How to reduce advertising costs on Facebook ads!

Facebook uses an auction system to determine which ads appear. Advertisers bid for the attention of customers. The more bids you win, the more impressions your ad gets, and the more likely your ad is to be displayed in front of the right people.

But unlike traditional bidding, Facebook's system doesn't just give the highest bidder the win; it also takes into account buying potential, trust, and relevance. To ensure user experience and display relevant and useful ads, thus helping advertisers and consumers.

Here are the three components of an ad serving system:

1. Bidding: Factors influencing this include how many opportunities there are to show your ad to someone and how many other advertisers want to show their ads to the same person. Facebook uses a formula to determine who will win the auction, which depends on the level of competition for a certain user's attention, the likelihood that the user will perform the ad's goal (click on a link, fill out a lead form, etc.), and the value of the ad to that user.

If you win the auction, the actual cost is not your bid amount, but the amount of the second highest bid. Spending more money will only give you more opportunities to bid, but it won’t necessarily eliminate your competitors.

2. Scheduling system: Factors that affect your budget include how much money you have and how long Facebook has to spend it. The scheduling system ensures that Facebook spends your budget evenly over the course of your campaign. This is true whether you set a daily budget or a total budget. Facebook will try to find low-cost delivery opportunities for you and consume the budget evenly during the scheduled advertising period. This approach ensures that you spend all of your budget and get as many placement opportunities as possible.

Variables that advertisers control: Who you’re targeting, what type of ad you’re showing someone, and more. You can set these conditions when you create your ad set and select your audience.

Automatic bidding vs. manual bidding strategies

When setting a budget for your Facebook ad campaign, you can set a budget for each bid (manual bidding) or choose automatic bidding (Facebook’s default setting).

Automatic bidding

With automatic bidding, Facebook will use its algorithm to find lower spend for your goals. It compares your bids with other advertisers and determines the level of competition for customer attention.

The benefit of using automated bidding is that it maximizes your budget and leverages Facebook’s smart push notifications to get the best results.

Here are some scenarios where automated bidding is useful:

You’re new to Facebook advertising. Automated bidding is a great way to maximize your budget, with Facebook automatically adjusting your bids for you.

You are trying to find a benchmark for your advertising cost targets. If you want to determine how much a lead or conversion will cost, automated bidding can provide you with that information.

You have a limited budget and want to achieve wide reach or high number of impressions.

Manual bidding strategy

Facebook’s manual bidding strategies allow you to set cost controls towards your desired goals. For example, you can let Facebook know how much it’s worth to get a conversion or goal, or how much you’re willing to bid in an auction, and Facebook will use your budget to achieve those goals.

Manual bidding is available only for selected placements and is set when you determine your budget. It changes the way Facebook uses your budget in each auction and can be used to manage your campaign costs, making you more competitive with other advertisers and improving the cost-efficiency of your campaigns.

1. Set a spending cap for your Facebook ad campaigns

The purpose of setting a cost cap is to ensure that each Facebook bid does not exceed the set budget amount. Facebook will then try to use that bid amount as an average to get the best possible performance.

Cost cap bidding is a good option when you need to control costs. Let’s say you sell high-volume but low-margin products through your online store, and you need to spend less than $8 per conversion to be profitable. Then by using cost cap bidding, you can find conversion opportunities that cost around $8.

The downside is that you might not get the number of conversions you want. Facebook will look for conversion opportunities within your spending cap, so you may not be able to spend your entire budget.

2. Set a bid cap for your Facebook ad campaigns

The purpose of using a bid cap is to let Facebook know how much you are willing to spend per bid so that Facebook doesn’t bid more than this amount. But it may not reflect what you actually paid. For example, if you bid $5 per click and win the auction against another advertiser bidding $3.50 per click, you will only pay $3.50 for that click, even though you set your bid cap at $5.

