On this episode of Ground Up, Kieran Flanagan talks about the early days of freemium at HubSpot, instilling a growth discipline that expanded well beyond the marketing team, managing cross-functional teams, and more.
Ground Up Podcast | Oct 21
Dann Albright on December 3, 2018 • 12 minute read
Feel the same way? Well, you’re not imagining the decline in your organic reach.
In 2014, due to the amount of content being published to the Facebook news feed, the social media giant refined its algorithm to show more relevant content to its users rather than all of the content.
Then, in early 2018, Facebook announced that “we’re going to shift ranking to make News Feed more about connecting with people and less about consuming media in isolation.”
The result has been a steady decline in the organic reach of your brand page. (According to our own research, 67% of marketers say reaching their audience organically on Facebook has gotten harder in recent years.)
One way to counter that? Spending money.
By advertising on Facebook, brands have more control over who sees their message, and perhaps more importantly, the number of people that actually see it.
But how well does it scale? In other words, if we increase our ad spend, will we also increase signups? Leads? Customers?
To find the answer, we polled a couple dozen agencies on both the effectiveness and scalability of Facebook advertising.
First, 92% of the marketers we surveyed said that Facebook ads are at least somewhat effective at generating sales.
54% said they’re “very effective.” Only 8% said that Facebook Ads are “not effective” in generating downstream impact.
Next, if you’re seeing success in your advertising efforts, do you continue to increase the investment?
The answer is complicated.
Most marketers say that yes, spending more money on Facebook ads will result in more sales. But there are a lot of “ifs.”
Let’s start with a big one.
Spending more money on Facebook ads will get you more sales . . .
Editor’s note: Want to quickly measure overall ad performance as well as the performance of individual campaigns? Grab this free Facebook Ads dashboard and track the performance of multiple campaigns in one place.
“Your ads can be the most engaging and memorable ads on social media,” says Keri Lindenmuth from KDG. “However, if you don’t have a sales team that’s able to listen to customers and their needs, you won’t make as many sales as you hoped.”
“Ads are a great way to grow engagement but don’t forget about ensuring your sales team meets the same high quality.”
Of course, this applies primarily to B2B companies and B2Cs with high-price items. But the point stands for other products, too. You can grab people’s attention with a Facebook ad, but the product (and people) still need to sell.
Our research suggests that many companies don’t expect direct sales from Facebook, but rather leads that sales team can turn into sales.
42% of agencies say that lead generation is most important to their clients when running Facebook Ad campaigns. (More important than actual sales at 2nd with 34%.)
Keep in mind that you’ll need to adjust your strategies and expectations based on your goal.
Here’s Blake Aylott from Common Thread Collective on audience size:
“If your product has a large audience then you can afford to scale your ads and put a massive amount of money into your ads. However, if your audience is niche then you cannot scale your Facebook ads because you will run through your audience quickly.”
James Pollard from The Advisor Coach gave an example from his own business: “Facebook is often very good at spending your money efficiently. You may max out your budget and only reach 90% of your target market.”
“However, you’ll typically spend much more trying to reach that last 10%. If your typical Facebook CPC is $2 or $3, it wouldn’t surprise me if you spent more than $5 per click to reach that last part of your audience.”
“Because I help financial advisors—who usually have a small target market—I see this problem all the time.”
HealthJoy‘s Rick Ramos gave a great example of the importance of audience size: “If you are a toothpaste manufacturer, basically, everyone can be your audience. I’ve seen a bunch of ads lately for Hello toothpaste. Their target is anyone with teeth.”
On the other hand, “Facebook advertising can be scaled to continue to have a positive return on investment as you raise spending, provided you continue to test ads that are being run and can target a large enough audience. A local car repair shop will begin to experience diminishing returns as spend is increased because the possible new business opportunities are limited,” says Vincent DeCastro from SEO My Business.
“Whether you can scale your ads on Facebook depends on how much room you have left to grow,” said Rick Kranz of OverGo Studio. “It doesn’t always equate to spending more money. Yes, in the broad B2C market there is usually some room to scale once you have your offer nailed down. But in the narrow B2B niche it is more about finding the right combo of offer, objective and audience. Just spending more money usually has a diminishing return.”
“Facebook Ads can scale well when the increases are done strategically,” says Etched Marketing‘s Rachel Lindteigen. “People get in trouble when they try to increase too much too quickly.”
“It’s best to test and scale slowly, increase your budget by 25% at most, allow a few days for results to come in, and then scale again, if desired. Increasing too quickly can cause the ads not to scale because the algorithm needed more time to learn about the ad’s performance.”
Casey Hill from Hill Gaming Company also emphasizes the importance of Facebook’s ad algorithm.
“When you change your budget, it resets the algorithm and this can impact sales. So for my clients, we start with testing different iterations over the first few weeks and finding the winner in terms of copy, image, and targeting.”
“Then when we double down our budget on that winner, we first make sure we have a sufficient timeline to deal with a re-adjustment and monitor the clicks/sales closely over the next few weeks.”
The ROI of the curve is clearly ‘S’ shaped in our experience,” says BEE Inbound‘s Lanny Heiz.
“Due to the decreasing marginal returns scaling is limited and the marginal gains will flatten out above a certain point. To kickstart the Facebook advertising algorithm a learning period is needed. The more money is spent, the more data can be gathered thus the more learnings can be taken. Thus, in the beginning, the curve of scalability grows linearly/exponentially and only later flattens out.”
