With nearly three out of four users visiting Facebook daily and spending over half an hour each day, it just makes sense. Pardon the pun, but it also makes cents. Facebook is a primary mover and shaker for online marketing for the reasons listed above, as well as the immense power that marketers wield in re-targeting ad campaigns to gain visibility among highly specific user groups.
After generating interest among targeted demographics on Facebook, marketers can further reach existing and potential customers by focusing more tightly and narrowing the field of play. This happens in a variety of ways using a sophisticated sales funnel to drive engagement and conversion, while spending the least amount of money possible in the process. For this reason, Facebook ads provide an ideal space for targeting and re-targeting customers again and again.
Funnel Cost Break Down
Here’s how the numbers break down for a typical Facebook ad campaign funnel (see image above). On average, initial, Awareness-level funnel clicks cost around $3.08 per click. These ads are aimed at a very broad audience with the intention of getting them to click a link that will take them to a company’s website. We can assume about 4% total conversion at this level of the funnel. At this rate, a company can expect to get about 1 customer in every 25 clicks/visitors (25 x 4 = 100).
Breaking the numbers down further, we can see that $3.08 per click at 25 visitors gets us to exactly $77 ($3.08 x 25 visitors = $77). This means that the actual cost for one converted customer at this stage of the funnel is $77. If a company’s average cart transaction is less than this, they will lose money on ad campaigns with this level of targeting. In other words, companies will end up spending more money to acquire the customer than they will ultimately make on the sale itself.
Now, compare these numbers to Facebook ad campaigns aimed at garnering Page Likes instead of website clicks. Page Like campaigns usually come in at about 68¢ per Like. The difference is an enormous decrease in cost over the broadly targeted web click campaign from before. Next, we add an additional qualifier, further refining the audience to those that have actually engaged with the brand’s page, costing about 21¢ per engagement. At this point, we are up to 89¢ in total: the first 68¢ covers the Page Like, and an additional 21¢ is spent to acquire the individual via engagement.
About 25% of these customers will organically enter the Consideration phase of the funnel on their own. Once we have a person engaging with the brand via Page Like, we can re-target ads to them, because they have essentially marked themselves as a primary target customer, someone that is interested in the product/services on offer. Here, we average a cost of about 26¢ per additional click, which brings the engagement cost up to a total of $1.15.
There is a 1-to-1 relationship between Page Likes and website visitors. 25 out of 100 people will naturally fall into the consideration stage. It costs an additional $6.50 to bring visitors in consideration back to the site: at 26¢ per qualified person x 25 qualified people = $6.50 in ad spend. At that cost, 4 qualified people in every 25 (16%) will convert on average. Another way to put it is that we can spend $6.50 to bring qualified traffic back to the site.
Those conversion costs are much more palatable: 100 Page Likes x 89¢ = $89 (Awareness phase ad spend). $89 + $6.50 (Consideration phase ad spend) = $95.50. $95.50 X .25 = $23.88 per converted sale. Compare this to the $77 per converted sale from the generic advertising campaign from before. This is a $53.12 improvement in conversion cost.
As you can see, it really pays off to know how to narrow down your market. With a highly focused, re-targeted ad campaign on Facebook, you can lower your customer acquisition and conversion costs substantially. To do this effectively, most companies are better off outsourcing to a team of professionals that can run their ad campaigns for them and achieve the greatest possible results consistently. Check out our PPC page to contact us and get started today.