This simple, logical formula will help you plan your social ads spend.
Facebook advertising offers a relatively low cost, highly effective form of advertising. For many growing businesses, Facebook ads is the most powerful advertising method available, as it allows for clear measurability, and access to very targeted audiences at a relatively low cost.
While there is no one-size fits all formula to help a business calculate their budget for a Facebook ads spend, we have created a formula below that will help businesses begin to set concrete marketing and spending projections for their efforts.
A Few Helpful Statistics to Note:
- Average Facebook Ad Click-Thru Rate: 0.9%
- Average Website Conversion Rate 1.0%-10.0%
- Average Facebook Cost Per Click $0.64
- Average Facebook Cost Per 1,000 Impressions: $5.99
- 6 to 8 touches to make a sale
- Conversions with remarketing is 4x higher than native efforts
Step 1: Determine your goal for Facebook Advertising
Are you looking to build brand awareness? Consider measuring impressions or reach. Are you seeking to get online conversions such as contacts, sales, or sign-ups for your email list? Measure things like website click-thru. (Click here to view our guide to measuring marketing success for more measurement ideas.)
Step 2: Gather Data
You’ll need to find the following pieces of data about your own marketing:
- How many visitors does it take to convert (contact or email sign-up) on your website?
Configure Google Analytics Goals to determine this. If you don’t have that figure, assume a 1-3% conversion rate for initial estimation purposes. If you get direct sales through your site, you’ll want to adjust your numbers below to accommodate.
- What is your sales process conversion rate for individuals who contact you or sign up for your email list? Once someone signs up for your email list or contacts you, what is the likelihood that they will become a customer or client?
- How much valid (non-spam) traffic does your website receive each month from sources other than Facebook, such as Google, referral traffic, or email marketing?
Reverse Engineer Your Path
Let’s say that you’ve decided your business requires 10 sales per month. You’ve gathered your data and figured out that:
- You have a 1% conversion rate on your website. Therefore, for every 1,000 visitors that you receive, 100 of them sign up for your email list or contact you for more information.
- You have a 25% sales process conversion rate. For every 100 people that sign up for your email list or contact you, 25 of them become customers or clients.
- You receive 500 visitors per month from sources such as email, search engine traffic, and referrals.
From this data, you can glean that it will take 1,000 qualified visitors to achieve 10 sales per month. (Note: this will strongly depend on your sale process, but this should bear true, as it is based on your historic performance data.)
- 1,000 Visits Per Month x 1% Conversion Rate=100 contacts per month
- If, of 100 contacts, 10% end in a sale – 1,000 visitors should yield 10 sales per month.
- If you get 500 visitors per month from sources such as email, search engine traffic, and referrals, you will need an additional 500 visits from qualified, interested parties.
- Facebook Ads yield 0.9% click-thru rate. Therefore, it will take 55,555 website impressions to achieve 500 qualified website visitors to bring you to that goal of 1,000 qualified website visitors each month.
- Average cost per 1,000 impressions = $5.99
- Therefore, $329.45 per month would be the LOW end of your budget, assuming that your visitors are warm, well-qualified, well-targeted leads. This is assuming that you can convert someone in just 1 impression or interaction, because they are already familiar with what you have to offer. Remember that earlier statistic, 6 to 8 touches to close a sale…
- If your audience is not established and has not had any interactions with you in the past, you will only be reaching non-fans to sell, drive traffic, and grow your lists. That is less effective and more expensive than targeting fans who expect (and desire) to see your content. You will need to multiply the number above times 6 or 8 in order to engage each individual enough to get them to convert. Therefore, you can expect that the HIGH end of your budget would be $1,976.70 to $2,635.60 per month
Ways to reduce your cost
The numbers above may seem impossible to budget for. Remember that over time, you can reduce your cost by keeping your audience engaged. You can also reduce your cost through retargeting (which has been shown to be up to 4x more effective, and 50% less expensive than ads without pixel retargeting). Here are other ways that you can reduce the cost of your Facebook ads spend:
- Quality targeting
- Long-term relationships with a warm and active audience
- Retargeting with Facebook Pixels (increase conversion by 4x, reduce cost by as much as 50%)
- Increase traffic from other sources by improving your search rank, email quality, and referral traffic
If you’re looking for other ways to grow your business through a comprehensive strategy, consider our small business coaching program, available to businesses nationwide. Click here for more information on marketing and business coaching.
If you want to learn more useful information like this, consider our Liftoff Business classes, available in person (in St. Louis) or online. Click here to view our schedule.