Episode Description:
In this episode we’ll learn the three most important things you need to do before jumping into launching a Facebook ad (including boosts). You can save a lot of money by better targeting your ad and ensuring you only pay for ads to be seen by perspective customers. You can save money by targeting non-traditional keywords or demographics that will reach your audience with less competition. Before you do anything know your numbers – do you know your customer acquisition cost and lifetime value? Learn why it’s so important to know this before jumping into Facebook ads!
Action you can take right now:
The goal of this podcast is to provide marketing and service insights, but also to provide actionable items that can occur right away without much thought. This episode explores aligning sales and service departments for the best customer experience.
- Take a moment to write down and define your ideal TARGET audience – so important!
- Determine and write down your average cost for a new customer – in essence you need to split the marketing expense over a period of time, by the number of NEW customers acquired over that same period. This is what it’s worth to you, to acquire a new customer. It’s very important to keep an eye on this to ensure your marketing efforts are fruitful.
- Install the Facebook pixel on your website. Visit Facebook instructions here!
After-Show Thoughts:
After recording this episode I inquired on some large Facebook groups of small business owners as to their success or challenges with advertising on Facebook. It wasn’t surprising there was a huge response – all varying from “facebook drives all my traffic and I can’t keep up”, to people responding “it’s a complete waste of money”.
I encourage anyone wanting to learn more about testing to listen to the advice of Vince Warnock from Chasing the Insights. You can find this episode here: Episode 7 of the podcast here.
Transcript from Episode 8 of the Marketing and Service with Justin Varuzzo podcast:
So you have finally gotten comfortable with social media and now you’re ready to click that boost button. You’re going to develop the most incredible social media digital campaign that’s ever been. But before you do, there are three things that you must know before you run that Facebook ad that and more coming up on the marketing and service.com podcast .
Justin Varuzzo here from marketing and service.com.
Thanks so much for listening today.
I want to talk a little bit about Facebook ads, if you’re like me and like so many other people who get started with social, but first thing you’re probably going to do is be inclined to click that boost button at the bottom of a post. That’s doing pretty well and try to get a little extra mileage out of it. And this is not a bad idea, and it can often be a very successful part of the digital marketing campaign. But I just want to cover a few things that you really should have a good handle on. So you can properly measure the success of your ad. Here’s the problem with boosting an ad. It allows Facebook to really do all the work and make a whole series of assumptions that it may or may not be able to do well.
So a lot of times when you boost an ad, you will get exposure to a lot of people, but you may not necessarily be getting the exposure to the right people. And that’s very important. Uh, a most obvious example of this is if you were trying to sell high-end movie projectors with commercials running on Sunday morning cartoons, this just doesn’t make sense. When you watch Sunday morning cartoons, you usually see advertisements for toys because they know that that’s where the kids are.
When you watch a news channel late at night, you see a lot of ads for medicines and prescription drugs, because they know that that demographic is generally an older demographic and it makes more sense to run the ads then instead of on Sunday morning cartoons. So Facebook works in a very, very similar way, and you have the flexibility to define an audience. And this is where you will start to find success with Facebook ads. When you take control of defining the audience of who you want Facebook to show your ad to. So this is the number one thing that you need to know before you run the ad is who do you want to see the ad? And I know that sounds like it may be somewhat of a simple question. And depending on what you sell, maybe it is everybody. If you’re selling a pillow, well, everybody sleeps. So, you know, you can run a pillow commercial on just about any channel, any venue in any platform. And no matter who you’re connecting with, chances are they’re someone who sleeps, but most of us are not in a business. That’s can spread such a wide net. And if you are in more of a niche business, then you really need to know who your customer is before you run the ad. N
ow that is something I can’t really help you with. You just have to take a little time and think about it. There’s no secret formula. Just think about your customers. What do they like? What are things that you would associate with your typical customer? For example, if you sell golf carts, then you probably are going to want to advertise to people who play golf. If you are a dentist, then maybe you want to advertise to people who have bad teeth.
