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Scaling with Meta’s bid strategies: Using Facebook’s cost and bid campaigns

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When you have a winning creative, you may want to consider scaling your ad spend. Meta supports a number of ‘bid strategies’ that can give advanced advertisers greater control over their campaign budgets. 

One of the best ways to scale your winning ads is with a cost cap or a bid cap strategy. Between the two, I recommend that you use cost cap over bid cap, at least until you have a better idea of your predicted conversion rate — I’ll explain why below.

But before that, let’s take a minute to look at what they are.

What are Facebook’s bid strategies and how do they work? 

Out of the box, all of Facebook’s campaigns are set to optimize for ‘highest value’ — this used to be called ‘lowest cost’ in the past.

What does this mean? That Meta will try to spend your ad budget to get you the highest ROAS.

This is great for most businesses, especially when you are spending limited amounts and you want to focus on margins. 

But what if you are a large business or would like to move as much inventory as possible as long as you do so profitably?

One way to do that is to tell Facebook to get you a sale as long as the cost of the sale — also known as CAC (Customer Acquisition Cost) is below what makes sense for your business.

What is your CAC or Customer Aqcuisition Cost for Facebook?

As far as Facebook's cost and bid caps are converned, your CAC is your cost per (purchase) goal.

To calcuate your CAC, divide your total ad spend by your number of conversions or orders (given that your campaign goal or event is set as 'Purchase').

Note: Remember that your CAC may vary depending on time of the year, promotions you may have run, or bidding costs/competition on Facebook. Keeping an eye on how it increases or decreases can help you optimize better.

Let’s take an example. Let’s say your AOV (Average Order Value) is $150 and your CAC is about $65 and that is profitable. 

What you can do is tell Facebook to get you conversions as long as the cost of those is under $65. Put differently, you will change your bid strategy from highest value to ‘cost per result’ goal. This tells Meta that for this campaign, you’d like to hit an average CAC of $65 instead of maximizing ROAS. 

The Difference Between Cost Caps and Bid Caps

With a Cost Cap, when you tell Meta that your target CAC is $65, Meta could get one sale for $55 and the other for $75 so long as the campaign’s CAC is an average of $65. You’ve given Meta the flexibility to go up as long as you are averaging your target CAC. 

With a Bid Cap, Meta would still try and get the $55 conversion but would skip the $75 conversion. It treats the $65 limit as a hard limit.

A word of caution - A cost or bid cap setting DOES NOT mean that Meta won’t spend your daily budget or exceed your price targets. It can do so, thus requiring that these campaigns be monitored and managed differently. 

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Before we get into the details, there are some key points for you to remember when using Meta’s bid strategies. 

Why choose cost cap campaigns over bid caps?

As you can see from the descriptions, with bid caps, Meta would skip any conversions that exceed the cap you set ($65). 

This means that it may leave a lot of conversions on the table to fall within the range you set, while still spending your budget in full.

Instead, starting with cost caps gives Meta more flexibility to serve your campaign(s) to a wider audience that may convert. 

How to set and manage bids for capped campaigns 

Let’s do this with an example. Assume your average order is $150 and if you can keep your CAC under $65, you are profitable and ready to scale. And let’s say you’d like to launch this campaign with a daily budget of $1000.

Here’s our sample setup:

  1. Campaign Bid strategy: Cost per result goal
  2. Budget: $1000/day
  3. Ad-set: Broad Targeting
  4. Cost per result goal (cost cap) = $65

I’ve used broad targeting in this example, but you can use any audience you’ve found success with. However, what is essential is that you use a proven creative with this campaign. This is a campaign meant for scaling your ad spend, not testing new creatives.

A few things to keep in mind BEFORE you set your campaign live: 

  1. IMPORTANT: Bear in mind that Meta may spend your entire budget of $1000 without getting a single conversion. Your campaign will need to be managed like any other campaign. There’s no guarantee that if Meta spends money, you’ll get conversions. Be very mindful of this, especially if you are trying this campaign for the first time.
  2. The $65 target that we’ve set is actually our desired CAC. If we can get this under $65, that’s even better. One helpful tactic is to set your CAC slightly lower (so maybe by 10-15% lower) than your desired CAC to begin with, if you're starting anew. You can then slowly adjust it as your campaign starts to deliver and bring results.
  3. So, in this case, let's update our cap to a $55 target cost and a $1000 daily budget.

Managing your bid campaigns

Once your campaign is live for 2 or 3 days, it’s possible that either:

  1. It didn’t deliver at all (no spend), or didn’t fully spend the daily budget.
  2. It spent all your budget.

The first means that the cap is too low. Facebook’s prediction algorithm doesn’t think that it can deliver ads and get you conversions at the cap you’ve established. 

In this case, you want to up your budget gradually. Do this daily until Facebook starts to spend the entire budget for the day.

If your daily budget is being spent in full, you can consider lowering the cap to reduce your CAC (I've added more detail in FAQs below).

Now, what if your campaign is delivering and spending but your actual CAC is much higher than your target CAC? In our example, say we are getting a CAC of $90 against our target CAC of $55 and our ideal CAC of $65?

Let’s look at some common questions about cost cap management below.

Frequently asked questions about managing cost-capped campaigns

Q - What to do if your campaign is delivering and spending but your actual CAC is much higher than your target CAC?

As an example, let’s assume that we are getting a CAC of $90 against our target CAC of $55 that we’ve set in the campaign, which is also significantly higher than our max CAC limit of $65.

A: As I said earlier, Meta can spend your entire $1000 budget without getting a single conversion. 

Cost cap campaigns need to be managed like any other campaign. There is no guarantee that they’ll work, and you should not spend beyond what you are comfortable with. 

One quick thing to remember here is that after iOS14, it can take 5-7 days for these campaigns to optimize, after which there’s a possibility that your CAC lowers. 

So it’s important to build this into your budget considerations, and if possible, give your campaign a few days. In the meantime, here are a couple of levers you can pull:

i) If FB is spending your full amount, consider lowering the cap. You can lower the cap by 3-5% every 2-3 days, and see if that helps the campaign’s performance over the next 7-10 days.

ii) You can also lower the daily budget to reduce burn while your campaign is optimizing.

iii) Finally if your CAC remains higher than your upper limit, shut the campaign and retry it with either a different audience or a different creative.

Q: How many audiences or ad sets should one set up and should they all have the same cap?

A: Our most common setup is a CBO campaign with multiple ad sets. You can set up as many ad sets as you like but my recommendation is to stick to proven audiences or proven interests. The creative should definitely be one in which you have a high level of confidence. 

Learn how to optimize your catalog creatives on Meta with examples from real brands.

And yes, you can definitely try different caps for different ad sets. I have seen some media buyers test the same ad sets with different caps in the same campaign. 

The bottom line is to use a great creative and then test it against a few audiences and/or different caps to find a combination where the CAC is acceptable. 

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