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Marketing | Sep 21
Melissa King on June 2, 2021 (last modified on June 1, 2021) • 13 minute read
Facebook ad bidding is an art. It’s easy to pick up, but it takes skill and know-how to master.
Whether you’re new to running Facebook ad campaigns or call yourself a veteran, you might find yourself at a conundrum: Should you use cost cap or bid cap when you bid for your ads?
We asked 40+ marketers about their preferred method and how they choose their strategy. Many of them told us that the right answer depends on the situation, and they explained the factors that should go into your decision.
So, let’s get to it.
First things first — what are cost cap and bid cap, and what’s the difference between them?
According to Facebook, its ads platform asks you if you want to control costs. If you choose to control costs, Facebook will default to cost cap with the option to switch to bid cap.
Image credit: Facebook.com
Each cap limits bid costs using different processes. Cost cap averages out your bids to meet your desired cost-per-acquisition. Meanwhile, bid cap places a hard limit on your cost-per-bid.
So, while cost cap keeps your cost-per-bid flexible to focus on results, bid cap prioritizes limiting your cost-per-bid.
When we consulted marketing pros about their favorite bidding strategy, cost cap won over bid cap — but not by much. Fifty-nine percent of respondents use cost cap the most often, while 41% prefer bid cap.
Why were the answers so close? When we asked the marketers for detailed advice, many of them told us that each strategy suits different situations. They mentioned eight factors to think about when deciding if you want to use cost cap or bid cap.
These competing interests probably come to mind first when you learn how cost cap and bid cap work. They were also the overarching theme for many of the answers survey respondents gave us.
Glue Up’s Manzar Mashhood frames their explanation of cost cap and bid cap with these factors:
“The bid cap simply means that advertisers can control the amount of money they’re willing to spend on Facebook auctions for people to see their ad. Now, this is not for them to take an action. Rather, the amount you’re willing to spend on the machine in order for people to see your ad.
Cost cap, on the other hand, helps advertisers in setting the amount of money they’re willing to spend on the action. This is different from the bid cap as it is optimized for cost. Cost cap is optimized for action, which helps advertisers simplify their campaigns when they’re trying to understand how much it costs to get somebody to purchase or download or whatever the conversion an advertiser is offering.
So, if you are all about cost, then choose bid cap. But if you are all about results, choose cost cap.”
This definition leads us to another question — how do you know if you should prioritize cost or results? “To choose between cost cap or bid cap when running your Facebook advertising campaigns, you need to understand the value of your customers and leads and what you’re willing to pay for conversions,” Jonathan Aufray from Growth Hackers answers.
Aufray continues, “If you care about every single conversion that you get and you want to make sure that each conversion doesn’t cost you more than what you’re willing to pay, then you should choose the bid cap option. For instance, you can tell Facebook to look for conversions at a $20/conversion and Facebook will work on finding you conversions that cost $20 or less.”
So, what if you consider conversions your goal? “On the other hand, if you want more conversions without focusing on each and every single one, what you want is to tell Facebook that you want the average cost per conversion to be $20. This is called cost cap bidding where Facebook will find conversions at a cost lower than $20 and higher than $20 as well with the goal to reach an average of $20/conversion,” Aufray concludes.
Lily Ugbaja of Mom Baby Heart points out that these ideas apply when you’re looking at more than one campaign, too. “Cost cap is ideal for generating a lot of campaigns at the lowest cost while bid cap is for fewer campaigns but with more certain conversions,” Ugbaja explains.
“So, as an advertiser, if you’d rather have a lot of campaigns at the lowest possible cost, and hope to get conversions from some of them, cost cap is your go-to. But, if you’d rather streamline your campaigns to target just bids that you are almost sure would convert, bid cap is the better option,” Ugbaja concludes.
For some folks, bidding will be a back-and-forth between cost-focused and conversion-focused strategies. Think about your individual campaign goals and overarching objectives as you switch up your bidding methods.
Editor’s note: How do your leads and purchases by campaign square up against each other? Get a quick look with the Facebook Ads Purchase & Leads Breakdown Dashboard Template for Databox.
