Many brands, whether they’ve been running new acquisition campaigns on Facebook or are completely new to the paid acquisition game, ask me: “how much money should we be spending on retargeting?” The answer comes down to several factors. Here’s what to consider when weighing how to allocate some of your budget to retargeting:
- How big are your current retargeting audiences?
- Which audiences have the highest chance of converting?
- How much can you spend to earn a profitable purchase?
Let’s break those down.
Related content: 10 Tips for a Killer Facebook Marketing Strategy
1 – How big are your current retargeting audiences?
Go into your Google Analytics or your Facebook Pixel data to determine how many weekly unique users your website earns in key intent areas, like product pages, FAQ pages or your shipping policy, for example. You can also look at how many users took certain actions, like adding a product to their cart, or abandoning the cart before purchase, or simply spent a significant amount of time on your website.
If any of those segments have over 1,000 unique users in them, they’re a large enough audience to retarget on Facebook. If your segment is under 1,000 people, consider combining it with another small, similar audience to get it over that 1,000-user threshold, and then separate them again when the audiences get big enough for their own retargeting campaigns.
As an example, let’s take a look at the chart below:
Both Audiences 1 and 4 would be great for retargeting! Audience 2 should be combined with a similar audience, if possible, but otherwise should not be retargeted. Audience 3 is too small to even worry about combining.
2 – Which audiences have the highest chance of converting?
Not all users are equal. A cart abandoner is more likely to make a purchase than someone who just looked at your homepage. Segment your retargeting audiences based on purchase intent, putting more of your marketing dollars towards those higher-intent segments.
As the chart indicates, your Instagram fans might have some purchasing power, but don’t convert nearly as well as users who have been to your site or made any moves towards purchasing (viewed a product or added a product to cart).
3 – How can you spend to earn a profitable purchase?
This is where data really comes in handy. Figure out how much you’re willing to pay per conversion and set goals from there. That way, the math will always spit out exactly how much you can spend and still earn a profit. For instance, If your goal is to earn a 200% return from your marketing efforts on a $100 product, you can spend up to about $50 to make that sale.
Think about how that $50 can be divided over the various touchpoints your potential customer will experience in your Facebook funnel before making the purchase. You wouldn’t put all $50 into new acquisition, as you’ll need to keep some for remarketing.
In the above chart, a $96 CPA might seem like a lot until you realize that you’re actually getting a $40 CPA across your entire account. New acquisition campaigns are meant to make users aware of your brand and products, while retargeting drives conversions at a much lower CPA, balancing out your overall costs.
Ideal allocations are different for every brand, and even for the same brand will change over time. For most brands, we recommend putting 60-90% on prospecting budget toward prospecting, with the remaining 10-40% toward retargeting. If you’re spending more than 40% of your budget on retargeting, consider expanding your budget.
Once you start to see purchases come in from your remarketing efforts, it’s important to look at your ad account holistically, rather than on a campaign-by-campaign basis. How much are you really paying for a new customer, and does this amount still give you the return that you want? If not, try adjusting how you allocate your budget between prospecting and retargeting. Chances are you’re spending too much on prospecting (which has a lower chance of earning high returns) and not enough on retargeting (which has a better chance of earning high returns).
But be careful! Spending too much on a small retargeting pool means your ad frequency (the average number of times a user sees your ad) will skyrocket, dropping your click-through rate fall and inflating your cost-per-click.