get the best return on ad spend. 

Once you've looked at the data and have some benchmarks for performance, you should think about what you can edit and test out in future iterations of that campaign. 

For example you could test different: 

  • Creative (images, videos)
  • Copy
  • Placements (News Feed, mobile-only, Stories)
  • Audience 

If you just change one element in each ad variation you'll end up with more conclusive results, showing you how to get the most from your Facebook ad budget. 

With the below ad, we've highlighted a few of the elements we could experiment with and optimize:

sociallyin-ad (1)

If we were to experiment with this ad to see how we get the the most bang for our buck we might:

  • Experiment 1: Use the same ad in mobile-only placements
  • Experiment 2: Change the copy, use <10 words and include an emoji
  • Experiment 3: Test a different CTA from "Learn More"

When running an experiment, Facebook recommends you let it run for at least 4-days:

We recommend 4-day tests for the most reliable results, and if you aren't sure about an ideal time frame, you can start with four days. In general, your test should run for at least three days and no longer than 14 days. Tests shorter than 3 days may produce insufficient data to confidently determine a winner and tests longer than 14 days may not be an efficient use of budget, as a test winner can usually be determined in less than 14 days.

Pro tip: Don't spend your whole budget on the first advert you create. It's a good rule of thumb to set aside 30% of your budget to test out variations of your ad. Then spend the remaining 70% of the budget on the best-performing ads. 

Let's recap: How to optimize your Facebook ad budget

Thanks for sticking with me throughout this guide! Let's have a quick look at the steps we've outlined above. Here are the 4 steps to optimizing your Facebook ad budget: 

  • First, you need to set some clear goals and objectives for your campaign. 
  • Second, figure out what budget you should be putting aside to achieve these objectives. Do this based on your customer LTV (if your campaign is acquisition focused) or use industry benchmarks and your own data to reverse engineer your campaign. 
  • Next, once your ads are up and running, you need to analyze the performance of each advert. 
  • Finally, optimize each and experiment with a number of variations to find the one(s) that will help you get the most return for your budget. 

Do you have any Facebook ad budget tips? Let me know in the comments. 


 

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AuthorKeith Kakadia

I am a native of New Orleans, LA. I have a strong passion for digital marketing and I enjoy the opportunity to work with some amazing brands. on digital marketing projects.

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