If you set your bid cap at $5 and your competitor sets their bid at $7, and Facebook deems your ads to be of equal value (both are providing relevant and useful ads to that particular customer), then you will lose the auction due to your bid cap.

Bid caps can be used to:

Get more conversion opportunities by setting a cap;

Improve your competitiveness in a highly competitive market. If your goal is simply to acquire customers before your competitors do, then using a higher bid cap can make your competitors lose the bid.

But you may not spend your entire budget because Facebook may not be able to use your bid cap to win you as many opportunities as possible within your budget. Additionally, your costs may rise as the opportunities for low bids decrease.

Speed ​​up Facebook ad delivery

Using bid caps, you can also choose to speed up the delivery of your ads so that Facebook spends your budget faster.

With a bid cap, Facebook knows how much it will cost to maximize your bid and will look for every bidding opportunity for you. If you choose to speed up your ad delivery, part of your budget will be spent on more expensive bids to ensure that your budget is spent as quickly as possible.

Accelerated delivery is only available if you bid manually and set a cost cap. Otherwise, there is no cap on what Facebook can bid, so some control factor is needed to keep costs in check.

Accelerated delivery is useful when you are running a time-sensitive campaign (such as selling tickets) and need the campaign to produce results as quickly as possible, regardless of the cost per conversion.

This type is not suitable if you want a low cost per result and want to spend your ad budget as slowly as possible.

3. Set target cost bidding for Facebook ad campaigns

Target cost bidding is a target cost you set to get conversions. Facebook will change your bids to ensure you get conversions within your target cost range.

Target cost bidding is suitable for:

Make sure you get as many conversions as possible for a fixed fee;

Keep your fees consistent.

However, you may be missing out on cheaper conversions because you’re limiting your Facebook costs to a certain range, thus losing out on opportunities to get conversions that could have been made for less money.

Additionally, you may not spend your entire budget because you may not have enough bid opportunities to convert people within that cost range.

Target cost bidding is only suitable for app installs, lead generation, conversions, and product sales because Facebook needs to track the cost per conversion for this type of bidding.

Manual bidding strategies for Facebook ads

Here are some strategies for using manual bidding (capped cost, capped bid, and target cost) in your Facebook ad campaigns.

1. Establish a benchmark for target costs

Before you start testing manual bidding in your campaigns, you’ll want to establish some target cost baselines.

If you know that your average cost per conversion is about $11, you can try lowering your target cost and see if you can get cheaper conversions for the same budget. This may result in fewer conversions, but may be more cost-effective. Without establishing a baseline, it’s hard to know how high or low to bid.

Understand your Facebook ad campaign goals and budget

Do you need to maintain a certain CPA to maintain your profit margin, or do you want to maximize the number of conversions you get (even if it costs slightly more)? Both bidding strategies can drastically change the results of your campaign.

2. Monitor your ads closely

Manual bidding campaigns can have erratic performance. Your ads may perform well in the beginning, but once Facebook runs out of bid opportunities to match your bidding strategy, your costs may start to rise. Or your bid may be too low to be competitive in the auction, and your campaign will be slow to deliver.

You can use the review tool to check your ads and see how your bidding strategy is performing throughout your campaign. This allows you to see how your audience’s response to your ads changes, how your bids affect your campaigns, how saturated your audience is, and how much audience overlap there is. Understanding how your audience responds to your campaigns can help you choose your bidding strategy.

This example shows how a bid cap strategy can stabilize the cost per lead. As you can see, the costs start to increase as the ads run. To ensure that as many potential customers as possible are acquired at the best cost, advertisers added a bid cap strategy on August 12, which keeps the cost of potential customers within a desirable range.

3. Slowly increase your bid

Let’s say your average lead acquisition cost is $5 and you want to be more successful in a competitive business. You can set your bid cap to $7.50 and see if you can generate more leads by increasing your bid. You can then adjust bids for your entire campaign, increasing your bid cap little by little until you get the results you want.

Author: Hugo.com

Source: Hugo.com