One of the great things about Facebook Ads is that it is entirely flexible in terms of your marketing and advertising budget.
You can decide how much you are willing to spend per day and how much you are willing to spend on any single click on your ads. This gives you great flexibility.
While this flexibility is great news when it comes to finding the right audience, it also adds to the challenge. You are going to have to decide how much you should be spending on your ads – with so many options, there is a whole lot more to think about!
How do you calculate your Facebook marketing budget and getting it right
- Working Out Your Conversion Rate and Profits: The first thing to do, is to calculate what your precise profit is each time you turn a visitor into a customer. What are your overheads on each product (your ‘cost of goods sold’) and what is your asking price?
Next, ask yourself what your conversion rate is.
- For every 1,000 people who visit your website, how many people buy a product? It might be one, it might be 0.1 or it might be 50! Whatever the case, knowing your numbers will allow you to work out how much each visitor is worth to you. If you have 1,000 visitors and 2 of them buys a R300 product, you are making R600 for every 1,000 visits. This means your website visitors are worth 60 cents each. This means you can afford to pay 6 cents per click and guarantee you will breakeven. If you pay 5 cents per click, you should be guaranteed to make a profit.
Some tips and considerations
There are a few complications and considerations however that make this a little less straightforward than it may initially appear.
For starters, you need to consider what your ‘customer lifetime value’ is (CLV). In other words, some customers might order more than once and that means you can afford to pay a little more.
The other consideration is your cash flow – and the fact that you might not perfect your adverts right away. You need to save a little budget in order to experiment with things like targeting and therefore to get the perfect conversion rate.
Ensure you do not burn through your entire budget on day one! Spread your budget and do so experimentation!
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