Now there’s not usually an option on Facebook where if you’re a user, you check a box that says I have bad teeth, but you could say people who like whitening strips or people who have associated themselves with teeth, bleaching products or something along those lines, you can start to insinuate from that data that perhaps these people are insecure about their teeth or looking to improve the color of their teeth and the nature of their teeth. So maybe they are more prime of an audience to advertise your dental services to then someone who is not looking for these things. These are just a few small examples. I mean, I can’t cover every industry in every concept here, but again, you get the idea. S
o what we’re really trying to do is we want to narrow the net of people who see the ad. Uh , it’s easy. If you have an unlimited ad budget, just show the ad to everybody and anyone who is relevant is going to see it, right? The problem is, is most of us would never be able to afford to have such a wasteful ad budget. So what we want to do is try to maximize the people who see our ad and get the best results from the ad that we run while keeping the net as small as possible. The bottom line is the more relevant in ad is to someone. The more likely they are to engage with that ad or keep you in the top of their mind for whatever solution they are looking for.
So what are some things you can break down on Facebook on your end when you run an ad? Well, the most common thing is demographic information. Again, what does your customer look like? Is it a, are they men? Is it women? Are they older? Are they younger? Are they top end? Are they wealthy? Are they in a high income bracket? Are they a middle-class person? Are they someone struggling financially? Uh, so we’re looking at income. We’re looking at , uh, neighborhoods. They live in maybe what are their interests are their interests that these people may have that would associate with the product or service in which you’re advertising. Uh , for example, if you’re providing a service to businesses, then you would want to target business owners. Now, not only would you want to target business owners, but maybe you would want to target people who are associated with a chamber of commerce in their community. Uh, that would be a great way to access business people. So you have to try to come up with these little connections that might not be incredibly obvious, but when you think about it, you say, Oh yeah, of course, if you’re on the, if you’re on a chamber of commerce, then you’re likely in some type of business capacity, one thing that , uh, another would be a hunting and fishing.
Those are just two things that seem to go together for a lot of people. Uh, so if you sell fishing equipment , uh, sure, you certainly want to target people who are interested in fishing, but you might also want to target people who are interested in hunting. It’s likely that , uh , the person interested in hunting is also someone who enjoys fishing. If you’re selling some really cool new piece of tech , uh, you might want to target people who have the latest and greatest cell phone. Uh, someone who rushes out to buy the newest iPhone is likely to be someone who really embraces tech. They’re , they’re an early adopter. They want to spend money for the latest, coolest thing . So that might be a good way to connect with someone and have a higher level of certainty. If you’re targeting someone with cool new tech and they have a phone that’s 10 years old, they’re probably not the person you’re looking for. So you can save some money by really niching down. These ads. The goal here in finding as many associations as possible is all about reducing the cost of the ad. So when you pay for an ad on Facebook, you are often competing with other advertisers. So for example, if you’re advertising again to the business owners, and that is how you define your target, you may be competing with many, many, many business to business companies that are looking to gain the attention of business owners.
However, if you structure that exact same ad, but target members of chambers of commerce, it’s a different criteria in the eyes of Facebook, you may be able to access the same people at a much lower rate because that specific demographic is much less competitive than let’s say the broad term business owners in the hunting and fishing example. Those are pretty similar, but let’s just assume that hunting is huge and in high demand and a hugely competitive market, and nobody cares about fishing, then you could push all your advertising towards the fishing, and it would be much, much less expensive again, to access the exact same audience than if you were running that ad and trying to target hunters. Does this make sense? Now, another step here in defining your audience is what we call negative keywords.
You might want to narrow down to an audience who likes something, but also does not like something else. Or you may want to exclude people who like a particular thing. Uh, an example of this could be, let’s say you run a business and you sell purses , uh, and you sell high-end luxury purses. So I know my wife would make fun of me because I’m sure I’m not up on all the premium purse brands, but , uh , let’s just say you would search women who like Victoria secret and Sephora.
Uh , I’ll go out on limb and say, they’re two premium brands, but they’re not known for selling purses. However, you may want to exclude , uh, people who like Michael Kors or coach that also fall into the Victoria secret and Sephora category because chances are, if they’re already a fan of Michael Kors or coach, you may have a harder time convincing them to buy your premium bag. Now that isn’t necessarily always the case. You may want to specifically target people who enjoy Michael Kors and coach, because, you know, they enjoy premium bags and you’re really confident that your premium bag is better than those brands.