Another incredibly important piece of the bidding puzzle to review is your individual testing results. Advice and best practices make great starting points for a strategy, but at the end of the day, your results will be unique from everyone else’s. Testing and data should form the basis for your bidding tactics.
A few respondents had different opinions on the best bidding style for Facebook ads, but they all came to their conclusions based on rigorous testing. They recommend that you test as much as you can, too.
For example, Jacob Landis-Eigsti recommends cost cap over bid cap based on data. “We always run a test for both bid strategies, but 90% of the time cost cap has outperformed bid cap. Because bid caps will never reach over your target bid, even if there’s an ideal customer a little over the manual bid, it can be challenging to drive sufficient sales volume using bid cap. Cost caps are the perfect mix of volume and hitting target costs, but if staying below your target cost is the #1 priority, bid caps tend to be a better choice,” Landis-Eigsti explains.
But, Famoid’s Kristel Staci found a different answer when looking at their results. “Facebook has some amazing advertising and demographic options, which makes split testing and budget management quite easy and effective. For us, bid cap has worked well. As long as we are looking at the numbers daily and making sure nothing is out of the ordinary, we’ve seen this method work best,” Staci says.
There’s often no right or wrong answer in marketing — only carefully researched ones. Both Landis-Eigsti and Staci chose the best solution based on their past results, and you should, too.
Sean Kim of KoKiMedia LLC looks at cost control on an individual basis. “If you have a maximum budget for each conversion, bid caps are super powerful to make sure your conversion price is under that set amount. If there is a specific conversion goal you are going after, using cost cap can help get you conversions at a given average price point.”
However, one element takes priority over either of those goals: “At the end of the day, choosing between the two strategies requires individual testing/experimenting to truly see what is more profitable,” Kim concludes.
How can you get meaningful data to inform your bidding strategy? Try conducting a Facebook ads audit focusing on the areas marketing experts recommend.
Since cost cap uses automated bidding and bid cap requires more manual input, you’ll have to think about control and convenience when choosing between the two.
Here’s how Jenna Carson from Music Grotto explains this difference: “A cost cap campaign means Facebook’s AI will work its magic to get the most of your required actions done based on your max cap. This is a quick and easy solution meaning that you can leave your ads in capable hands knowing that you won’t overspend on your budget – if you’re low on time then this is for you!
Bid cap allows Facebook advertisers to manage the adverts at a granular level looking at specific bids but if your bid wasn’t enough, it’ll need a lot more management to make it work — but it can save you in the long run.”
Yuvi Alpert of Noémie agrees with Carson but adds that cost cap requires some learning as well. “If you’re looking to control the cost of your results, cost cap is the way to go — however, this does come with a learning curve,” says Alpert. “If you’re looking to manually cap bids in auctions, bid cap’s the best option. This is a more advanced method for businesses with the ability to calculate based on marginal cost and projected conversion rates.”
While explaining the individual benefits of cost cap and bid cap, Daivat Dholakia of Force by Mojio brings up ease of use. “While [cost cap] won’t be exact, you will even out a place where you’re paying as much per purchase as you have requested. It’s predictable and easy to set,” Dholakia says of cost cap.
Meanwhile, Dholakia explains that bid cap “is a little more complicated. It sets a limit for what is bid on your behalf in auctions. While it averages to lower costs overall, it takes more work overall.”
So, after you think about your campaign data and priorities, you should also factor in your resources. Do you have the time to put in the extra work needed for bid cap, or should you opt for cost cap’s simplicity?
Facebook ad targeting has a huge influence on your campaign results. Did you know that it also impacts your bidding strategy? While cost cap allows for broader targeting, bid cap works better for marketers who have an exact audience in mind.
Chartered Surveyors London’s Paul McLaughling prefers cost cap because of its targeting flexibility. “Using cost cap I’m not paying more, but the Facebook algorithm is able to catch some more costly, but more beneficial marketing operations for me. Then it does some cheaper ones so, in fact, I have various marketing possibilities covered. With bid cap, it can only use those that don’t pass the border of my budget — so, some medium ones — and omit the chance to use more expensive ones,” McLaughing elaborates.
