What budget should I invest in my Facebook and Instagram advertising campaigns?
At one time or another, you asked yourself this question before launching your campaign.
Some marketers simply set an arbitrary percentage of their revenue to reinvest in advertising.
Others set annual budgets with the help of their CFO and then allocate that budget month by month.
There are also marketers who have a "my budget is unlimited if I reach my profitability goals" approach.
Still, if you allocate too little budget to your campaigns, you may miss out on many opportunities.
On the other hand, if you invest too much money, you are more likely to lose money.
How do you set the "right" budget to achieve your marketing goals?
That's what this article is all about!
You will discover with me how to set a budget on Facebook so that Facebook spends it in the most optimal way possible.
Next, we will see a 5-step process to define the budget of your campaigns, whatever your objectives.
1) Understand how to manage budgets on Facebook
When you advertise in the Facebook Ads Manager, you have 2 ways to set your campaign budget
The first way to do this is to set the budget at the "campaign" level and let Facebook drive it through the campaign budget optimization (CBO).
Campaign budget optimization (CBO) is a bit like all risk insurance.
You give Facebook a budget (e.g. $30 per day) and its algorithm distributes the budget among the different sets of ads that make up the campaign.
With CBO, you won't have to go back and forth on managing your budget. Facebook will do it for you, in real time.
As Facebook explains, its algorithm will itself choose to allocate a larger budget to a set of ads that bring better results (or have a higher potential for conversions) and Avoid spending your budget on ad sets that have fewer opportunities for conversions.
Here is a schematic representation:
You should use campaign budget optimization if:
- You are more interested in optimizing the cost per result of your campaign, rather than a particular set of ads
- You don't do A/B testing
- You want to take the burden of managing your budget off your shoulders and leave it to Facebook
Mind you, I explained in this article that Facebook's algorithm doesn't necessarily know that certain sets of ads are more valuable to you (e.g. subscribers to your newsletter may be more important to you than people who visit your website).
In addition, optimizing the campaign budget always makes it difficult to integrate a new audience into the campaign.
This is why some advertisers prefer the second method: Budget management at the advertising package level.
It simply consists of setting the budget for the ad sets in your campaign yourself (ABO) and actively manage the budget based on the performance generated by each ad set.
With this method, you have more flexibility for :
- Testing audiences
- Allocate the budget you think is appropriate for each ad set
- Manage the budget allocation between the different advertising packages (audiences) yourself
Be careful, though.
More flexibility also means that you will have to spend more time managing your budgets and you are never safe from making mistakes.
When your campaign contains only a few ad sets, it's pretty easy to manage.
However, if you have a campaign with multiple ad sets and you're looking to scale, I'd recommend optimizing the campaign budget instead!
You will save a lot of time and you are less likely to make mistakes.
2) Daily budget or global budget?
You have now understood that there are 2 ways to set a budget on Facebook: at the campaign level or at the ad set level.
There is another subtlety you should know about Facebook ads campaign budgets.
You can choose whether your budget applies to each day or to the entire duration of the campaign or ad package.
When the budget applies to one day, Facebook refers to it as a "daily budget".
When it applies to the entire runtime of the campaign or ad set, Facebook refers to it as a "global budget."
Daily budget
With the daily budgets, you tell Facebook the average amount he or she can spend each day. Facebook will do its best to spend its budget based on your bidding strategy.
So, if you set a budget of $20 per day for 7 days for your campaign, Facebook will make sure that you don't spend more than $140 over the week.
However, don't expect Facebook to spend the same amount every day.
The algorithm can deviate by a maximum of 25% from the daily average.
As Facebook explains in this article:
"If vur daily budget is 10 €, we will not exceed 70 € per calendar week. Some days we may spend up to €12.50 and others less than €10. This graph gives you an idea of how we might spend the €70. The blue curve shows the general spending trend from day to day. The green hexagons represent the amount actually spent on a given day (on average, €10 per day for a total of €70)."
In summary, the daily budget is the best option for advertisers who have campaigns that run continuously and are looking to control their daily expenses.
In addition, the daily budget offers the advertiser more flexibility to increase or decrease the budget based on performance.
Overall budget
Global budgets are most often used in 2 situations :
- Campaigns with an end date and a defined budget. E.g.: a flash operation over a weekend, a launch, etc.
