How Much do you spend on Facebook?

[Daniel_v10]

Hi guys.

Trying to stop myself going insane here on our increasing facebook spend.

Just curious as to what % of your gross monthly income goes on facebook?

We are seeing some months where something like 30-35% of our gross income is spent on facebook, is this unusual? It was around 10-15% this time last year.

Thanks

[John-Smith]

Hey,

We don't spend on Facebook as we get enough traffic on our paystub generator site from google.

But its tough to say that the amount you spent is unusual or not because we don't know the conversion rate and other factors.

And you can't compare % as you don't set the same campaign with the same strategies. so spending amount will differ for sure. what you should focus on is the outcome. how many conversion or leads you got from those campaigns. if it's good then spending 30-35% is not an issue.

[Nick]

Hi Daniel, 

Nick here from Shopify. 

There is a very good technique to find the right audience for your products and brand using Facebook ads, which will, in turn, help you determine what to spend on your ads. It is called the 3x3x3 technique. It starts off with you creating 3 ads for 3 different audiences with 3 sets of different copy/ images and a small but the same budget for each. After monitoring the results of each variable you will see some ads performing better than others, which is when you can drop off the less successful ads and raise the budget for the more successful ads that reach the best audience for you. There is a great guide for this technique to learn more which you can see here. 

To understand more on how much to spend on your ads, Shopify's partner Oberlo have a blog post going into more detail on it with some great tips on Facebook ads also. You can see the blog post here. 

Hope this helps. 

All the best, Nick

[Markus_-_Lean_b]

Hi Daniel,

Markus from Lean biz Growth.

There is no fixed rule as to what % of your revenues you should spend on Facebook ads.  

It will depend on things like what your objectives are and the stage of the business. ie, a startup looking to grow quickly might be spending 50% of revenues on Facebook where as an established company might only spend 5%.

It would also depend on what channels you are using. If Facebook the only source of traffic or do you also invest in Google ads?

So the right amount is whatever is right for your business and objectives.  

Do you know what the ROI is on your Facebook campaign?

Markus

[Daniel_v10]

Hi guys,

Thanks for the replies - Obviously each campaign has a different conversion rate - some better than others.

However to simplify, What im asking is:

If you generate $30,000 per month from facebook leads are people out there happy paying $9000 for those sales?

Thanks

[jlpetracca]

All depends on how much traffic you have...

If you dont have enought traffic and sells will be difficult to you to find a GOOD AUDIENCE.

One you find a good audience, you will have a Really Good ROI.

With at least 5,000 clicks you have to make it...

If you generate $30,000 per month from facebook leads are people out there happy paying $9000 for those sales?

No chance. At least $90,000...

[Jeremy_Robinso1]

Daniel,

There are a few numbers you will need to work out before you can answer this question definitively.

The first would be your lifetime customer value, which would be the average reorder rate times the average order value. 

Second, you would need to determine your overall gross margin (before marketing costs), then multiply your gross margin times your lifetime customer value cost to get your gross margin per customer. 

Once you have that number, you will want to make sure all your campaigns are set up to segregate new and existing customers. This can  be easily done by creating a custom audience of previous customers (it can even be automated using a low-cost app) 

When determining your budget, you should be targetting a new customer acquisition cost that is 1/5 to 1/3 of your gross margin per customer. 

in other words, if LCV is $200 and your gross margin is 50% ($100/customer) then you should aim to acquire a new customer for between $20 and $33 on average. Spend less and you are likely missing opportunities. Spend more and you are likely to go broke.

It can take some time to get to the point where you can measure all this, but you should be working to get a system in place.

Hope that helps, Jeremy

[Anonymous]

Are you targeting customers that are actually interested in purchasing from you. Over the years ive seen so many of my clients targeting the same audience, in which they are already saturated. 

[Kevin_Simonson_]

Excellent question. Wanted to share an in depth answer for ya.

Spend depends on your Audience Goals.

It’s imperative to grow and increase the reach for your brand on Facebook. There are several ways to think about this.

First, you've got prospecting, which is acquiring new users.

Next up is brand retention. That's going to be bringing people who have purchased back to purchase again.

Another audience goal is planning. Throughout the year, every brand has critical moments, and increasing reach throughout the year can have a positive effect at those times.

We have one client who really focuses on gifting. And so, fourth quarter is really huge for them. Meaning, it’s really important for them to say, okay, how could we increase our reach throughout the year? That way, by the time we get to quarter four, we're reaching as many people as possible.

The final audience goal is lookalikes. We want to leverage audiences to make lookalike audiences to increase the likelihood that the brand will acquire qualified users. Instead of guessing, i.e., we really think our product will appeal to people who live close to golf courses, we can say with confidence, i.e., we already have this audience of people who are purchasers and are qualified, so let’s go ahead and leverage that to, take people to the next level, find new customers and really grow the program

Today we published a blog about this if you want to learn more: https://bit.ly/2NYyQeN

Hope that's helpful! 

[serioushaha]

Know your customer LTV to decide how much can be comfortably spent on acquisition.

If you own a Shopify store and want to build a loyal and high value customer base, then understanding the lifetime-value of acquired customers is critical to your brand. Take informed business decisions while scaling up acquisition efforts. Understand your Customer cohorts on Shopify here -

https://apps.shopify.com/customer-lifetime-value

[Propelguru]

When people ask me how much money they need to get started or how much money they can spend on Facebook advertising, I like to break it down into three levels.

Level 1

If you're searching for the absolute bare minimum in terms of Facebook ad spending, even $1 a day will make a significant difference. So far in 2020, the average cost per thousand impressions (CPM) is $9.77. So, if you only spend $1 a day on Facebook ads, your ads will be seen 37,359 times in a year. That means you can get 37k impressions from people for just $1 per day.

Level 2

Spending enough to take advantage of Facebook's efficient algorithm is the next move after spending $1/day. According to Facebook, an ad set requires 50 conversions per week to exit the learning process and feed its algorithm with data in order for Facebook to find more users like them that are most likely to achieve your target. This is the point at which you would really benefit from Facebook advertising. So, how much do you spend on Facebook ads in order to get 50 conversions? Fortunately, "conversions" do not have to imply "purchases." You may choose to optimize your campaign for add-to-carts or even connection clicks. You can reduce the minimum amount you need to pay to take advantage of Facebook's algorithm by moving up the funnel (for example, from transactions to add-to-carts).

Level 3

The disadvantage of level two and optimizing for add-to-carts is that it only optimizes for add-to-carts, rather than transactions. Although adding products to a cart is a required move before making a purchase, it is possible for users to add items to their cart but not make a purchase. Stage three needs you to spend enough money on Facebook ads to make 50 transactions a week. So, if your average cost-per-purchase is $11, you'll need to set aside $550 per week for Facebook advertising, or $2,360 a month.