And yes, when we say Facebook we also mean Instagram.
Determining the right advertising budget is a question we often get and it is something that gives many advertisers a headache, from the very young to the very large.
It must be understood that when we mention a number it is not done unprepared. It presupposes the study of specific sizes, knowledge of the market and the goals of the company.
What we will write below applies, of course, to Instagram as well as to the other platforms, in general.
Understanding numbers and goals
The first thing to do is to understand the numbers that concern your business and your sales.
For most customers the goal is obvious: to make money! This means that they are waiting for leads which will lead to sales.
In general, the marketing budget for each business ranges between 5-12% of turnover. If it is a well-known and well-established company, an expense close to 5-7% is satisfactory, if it wants to maintain and / or increase its sales at a steady pace. If it is an unknown company or a new company that needs to move more aggressively, then it should move at a cost of 10-12% of the turnover (or the estimated turnover if we are talking about a completely new business).
The case of the company that is advertised for the first time is a bit more complicated as they need information, from market research (either primarily ie direct research or secondary ie from industry data). Also, data from competitors, if available, is extremely useful.
Let’s look in detail at some of the elements that help us determine the correct advertising budget. As a rule, the advertising budget is distributed by means according to the audience and the goals. But let’s look at them in a little more detail.
1. What is the appropriate cost per lead?
As we know lead does not mean sale but an item that can lead to a sale. Another point concerns the cost per core event. What is this; If in order to complete a sale it is required e.g. a customer discussion with a salesperson, then the time spent is measured at some cost. This cost is set by you and of course it must be such that it leaves a profit. So the amount you will spend for each such event must “make money”.
Caution: we can not assume that the lowest cost per lead does not necessarily produce the lowest cost per event. If you are selling something that is cheap and with a small profit margin then you need to determine exactly the amount of this cost. If you sell something more expensive, with a higher profit margin, you have a greater margin of movement without meaning that it takes you to waste money.
2. Cost per acquisition
You should also be concerned about cost per acquisition. Obviously acquisition is about acquiring a new customer and indicates how much money you are willing to spend to get a new customer, and of course it varies from one business category to another. It is not, and could not be, the same for someone who sells cars and for someone who sells notebooks.
3. Cost per conversion
You should see the conversion rates. Is there a sales team or are you just selling directly? So you need to consider how many contacts and communications are required to turn lead into a sale.
Objectives and budget allocation
And somehow we get back to the expectations and goals of the business. One possible goal for a start-up business could be to reach € 100,000 turnover in four months (very clear goal). In order to be able to process this goal we will need market data (cost per lead, cost per event, cost per acquisition) which will come from the movements of competing companies.
The next step is to allocate the budget. The distribution is one per month, for the entire duration of our campaign, and per type of advertising, in order to produce results.
Based on the literature and experience to date, about 20% of the budget should be for education, engagement and audience building. Often, businesses make the mistake of making ads for leads only or for recognition only. And yet, both men and women are needed. The percentage of the budget that concerns the audience is actually an investment for the future. Thanks to this, the business will not run out of audience.
Then, 60% of the budget should be for the promotion of specific things (products, services, offers, discounts, etc.) to bring the desired conversions.
The remaining 20% should be directed to retargeting so that there is continuous feedback on sales. If this triplet works harmoniously, it ensures you the maximum return on your advertising spending.
Mistakes to Avoid
Let’s now look at the most common mistakes made during the campaign.
The first has to do with duration as it concerns not giving enough time to the campaign to perform. Time is a necessary condition for the campaign to “run”, gather the data needed to edit it and work on these necessary adjustments. It is good to know or try to find out the purchase cycle of your products (or services), ie how long it takes from the initial lead to conversion. If the cycle is small then you will have data very quickly and therefore you will be able to edit it quickly and adjust it quickly. If the cycle is long, like six months, then your campaign should run for a while, generate data, edit it, customize it, and so on.
The secondly is not spending enough. The size of the audience and the cost of the product are what will guide you in how much this is “enough”. If the budget is too low, then the distribution that Facebook will make will be so small that you may not receive a single lead per day.
The third The most common mistake we make is choosing the wrong campaign type and campaign goals. Although we said that the three types (brand awareness, leads, retargeting) must coexist, if you are targeting leads do not target brand awareness. By choosing a campaign goal and even the right goal, you tell Facebook what you want to achieve. He then knows what to do and does it well.
The last one but equally important is the misreading of the data in the ads manager. Going to the customize column in the ads manager you can select and organize the metrics that suit your business so you do not get lost in a volume of useless data. Their existence is to help you make better decisions and not to confuse you.
And as we have written many times in the past, the golden rule of online advertising is: test, test, test!
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*The article has been translated based on the content of https://www.greekinternetmarketing.com/blog/proothisi-istoselidon/pos-na-prosdiorisete-poso-poy-tha-dapanisete-gia-diafimisi-sto-facebook by www.greekinternetmarketing.com
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