Clarify Capital‘s Nishank Khanna sums up the importance of targeting: “The key is to stick to targeting that drives qualified leads that convert into sales. At the end of the day, nothing else matters except closed sales.”
Zach Hendrix from GreenPal shared a great story about how his company used good targeting to help them scale their Facebook ads:
“In a recent campaign we ran in Nashville, TN, we ran a pay-per-click FB campaign with one ad targeting the entire metro Nashville area. The headline read ‘Local Lawn Pros in Nashville are a click away.’”
“And I thought the performance of the ad was good with a click-through rate of over one percent and conversion rate of over 10 percent on the Nashville landing page but we needed to improve on it. We thought, how can we make this more contextual and relevant to the viewer? [So] we researched census data, looking at the average income and home values throughout the Nashville area.”
“We found that East Nashville, an up-and-coming neighborhood, was populated with more working class, and a creative class demographic and we hypothesized this customer segment would be price sensitive but still not want to cut their own lawns.”
“So we segmented those zip codes and only ran a specific ad for them, with a headline ‘The Cheapest Lawn Mowing in Nashville. Lawn mowing from $20.’”
“We then created a matching landing page. After running the ad for one month, on-page analytics proved the guess to be true. We saw over 200 percent lift in click-through rate and 30 percent lift in on-page conversion.”
“Studying the data your own business generates can tell you which of your online marketing campaigns works best. Do the ads appeal to your target market or another market altogether? The data may also point to completely new areas of customer interest.”
“In addition to spending increases, it’s primarily the quality of your content and the specificity of brand’s messaging that sets the leading organizations apart when speaking about ROI,” says Ian Revling of Evolve Digital Labs.
“Don’t deliver product catalog based websites or bland images of your product to consumers, there’s too much content on social to compete with user’s family and friends. Successful and profitable social media campaigns deliver potential consumers their products in real life situations that they can empathize and interact with.”
Daniel from Amp My Content also prioritizes great content in Facebook advertising:
“Right now we’re running Facebook ads and seeing a $22:1 ROI… but our results are not typical. We’re running ads to content, that content converts leads, and then we have automated sales processes in place.”
“Because we push to content, we usually see lower lead cost, and higher relevance—meaning the ad cost lowers also.”
“tl:dr version[:] Yes you can spend more and see more sales—but it’s not uniform. Also, you’ll see far better return and lower cost, pushing to lead capture than offer alone.”
Lightning AI has managed significant Facebook ad budgets, says Colette Nataf. “By aggregating our data, we’ve found that at very low volumes, Facebook scales easily, but we see exponential increases in cost per conversions starting at spends approaching $5,000 per week.”
“This means that for advertisers who are starting out, Facebook is a really effective channel in terms of costs.”
“But once advertisers are scaling up to more than $20,000 per month in ad spend, even though the CPMs or CPCs may stay in the same range, the cost per conversions overall increase steadily. We’ve found this is true regardless of the advertiser’s industry and product that they sell.”
“For advertisers who are looking to scale up on Facebook without seeing an increased cost per conversion, there are three options,” says Nataf.
“First, test new ads and creatives all the time. Second, test and optimize your funnel—everything from your landing page to your add-to-cart payment portal. The third option is to find and create new audiences.”
“We’ve found that rapidly creating and testing new audiences allows advertisers to increase scale with new types of audiences, which can help to stabilize the overall cost per conversion in the account.”
Many marketers pointed out that spending more on Facebook ads can be very effective—if your targeting, messaging, copy, creative, and other factors are working well. Here are a few questions to ask yourself:
“Increasing the budget on Facebook ads will effectively boost the sales only when three conditions are met,” says Andrzej Muzaj from CrazyCall:
“If you’ve hit the roof it’s time to look for ways to broaden your audience. And if you’ve spammed to the death your target audience, your sales will rather drop then go up.”
“If you haven’t taken the time to create a strong foundation of targeted audiences, dynamic ad copy/creative and precise ad placement, then no, you won’t generate more leads by simply throwing more money at your campaign(s),” says Intuitive‘s Rachel Bills.
“However, when you’ve taken the time to build audiences for the different parts of your conversion funnel and curate a narrative with your ads that solves a users problem then Facebook scales swimmingly.”
Every company needs to find what works for their industry and business model.
“For example, florists may have a Facebook campaign that scales around Mother’s Day, but on a random weekday in October will be unable to use Facebook as a channel at all,” says agency marketer Josh Meah.
Other companies may find that they have seasonal cycles as well. Or that Facebook ads don’t work as well for their particular industries:
“Based on our experience and about a year’s worth of data, Facebook advertising is very effective for some industries, like real estate/rentals, and can be a less direct impact on sales for other services,” according to Delta‘s Theresa Keller.
Finally, remember that sales volume isn’t the only measure of how effective ads are, says Max from FishTankBank.
“If you’re showing ads to a new audience then you’ll have a hard time generating any sales. However, there are less measurable benefits (brand awareness) which make it a worthwhile endeavor.”
All in all, marketers generally agree that spending more on Facebook ads will generate more sales if you can satisfy a range of conditions.
What about you? Have you seen increased sales because of an increased Facebook ad spend? Or have you found that your industry doesn’t work that way? Share your thoughts in the comments below.
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