Budgeting tips for small businesses in social media advertising

You can easily calculate your budget based on the amount of testing you are planning to do, the country you are advertising in and the technical limitations of the algorithm. In short, your campaign is the most effective once it starts to use algorithms to find the right people. For that, it needs a steady flow of at least 20 conversions per week. 80 times your base CPA is usually a safe space to start. If that’s too much, you can go for a softer objective and calculate based on conversion rate, click-through rate and CPM.

Overall, if you want to build your strategy properly, you will most likely hit a mark somewhere around 3200 EUR per month. 

Does social media advertising work?

Social media advertising is one of the easiest and most effective ways to advertise your business. Most advertisers find out it’s a great way to reach out to new customers and scale your business. On top of that, social media has the advantage of interacting with users during their spare time, which also means enough time to further explore your product or business.

At the same time, it can be quite overwhelming with all the format and optimization possibilities available. Especially if your learning curve is limited with a certain budget and you cannot just play around without seeing some impact as soon as possible.

Why social media advertising?

Social media have a powerful position on serving ads at places where people meet, communicate, but more importantly explore. When the user logs in, they don’t know what they will see, they come with an open mind and are ready to explore. 

Your ads are taking advantage of that higher alert level and if you serve relevant content to relevant people, there’s a higher chance they will give you their time. In comparison with ads on other websites, or with TV ads that are keeping users from their intended destination or content, on social media, you are just part of other content that might be interesting to the users.

Historically, ads were also profiting from a higher importance status as they were mixed among posts from friends and family. But as feeds are gradually filling up with more non-personal content, this is not as true as it used to be.

Another important factor is that social media can leverage a lot of data to help you drive the results. That’s of course the same for other advertising channels such as Google, but on social media they are tied to personal accounts and many times voluntarily shared by the users. But let’s not get too technical (yet).

What is your goal?

Quite an obvious one, but many times still a very important question. What is your ultimate goal? 

• Do you want to make just the first contact with a new potential customer? 
• Do you want to increase awareness of your brand? 
• Or do you want to drive sales?

As a business, you most likely want to see revenue impact for your invested money. So the answer is most probably sales, right? At this point, you need to consider your product, the sales process and price level as well as how long it will take for the customer to make the final decision. 

Social media will usually deliver exactly what you ask for. For some customers, just showing them a product can be enough to earn a purchase. However, others will need to gain trust first, or you might need to let them explore all the options and information first.

Data a infrastructure

Data is the key to success. And it has also been the buzzword for at least a decade. What do you – small business – have to do with this cold and technical word?

Let’s put it differently: Social media has a lot of information about its users. What actions they have done,what products they explored and much more. But they also have an obligation to keep their users’ privacy. 

That’s why you need to: 

• Show that you have permission to use certain information, 
• or collect some of your own.

And it’s easier than you might think.

Mighty lookalike audiences

As your business already has some customers and you have their contact information, that’s the first part of your data. Also, you should have access to (anonymous) data of these people. Further on, if you select just higher paying customers, that’s another set of data.

This is usually your first step to success – you can skip a few steps using lookalike audiences. You will share your set of contacts with Meta or any other channel saying: “These are the people I’m looking for,” and the system will find an audience of people most similar to them.

Pixels and measurement

Another automated way to leverage data is to send your own signals. By implementing measurement pixels to your website and marking certain events – such as purchases, submitting a form or adding something to cart, you will simply say: “Hey, these people are doing certain actions on my website!”

Now you can see the impact of your advertising, but your campaign can also look up who is making these actions and look for similar people from a broader audience – making your investment more efficient and decreasing cost per desired result.

How does it work?

In social media advertising, the common structure is a 3-level set up: 

• There is an overall campaign stating your goal, 
• ad sets holding your targeting, 
• individual ads containing your creatives (images, videos and texts).

All data helping the advertising system to find new potential customers faster are stored on the ad set level. This means that if you run multiple targeting groups, you need to be aware that each of them should gather enough data to be as effective as possible.