So that’s just a , an example of where you may want to exclude a certain group of people , uh , to go back to the cell phones. If you sell cell phones and you’re promoting a new phone, then you would probably want to exclude people who already own the latest cell phone. There’s nothing left to sell them. They already have it. So that would be a good group of people to exclude from your ad. You might want to exclude people who already like your page on Facebook. That’s an option. If you have a good engaging audience, then it may not be worth spending money to reach them because they’re probably already seeing what you’re posting. So it might be a good idea, especially as your page grows and you have more and more likes, you may want to exclude those people from seeing ads. Another example would be if you’re doing credit counseling , uh, you may want to exclude , uh , households with an income over a hundred thousand dollars a year. Uh , and again, I don’t know, I don’t know if any of this is right or wrong. I’m just kinda throwing out examples to give you an idea of what we’re talking about here. Um, if you sell renter’s insurance, you would want to exclude people who home own a home, because if they own a home, they’re not renting. You don’t want to risk them seeing your ad because it’s not relevant.
So I think we got the point here. You want to define an audience that is as relevant as possible. There are some limitations. Facebook makes assumptions about people based on the things that they like and the pages they engage with. And sometimes it’s accurate. Sometimes it’s not so accurate. Uh , but more importantly, sometimes it’s limited. You might have a very niche product where you say, I want to know people who like this, this and this. And they may just not be an option when you try to define the audience within Facebook. So keep that in mind. I’m not going to get into a tutorial on how to actually define this profile. I think you’ll find a lot of resources online, including Facebook itself has a lot of tutorials on exactly how to define your audience. Uh, but creating a custom audience is just an absolute necessity. And I , I cannot stress enough how important it is to do so, because if you just spread a wide net , uh , you’re going to be paying to deliver ads to a lot of people in which your product or service are not relevant, and it’s going to become very expensive. And the idea here is that you want to try to pay the least amount of money possible to get the greatest impact, of course, right? This , this that’s common sense.
So the second thing that is important that you need to know before you run an ad is what is your customer acquisition costs ? This is a term you may have heard before. Maybe you have not heard it. You may see it abbreviated as CAC or acquisition or acquisition costs , customer acquisition costs. What this means is essentially your customer acquisition cost , uh, is the cost , uh , is, is the sum of all your marketing expenses divided by the number of customers you have in, in short. So how much do you spend to get a customer? Uh, and it’s important to know this because you want to make sure that the ads that you’re running are successful and the only way to do that and to know if what you’re spending on the ad is successful is to know what your target customer acquisition cost is. Now, if you’re selling something hugely expensive, let’s say you’re in the finance industry and you’re selling a mortgage refinancing.
Um, obviously there are a huge amounts of money and profit involved in those types of deals. So a customer acquisition cost for a credit card company might be 150 to $200 they spend and you see it, you, you, how many, how many credit card offers do you get in the mail every day, sometimes you get six or seven in one day, these companies are spending a ton of money because there is a huge reward to capture you as a customer and charge that interest month after month, year after year. However, if you’re selling something much less expensive with a much lower profit, your customer acquisition costs might be a dollar a and maybe even 50 cents. Who knows . I mean, I can’t answer this question for you, but if you’re a new business, I can tell you, this is going to be a lot harder to determine than if you have a few years of history to look back on. Obviously the more data you have historically, the better you will be at predicting the future. Now it’s not always a hundred percent, but at least you have a basis to understand why you believe what you believe, as opposed to just guessing or making it up out of thin air and saying, Oh, I think I want my customer acquisition cost to be $10. Well, if that’s correct, you really need to know why, why is it $10 and make it based on , uh, your expectation of how many customers you expect to get and the profit margin of those customers.