- Campaigns for which you want to spend your budget at certain times only. E.g.: a restaurant owner who does not want to spend his budget during off-peak hours
In all cases, you must set an end date for the campaign and a total expense.
Once you have defined the campaign budget and duration, all you have to do is let Facebook manage your budget for the duration of the campaign.
Facebook's algorithm will spend your budget during the days (and times) when you might have the best results.
Therefore, you may see larger variances in your expenses (greater than 25%) from day to day.
You can also schedule your ads to run at certain times of the day only.
Here is an example of a flash operation that we launched between April 21st at 6pm and April 25th at 11:59pm.
We had set a budget of 350€ for the duration of the campaign.
The average amount spent each day was 85.91€, but we can see that Facebook spent much more on some days than others.
The peak of spending was on April 22 with an expenditure of 95,61€ on one day!
Also note that the choice of daily or global budget is irreversible once the campaign is launched.
If you want to change it, you have to cut the campaign, duplicate it and then modify this budget.
3) How to set a campaign budget on Facebook Ads?
We're already well into managing budgets on Facebook and Instagram ads, but I still haven't told you how set your budget.
How much to invest?
You will discover it in a few moments by following this framework in 5 steps.
Step #1: Define your goals
Start by determining a specific marketing goal to achieve.
On Facebook, you have 3 main types of goals and 11 advertising goals:
- Awareness brand awareness, coverage
- Consideration traffic, interactions, video views, app installs, lead generation and messaging
- Conversion : conversions, catalog sales, point of sale traffic
In which category do you fall?
Let's take a few examples.
An advertiser could use advertising to drive traffic to their website.
Another advertiser could advertise to generate sales on their website.
(Yet) another advertiser is advertising for more people to download their iOS app.
Is this enough to determine a Facebook Ads campaign budget?
Not quite.
You are missing several pieces of information.
The first is the volume.
What are your goals in terms of results?
How many sales do you want each day? How many visitors do you want per day to your site? How many app installs do you want to get per day?
Let's go back to our examples.
- Traffic: the advertiser wants to get 100 visitors per day on its website
- Conversions: the advertiser wishes to generate 10 transactions per day on its website (we will talk about the value of these transactions in a second time)
- App installs: advertiser would like to get 50 new app installs every day from Facebook
Shall we move on?
We are far from finished!
Step #2: Forecast (or anticipate) the costs per result and calculate your projected budget
In this second part, we will focus on the costs. Indeed, without this information, it will be difficult to calculate your projected budget.
First of all, do you know :
- Cost How much does a result cost you? Or how much are you willing to pay at most for the desired result?
- Revenues How much do you get for an average result?
If you know how much a result costs you and the revenue generated per result, then you can easily calculate your Facebook ads budget.
For a traffic campaignThe only data we are interested in is the cost per landing page view.
There are 2 possible cases.
1st case : you have never makes advertising campaigns before.
To find out the cost per landing page view, you can either give it an arbitrary value or do your own research.
Unfortunately, there are few reliable studies in France that will give you an average cost per click that is realistic for your industry.
I therefore advise you to launch an initial 7-day traffic campaign and invest 5 to 10€ per day on a targeted audience (less than 1.000.000 people).
You can then get an idea of the cost per click and cost per landing page view for your account.
For example, if you see that the cost per landing page view is 0,30€, it means that you have to invest 30€ if you want to have 100 visitors per day on your website (cost per page view multiplied by the number of visitors).
Case 2: You have already launched Facebook advertising campaigns
In this case, go to your reports and analyze how much a landing page view cost you in the last 3 months.
Ideally, select only campaigns with the "traffic" objective because Costs differ depending on the campaign objectives.
For an app installation campaignThe reasoning is exactly the same except that you measure costs per app installation.
For a campaign with a conversion objectiveThe budget calculation is slightly different since you also have to take into account the value of a conversion.
You are also faced with 2 possible scenarios.
If you've never run a campaign before, you need to do some forecasting. Here's an example:
- Maximum cost per result of 30€. In other words, you are willing to pay a maximum of 30€ for a conversion (purchase, lead, etc.). This is also known as the cost of acquisition.
- On average, a purchase brings you $100. This is the average revenue generated per conversion.
Then you just have toapply a rule of three to calculate your budget.
For example, if you want to generate 10 transactions per day worth $100 with a maximum acquisition cost of $30:
- This is equivalent to generating a turnover of 1000€ per day.
