How to Allocate Your Paid Traffic Budget
So you’ve been given you online advertising budget, now what? With so many platforms out there as well as different strategies within those platforms, you’re going to need a plan for allocating that ad spend to get the most out of your businesses lead generation efforts.
In the first post of this series we introduced our live brick and mortar hot tub company case study. This post will continue right where we left off. If you have not read that post yet I suggest you do, just so you know where we are at.
In the previous post we determined our Customer Lifetime Value (CLV) and estimated based on very raw data our Cost Per Acquisition (CPA).
We then decided on a total advertising budget based on a percentage (in this case 12%) of our gross markup.
Below is what we came up with in order to increase sales to 60 hot tubs in the next year which would be 15 more units over the company's previous year.
Ad budget is based on 10% of gross markup to a maximum of 12%
60 spas * Avg Sale = $420,000
Min ad budget: $42,000 * .48 = $20,000 (rounded)
Max ad Budget: $50,400* .48 = $24,200
We will use $22,000 for this exercise as it is right in between and gives us some wiggle room.
Now some may say this ad budget is pretty low, but we are working with a family owned small brick and mortar business, they are used to taking things slow and scaling methodically.
The best thing we can do is lower the cost per lead, provide hard data that shows we can consistently create leads and sales using these methods, and advise the customer to increase the ad spend in order to drastically increase their sales.
For now however we will work with what we got.
Divide Ad Budget Up By Marketing Channel
Now it’s time to figure out how we are going to spend that $22,000 dollars to make the most impact. For every business or entrepreneur this is going to be different. Depending on you level of comfort with a platform and the type of business you have, your allocation might be different.
In the case of the hot tub company, we have a very visual medium which is a highly desired, luxury product, but not so much an urgent need.
While there are some people who are further down the funnel doing research online for the best brands and local dealers, you almost have to remind people that hot tubs are cool and create a desire for them.
Therefore we will want to have our toes dipped in the Adwords waters enough to get those mid funnel researchers, however a bulk of our ad spend will be dedicated to driving awareness on Facebook.
Also, at this time the company is producing a couple of TV commercials that will be aired on cable as well as online, which eats up a bit of our budget.
Segmentation of Ad Spend
- TV Cable Ads $8,000
- Facebook ads $8,000
- Adwords $5,000
- Youtube $500
- Perfect Audience retargeting $500
As you can see the Google Adwords budget is VERY small for a yearly spend. In order to get the most from that spend we will only target keywords that are buying related. We want to pop up when someone in our territory is close to making a purchasing decision, so our keywords will have to be tightly controlled and monitored to make sure we are not wasting any clicks.
Since we will have 2 nicely produced professional videos to work with, we will take advantage of Youtube instream ads, as part of this budget. Youtube ads are so cheap right now that it is pretty dumb not to take advantage of them no matter what industry you are in.
Something curious you may see in the list above is we are going to use both Google Retargeting as well as PerfectAudience. I will be honest, PerfectAudience was my first foray into retargeting, the interface is so easy to use that I would set it up for any client. We will actually be running retargeting from 3 sources once we get going, Facebook custom audiences, Google Adwords, and Perfect Audience. If you do nothing else with paid advertising, learn retargeting and set it up for your website, it is essential to your business!
With all that said what I really want to focus on is our allocation of the Facebook Ad spend, which takes up a majority of our budget. As I mentioned earlier in the post, we have a very visual product which is also a luxury item. We need to build desire, and awareness.
Make them want the product (desire), then show them where they can buy one (awareness).
It is a pretty standard marketing formula that has been around for a while, AIDA.
Let’s see how we break that down with Facebook Ads.
Facebook Ad Spend By Ad Type
- 60% on awareness - cold traffic to content (not to lead page)
- 30% Targeted cold traffic to lead page
- 10% retargeting visitors who don’t convert
Our basic strategy with this breakdown is to send cold Facebook traffic that we target by geography and demographics to a piece of content on our site, like a blog post, gallery, or video related to hot tubs. This will act as a way for us to tag them with a Facebook Custom Audience pixel, and tells us these people may be interested in hot tubs.
Before we go any further I should point out that this is not a unique strategy that I just pulled out of nowhere. This is a marketing tactic that has been gaining a lot of steam as of late and promoted by the guys over at Digitalmarketer.com or RickMulready , and a few others.
We don’t need to reinvent the wheel here, this tactic makes too much sense and just plain works!
Once we have that person pixeled and added to our Facebook customer audience we can then start sending them ads that lead them to our lead page. We will be going into landing pages in another post, but basically we are giving them more in depth information about the hot tub product in exchange for their email. Once they are on the email list, they are a cozy warm lead we can nurture on our list.
Why Bother Sending Cold Traffic to a Lead Page?
If that little Facebook pixel funnel makes so much sense than why would we spend any money sending cold traffic directly to a landing page? Well, 2 reasons.
1.Test out the landing page and see if it converts.
2. It still works and we can get some results fast
The retargeting funnel takes some time to mature and start really churning out leads. We need to be able to test our landing page right away as well as score some early wins to get the momentum going.
Who knows... maybe after a couple weeks or so the cold traffic will convert better and cheaper anyway. You won’t know until you test, test, and test again.
Successful Paid Traffic is About Spending Wisely
You never want to dive into any kind of marketing where money is being spent daily, without a plan. To quote my favorite radio host Dave Ramsey “every dollar has a job” - in Dave’s case he is talking about personal budgeting, but it rings true in advertising.
Every ad dollar we spend has to have a goal attached to it, and that goal has to be track-able.
If not we won’t be able to tell if we are wasting our money and need to change course, or scale up to increase profits.
These are the benefits to running an analytical and metric based advertising campaign, the numbers rule all!. Allocate wisely, test, track and adjust. Adwords giving you zilch for its high cost per click, but Facebook is adding conversions everyday? Start moving your budget around.
Yes it is a lot of work to keep track of all this, that is why it is so important to have a dedicated team member in charge of your paid traffic campaigns, or hire an outside agency.
Like all the posts in this Brick and Mortar Facebook Ads study, these tactics are just one way to skin the cat. We are starting with very basic strategies that we can build on once we track , test, and adjust. The above is just a starting point, based on a hypothesis, supported by data.
In the next post we start putting all of that to the test as we dive into creating our Facebook ads funnel, this is where the fun starts!