Uh, it’s very, very important. And I’m going to lump one other metric into this customer acquisition costs , uh , and it’s customer lifetime value. This is another metric , uh , customer lifetime, or sometimes it’s just lifetime value. You may see this as C L V, or you might see it as LTV abbreviated sometimes. Uh, but your customer lifetime value is what you expect to get out of the average customer over their lifetime. Again, this varies for every business in very industry, every industry, if you own a company that sells school backpacks for school children , uh , or let’s say the little ones that infants or kindergartners or first-graders would wear , uh, then your customer lifetime value is probably going to be one of those bags, whatever the sale price of one of those bags is times three or four or five, three years, four years, let’s assume every kid gets a new backpack every year when they start school , uh, you may only have a lifetime value of about four, three or four sales cycles. And, you know, again, if let’s say the bag is $20 and , uh, then, then the value of that customer would be whatever the profit is on what they buy four times over their lifetime. And then once they grow out of your industry , uh, that’s it, you’re never getting them back again. T
hey’re not going to go back and buy a backpack for a third grader when they’re in ninth grader in high school or in college. Now, again, some industries, it might be a , let’s say you so heating home heating oil. Uh , that’s something where your customer lifetime value may be the expected time. They will stay in their home in that community. Uh , if you live in a neighborhood with a lot of seniors , uh, you may find that , uh , where I live in New York, a lot of them moved to Florida. Uh , so if you’re , if you’re already in a senior neighborhood, you might only expect to get a few years before they bail and get out to go be in the sun and get away from the winters. So again, just some examples of, of, to help you kind of guide yourself into really understanding , uh, how much does it cost for you to get a new customer? The reason this is so important is because you have to know when you’re paying for an ad and your ad is successful. You have to be able to define what successful is. So if your average cost to acquire a new customer is $10, but you had to spend $50 on an ad to get one customer. Well, then your cost for that one customer was $50. It’s way too high that ad’s not going to work for you. You’ve got to change something on the flip side.
If you’re used to paying $10 a customer, and now you can run an ad on Facebook where you’re gaining a new customer. And on average, you’re only spending $5 a customer. Now you can look at this and say, Hey, maybe I’ll pull back on some of these other advertising expenses that I’ve had that have been running me eight, nine, or $10 a customer. And I’ll take that extra money and push it more towards Facebook because I can get more customers for less money . Again, this is common sense, but you have , I have to know what this is before you click boost, or before you define the audience, you have to know what the definition of success is for an ad. We all say, well, we want to run an ad and get more customers. That’s great. I mean, I’m sure if you spend enough money, you’ll get a customer in any industry doing anything, but is what you’re spending worth it. Are you going to get a return on the investment?
So this is all about maximizing the return on investment.
One to move into the third thing that you have to do before you run a Facebook ad, you will see references. As soon as you start looking into Facebook ads, you’ll start to see references about the Facebook pixel and installing a Facebook pixel on your website. Now, this sounds really scary, and it’s kind of a wacky concept if you’re not familiar with how these work, but it’s actually a really simple, a really simple thing that provides a tremendous value. So basically when you set up a Facebook ad, you can ask Facebook to create a pixel for you. It’s essentially about a sentence worth of code that you can have. Uh , you can put on your website or have your web developer put it on your website. And any time someone visits your website, Facebook will know it.
Now, of course you are giving analytic information about your business to Facebook. And Facebook is obviously always under scrutiny about how they use this data and what they use it for. But for the most part, I , they don’t sell anything other than your information. And it’s unlikely that they’re going to start using that data to directly compete with your product and or service, but just keep in mind, you are agreeing to share some information about your web visitors to Facebook, but in return, what you can find out is where are your customers coming from? So in the most traditional manner, if you don’t have a Facebook pixel, you could run an ad and let’s say someone sees your ad. And they say, Oh, okay.
Here’s someone who offers a coaching. I’m kind of interested in , in coaching and I might want to follow up with them. And then you close Facebook. And a week later you go on Facebook, you see the ad for coaching again, and you say, Hmm . Yeah, I really, I, I might make an appointment with this person and off another week , uh , then you see the ad again and now you’ve kind of remembered the name and Oh yeah, Acme coaching.