- Knowing that you are ready to pay 30€ per purchase, you will have to invest 300€/day (10 transactions x cost per conversion) to reach your goal
- You would have a return on advertising investment of 3,33 (1000€ divided by 330€)
If you know what your costs are, you can simply do the same calculation, except that you will replace the acquisition cost and average revenue per conversion with their actual values!
(To find the average shopping cart, you must divide the conversion value of the purchases by the number of purchases).
Note: I wrote a more in depth article on acquisition costs, conversion values and ROAS. This should help you to see more clearly if you find this part more complex.
Step #3: Allocate your budget
We have done the hardest part: determining your budget.
Now, how to allocate this budget?
If you regularly read the articles on this blog, you know that I talk a lot aboutorganize your campaigns with a sales tunnel logic :
- An acquisition campaign
- One or 2 remarketing campaigns (middle and bottom of the sales tunnel)
- A loyalty campaign
I talk about it in detail in this article on Facebook sales tunnels.
This distribution does not vary much depending on your activity: e-commerce, services, infoproducts, saas, etc.
Generally, we split a budget on Facebook Ads with the 75/25 method.
The idea is simple.
It consists in allocating your advertising budget within 2 or 3 large campaigns.
- 75% in acquisition : campaign that aims to raise awareness of your brand, your offer and acquire new customers. This is usually your least profitable campaign 🙁
- 20 to 25% in remarketing A campaign that aims to show personalized advertising to people who already know you in order to generate a sale.
- 0 to 5% in retention Loyalty: building customer loyalty also means offering them quality products.up-sell (upmarket), cross-sell (complementary products) and novelties (repeat purchases). This is usually your most profitable campaign 😉
Why invest so much in acquisition when this campaign is less profitable than others?
Because you must build your personalized audiences People who visit your site, interact with you on social networks, etc.
If you don't, your remarketing audience pools will be too small, which means you will quickly saturate your (own) audiences and have less profitable campaigns that don't scale.
Here is what a budget breakdown looks like in funnel once set up on Facebook.
Campaigns with the keyword "ACQ" in their name are acquisition campaigns, while campaigns with the keyword "RMKTG" in their name are remarketing campaigns.
Step #4: Launch the campaign and track results
All that's left is to launch your campaign and find out if your cost and revenue predictions are confirmed in reality and if you need to adjust (or not) your budgets.
But, beware.
Launching a Facebook ad campaign is also about pressing the right buttons, targeting an audience, choosing the right locations and writing the text for your ad.
I'll refer you to my guide to Facebook advertising that teaches you how to launch profitable Facebook advertising campaigns.
Once the campaign is launched, wait 5 to 7 days to follow your results.
You can then analyze the cost per result.
Let's go back to our examples.
For the traffic campaignHow much does a landing page view cost you?
If the cost is lower than expected, you can leave your budget unchanged or decrease your budget since it costs less than expected.
If the cost is higher than expected, you can either optimize your campaign or increase your budget to reach your goals!
The reasoning is the same for app install and conversion campaignsThe only difference is that you have to take into account the value of the average shopping cart for conversion campaigns.
If a purchase brings in more money than you expected, you will have to invest less than you originally planned.
Otherwise, you will be forced to optimize your campaign or increase your budget to reach your initial objectives.
Step #5: Adjust your budget
Finally, remember that your budgets are never fixed!
You can always readjust them according to the campaign's performance.
If the campaigns perform well, why not increase your budget?
Simply go to the "Budget" column of your campaign or ad set and click on the little pencil to change the campaign budget.
Then increase the budget by up to 20% and re-evaluate after 3 days if your costs per result remain stable.
If the campaigns are not performing as well as expected, you can always decrease the budget while you figure out what went wrong.
It's safer, especially if you're not used to running campaigns on Facebook and Instagram!
Conclusion
It is never easy to define a budget to invest in advertising.
You could arbitrarily define your budgets, but this is not a very scientific approach.
In this article, you have learned how to use a method based on objectives and costs.
In my opinion, this is the most relevant approach to accurately define a budget to invest in social advertising.
The only thing it requires is that you quantify your marketing objectives, know (or estimate) your costs per result and the revenue generated per conversion.
Once you have this information, you will be able to calculate the "right" budget to invest in your campaigns and adjust it as the campaign progresses!
How do you calculate your budget to allocate on Facebook and Instagram ads?