Andrew Steninmann from inkablelabel highlights how targeting strategies play into business size and bidding tactics. “If your business is new and you want to get as many leads as possible, then you should use the cost cap method. This method is the basic setup for getting leads at a most average cost like pay as you go. But if you have an old business and have experience with Facebook ads running and also want to get more leads at the lowest average cost, then the bid cap is perfect for you.”
As you plan your Facebook ad campaign, look at it holistically. Your business goals, targeting methods and bidding tactics all influence each other. Every detail counts.
If your budget structure makes it important to keep an upper limit on your spending limit per ad, it might be wise to choose bid cap over cost cap.
Chris Riley of USA Rx points out that you should keep your bid cap under your absolute upper spending limit per ad. “When advertising on Facebook, it is important to make sure that your maximum bid cap is less than the maximum amount of money you are able to spend on your projected conversion rate. So if you’re expecting the ad to bring in an additional 100 dollars worth of business, it is only worthwhile if you bid less than that amount,” Riley explains.
Marketers with tight budget restrictions can also research CPC-reducing strategies to keep overall ad costs down. In general, as you optimize your ad targeting based on best practices, you should see lower costs.
Many of the factors we already discussed won’t have as big of an impact if you have a shorter campaign. Campaign length influences your bidding and targeting priorities, especially if you have a fast timeline.
According to Impulse Creative’s Rachel Satow, cost cap works better for long-term campaigns than bid cap. “First, consider your optimization goals, they are not available for all. Then, consider your timeframe for the spend. Cost cap can be slower to spend and better for long-term campaigns,” Satow begins.
Satow continues, “A bid cap is good if you know the value you can expect from a new customer to keep conversion costs below that value to retain profit and have an attentive team monitoring the campaign as it will require more frequent updates.”
If your ad campaign moves fast, your bidding tactics will have to as well. Always keep an eye on your data and adjust your strategy according to your metrics.
Editor’s note: Busy marketers need bird’s-eye views of their data to keep up with business. The Facebook Ads Campaign Review dashboard overviews your ad campaigns to give you the high-level metrics you need fast.
Even considering the factors we’ve already discussed, bidding tactics have no hard-and-fast rules, especially if you think outside of Facebook’s logic.
If you don’t mind making frequent adjustments, try this strategy from Vincent D’Eletto of WordAgents: “When it comes to Facebook ads, I find myself using the lowest-cost bidding strategy with a bid cap. It’s most effective to cap it at around 25% to 30% higher than I’d want to pay for the average ad. Any lower and you’ll risk losing a lot of placements.”
Keeping your bid cap lower than your limit may help when you have a tight budget, but if you have the financial room, raising the cap could open more opportunities.
D’Eletto gets great results from this approach. “I find this ends up costing less per conversion, and while it may require more tweaking, it’s generally worth it. I’d advise using the lowest cost bidding without a bid cap when you have the entire budget to spend and don’t need to scale, such as in a short-term strategy,” they suggest.
Looking for more outside-the-box Facebook ad strategies? We asked marketers about their tactics, and they had 29 ideas to share.
The cost cap vs. bid cap conundrum also comes down to cost-effectiveness and predictability. Marketers who find cost cap more budget-friendly than bid cap have to weigh its cost-effectiveness with bid cap’s control.
Krista Neher of Boot Camp Digital Publishing tends to save costs using cost cap but considers bid cap more consistent. “The advantage of a cost cap is that it controls your final cost. The advantage of this is that you may pay more for an individual click, but the final cost per action should be lower. Cost caps also help to control your final cost – so if your final costs are going up, the cost cap will be hit and your ads won’t deliver expensive conversions,” Neher says of cost cap bidding.
And as for bid caps? “Bid caps control the bid and not the final cost per action. This is helpful if you want to have more consistency in delivery and predictability in what you pay per click.”
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