I’m going gonna , I’m going to check them out. Then about a week later, you just Google Acme coaching. You go to their website, you sign up, the problem is Acme coaching. If they don’t have a Facebook pixel, they’re never going to know that this client actually came as a result of their Facebook ads. They’re just going to know that someone went to their website and , uh , you know, scheduled a coaching session. So having this pixel, it really allows you to understand if the customers visiting your website have had previous engagements with you on Facebook. And that’s super important. It’s a really good thing to know, because it helps you judge the success of your campaign. You know, it also allows for a retargeting opportunities. If you’re not familiar with retargeting, it’s the concept that we’ve all seen, where you might go to Google and search for something. And then when you’re on a website later on, you start seeing the same ads for the thing that you would search for on Google. That’s just called retargeting . It sounds more scary again, and feels more scary when you go to a website and you start seeing things, you think that website knows what you were looking at.
They don’t , uh, but Google does. And Facebook does. And they will allow you as a business to retarget customers across their journey on the web. So if they’re looking at something that is of interest to them , uh, in regards to your business on Facebook, and then they move off of Facebook onto other websites, they may continue to see ads for your business. This is called retargeting. A Facebook pixel is really essential in that retargeting platform. Another thing to do with that Facebook pixel over time is you can build a custom audience based on your web users behavior. So for example, if you find that people are coming to your website regularly, but not directly from the app , they just, they see your ad. At some point, then later on, they come to your website and they sign up. You’re going to know this because you have the Facebook pixel. And now what you can do is if this happens hundreds of times, you can start to build a profile of people who match those people.
They also call this a lookalike audience is a word that you’ll hear a lot. When you’re dealing with Facebook advertising. It’s a very powerful tool where you can take data from existing customers and then base book will try to match those unique traits or interests that all of your customers have in common and build an audience from that. And again, this can be an incredibly powerful tool. That’s really using big data in a, in a, in a really nice way to help small businesses and marketers alike. Uh , of course the pixel will allow you to track your customer acquisition cost , uh, based on specific conversions. And if you’re not familiar with the word conversion, conversion just means that someone who buys or achieves whatever goal is the point of your ad, maybe you’re just looking to develop leads. So if you get a lead that may be considered a conversion, or if you’re selling a product and you make a sale, that would be a conversion. So by having that Facebook pixel, again, it gives you the information that we had just discussed as the number one most important thing is knowing your acquisition costs and the lifetime value of a customer. This will now start telling you that. So if you are a new business and you don’t know where that number should be, or you’re not familiar with that number just yet having that Facebook pixel set up on your website, when you run Facebook, ads is going to help you figure out what that number is.
Then at least from there, you can say, well, is this worth it? If it’s not again, you got to rethink it and you got to edit your ads. You can edit your audience and you can just keep tweaking. It. That’s the real key to Facebook advertising success is tweaking and tweaking and tweaking and tweaking. You can have different ad variations. You can offer different discounts or promotions, but you just keep trying different things and see what works and what doesn’t, and then gradually focus more and more of your money and your ad spend on the things that are most successful and pull back on the things that are not as successful. And it really allows you to , to niche down your ads and be incredibly successful. So just to summarize everything we discussed, I know it’s a lot of stuff, and I know it’s a lot of technical stuff that you have to get over. And I know it’s not easy, but just know these three things before you start, you have to be able to define your customer through demographics. You have to be able to do that before you run an ad on Facebook, you have to know, or have a good idea of a customer acquisition costs and the lifetime value of the customer, because this is going to determine whether or not it’s worth getting the customer. Uh, if you, if you sell something and make a million dollars on it, and I said, I can get you a customer for $10,000.
You’d probably say yes, every single time, if you sell something, that’s $5. And I tell you that the customer, I can sell you a customer for seven bucks, you’d say, no, thank you. You, that is your acquisition cost. Does it make sense to run the ad? And then last is that Facebook pixel understand it, read about it, learn more about it. Maybe at some point, I’ll deep dive into a tutorial on the Facebook pixel, but you definitely want to utilize this. If you’re running Facebook ads, because it’s going to give you a lot of additional information to help evaluate the success of your campaign.
Thank you so much for listening today. If you enjoy this podcast, please, please, please take a moment to subscribe. That means so much to us. And if you have any questions, shoot me an email.
Check out the website, https://www.marketingandservice.com. We are here to help you succeed. I want to help make customer service fundamental part of business culture. It’s my dream in life. I want to help you do it, and I want you to succeed in doing so. We’ll catch you on the next one. Have a great day.