How To Determine Ad Spend

Why Should You Have a Social Media Budget? Social Media is a great tool for lead generation. 1 in 2 people have at least one social media account making it necessary to market on social media. Facebook has 30% of the worlds population using the platform. It's now a crucial marketing platform in order to keep competitive in today's market.

Where do you start? Let's jump into the components to consider when creating your budget.

1.Determining your Goals & Timeframe

Before determining your ad spend your company should consider what your goals are. The truth is there is no one size fits all.

Awareness- Build brand awareness or increase reach

Conversion- Sending traffic to your website, increase engagement, or encouraging e-book downloads or communication.

Consideration- Traffic to a physical store or a purchase

2.Target Audience

Where are your target audience located? Maybe Facebook, Instagram, Twitter or Tik Tok. How many are on the platform and how many might be interested in your product/service? This will determine your monthly reach when creating your ad.

3. The Value of Your Average Customer

Understanding the value of your customer or Lifetime Value is the profit predicted for the entire future of that customer. Lifetime value will answer how much one customer is worth over time versus how much it cost to serve them. Subtract those elements and you determine how much your ROI for each acquired customer.

4. Lead To Ratio

How many of the leads that you receive actually become customers? This will determine how much leads you to need to have in order to reach your goals. E.g. A reach of 1000 may generate 50 clicks and 1 lead. This may mean you may need to create a more compelling ad copy. Or more ad spend. Determine this by the platform conversion average for your industry. Note: Improving your sales process will ensure that the leads that you are receiving are quality and improve the effectiveness of your ads, ensuring that you reach your goals faster.

5. Creating Ads Based on Past Ads

Looking through previously run paid ad reports to better understand how much investment may be needed in order to reach the new goals. If your ads failed to meet expectations more research may be needed in order to find out why that is. It may be that it wasn't properly targeted. Or that your copy didn't resonate. However, if your ads were effective you may choose to set the same budget parameters.

5. Content Creation- This portion should account for a major part of your budget.

Some types of content to consider;

  • Photograph-

  • Video. What will you need in order to create a video ad. Will you be creating a short commercial or an explainer video? For high production shoots you may need directors, stylist, and other staff.

3.Industry Average Spend

If you haven't advertised on social media or maybe haven't on that particular platform. You may look at your industry leader or competitor. E.g. Facebook's average conversion rate is 9-10%. According to Webfx, the breakdown looks something like this:

Apparel 4.11%

Auto 5.11%

B2B 10.63%

Beauty 7.10%

Home Improvement 6.56%

Healthcare 11%

Education 13.58%

Consumer Services 9.96%

Employment 11.73%

Finance & Insurance 9.09%

Fitness 14.29%

Industrial Service .71%

Legal 5.60%

Real Estate 10.68%

Technology 2.31%

Travel & Hospitality 2.83%

Overall average 9.21%

 5. Performance-based approach

This method is trial and error and requires that you choose a budget and then adjust based on the results. To measure you may want to choose KPIs to monitor. The KPIs can be clicks, sales, click-through rates, or engagement rates.

To End

Making sure your company is tracking your ROI accurately on social media is important, tools like Hootsuite can be useful for quick data but may not have all the analytics you need to determine social medias impact. Social media is constantly evolving and businesses are shifting to investing into paid social media.