How to Set an Effective Facebook Ad Budget
One of the most overlooked components of a good Facebook ad campaign is knowing how much to spend on the ad budget. Setting an advertising budget can seem like the simplest thing in the world, until you realize that your Facebook ad campaign isn’t bringing in more sales. Digital ads work differently than traditional or television ad placements — you are not purchasing a space where the ad lives for a few weeks, instead, you’re purchasing clicks.
Online, you’re competing against everyone else in your industry and paying each time someone clicks on your ad. Setting a realistic budget is essential for getting the most out of your campaign without spending more money than you need. Before you can set a realistic Facebook budget, you need to know how their ads work.
How Do Facebook Ads Work?
In simple terms, you start your ad campaign by building a target audience of people. That audience will then be shown your ad on their Facebook feed. You then create a budget, which is used to bid for impressions and clicks. The higher your budget, the more impressions and clicks you’re likely to get.
Every ad you send to your target audience will have a cost attached to it: the cost per click (CPC). The cost per click is exactly what it sounds like — how much it will cost you when someone clicks on your ad. How many clicks your ad can get — in other words, how many new leads you can get — depends on your budget. The higher the CPC, the higher your budget should be.
For example, say your CPC is around $5 and your budget is $50 per day. That means you can get about 10 clicks a day before your budget runs out and Facebook stops displaying your ads for that day.
How to Set a Realistic Facebook Ad Budget
There are two types of budget you can set: a daily budget and a lifetime budget. Let’s break them down.
Daily budgets are the average of what you want to spend each day. If you want to spend $500 per weekday, some days will spend more than $500 and others will spend less. For example, a daily budget set at $500 may actually look like this:
- Monday: $500 spent
- Tuesday: $350 spent
- Wednesday: $430 spent
- Thursday: $550 spent
- Friday: $610 spent
- Saturday: $0 allocated
- Sunday: $0 allocated
This averages to a daily spend of $488.
The other type of budget is a lifetime budget, which is how much you want to spend for the entire duration of the ad campaign.
What is a Good Minimum Budget for Facebook Ads?
There is no right answer for this — you must consider your market and the average CPA and CPC for each product and service you want to advertise.
Do some research on what ads in your industry typically cost before you set your budget. Products with higher CPAs will naturally need a higher budget. For example, say your daily budget is $100, but the CPC is $25. That means you can only get 4 clicks per day, which likely won’t get you a good return on your investment.
Typically, a marketing budget for any business is 5%–12% of their revenue. Not all of your budget should be put into one campaign either. The average budget delineation looks like this:
- 20% of your budget goes toward brand awareness campaigns
- 60% of your budget goes toward product/service promotion
- 20% of your budget goes toward retargeting (showing your ad to those that engages with it in the past, but did not purchase)
Setting A Cost Cap
Facebook recommends your budget to be at least 5x larger than your cost cap. For example, say your cost cap is $5. Your minimum budget should then be $25, so you can at least get 5 clicks on your ads per day.
Lowering an Existing Lifetime Budget
Facebook recommends that you keep the new budget equal to, or more than, how much you’ve spent so far, plus 10% of the amount you’ve spent over the past 2 days. For example, if you’ve spent $300 so far, and $100 of that amount was spent in the past 2 days, your new budget must be at least $310. This way, you don’t lose potential sales.
Also, use caution when decreasing your budget near the end of the day. Facebook’s algorithm may not update in time to apply the new budget.
The Takeaway: What Budget is Good For You?
If you’re looking to advertise on Facebook, then we highly recommend that you do some market research first. Learn how much it will cost when someone interacts with an ad in your industry and go from there. The baseline rule is that the more budget you have, the more clicks you will receive, thus the higher return on your investment.
The second thing to keep in mind is your audience: the larger your audience, the more reach your campaign has. However, it also comes with the risk of spending more money on unqualified leads — people who click on your ad, but have no interest in buying from you.
The takeaway? Find your audience and know your CPA. Still not sure if Facebook ads are right for you? Check out these blogs: Are Facebook Ads Worth it? and How to use Facebook to Increase Your Sales.
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