These actions can be anything from visits to your website to final purchases. The system will use information about your customers to find similarities and look for more people that fit this description, therefore increasing your chance to pay less for the result in the future. To be able to identify the similarities, it needs a significant amount of data.

That is also the reason to consider if it is more likely for you to get 50 sales or 50 visits for the set budget.

Funnel

Specification of your funnel can be done according to a lot of different frameworks, be it awareness-consideration-performance, see-think-do-care or any other.

To simplify it – you need to craft different campaigns with different goals: 

1. Reaching as many unique people as possible (within desired audience), so they know that your business exists;
2. Getting as many visits to your website as possible, so the customers further explore you and your products;
3. Getting as many purchases as possible.

Considering you are a small business, you will most likely not have a huge budget – especially in the beginning, when you need to prove that the channel works for basic awareness.

If your budget is really tight, you can further simplify your campaigns into just 2 categories:

• Acquisition: Show your product to new customers.
• Remarketing: Remind those who were already on your website or who didn’t finish their purchase that the product is still available.

For each of those, you will set an optimization objective that fits and for which you are able to deliver enough data for the campaign to learn from it.

Targeting 

This leads us to another question: How should you target your audience, or how many ad sets do you need to have, if each of them needs to have a big enough budget?

For remarketing, you should be targeting your website visitors. Therefore, you need to decide for how long (from their last visit) you want to show them your ad. 

For acquisition, you aim to leverage the data you have. However, in order to have a comparison, you can also test interests: 

So, your setup can be as follows:

• Lookalike
• Interest 1
• Interest 2

With lookalike audiences the higher the quality of the source audience, the better. You can use people that purchased in the last few days, the data about your customers from CRM and/​or any other events from the website, including visits.

Once proven, you can combine them together – which will allow you to gather more data and let you scale based on results. 

The important thing is not just who to target, but also which audience not to target. By proper exclusions, you can decrease the amount of ineffective use of your budget – simply put, you make sure you are not showing your ads to people for whom it doesn’t make any sense.

Usually, you want to exclude people that have already bought your product – but I personally also recommend website traffic. That way, you are not spending your money on the same customer twice.

Creatives

What you show to your customers is more important than you might think. It is the first impression of your business, it creates expectations (of price, delivery, quality etc.) and has a big impact on the success of your campaign.

There can be different reasons why people buy the same product. Which one of them will work best?

That’s why it is considered best practice to always have more than one text, more than one banner. Try out different formats and test what works best. Videos can sometimes overwhelmingly overperform banners – but sometimes it is also vice-versa.

A good thing is that the system will automatically allocate impressions and your budget to the creatives that perform the best – so even if it costs a little bit more to create all the assets, you don’t need to allocate more money to them. 

Just keep in mind that the creatives should be different from each other, so they can really cover all the potential triggers and your USPs.

Testing

As we already mentioned, testing is an important part of the steps you will be taking. The ultimate advice is to always have 10 – 15 % of your budget free to allocate to testing new things.

In remarketing, you want to test different time windows (amount of days from action) to find out when is the best time to reach out back to people. That means a little bit more money in the beginning, but less money in the long run.

Testing creatives does not require money, but once you identify good performing campaigns, it is crucial to keep your performance stable and to be able to find new ways to improve it.

To compare results properly, keep in mind that you need to go through necessary amount of time or money:

• In remarketing, you want to go through a full cycle (based on the setup it will be most likely 7, 14 or 30 days).

• In traffic campaigns, you want to compare CTR after statistically relevant amount of clicks (at least 100 is recommended).

• For conversion oriented campaigns, you want to see your CPA after at least 30 events were gathered.

Budgeting

For most budgeting decisions, you need at least the initial run to uncover CPM (price for 1000 impressions), and your base CPA. From that you can calculate the minimum recommended amount of money.

For traffic oriented campaigns, you should take your own usual conversion rate (or at least some benchmark, which is usually between 2-3%) and compare it with your CPM and CTR:

•  If your CTR is 2%, you need 50 visits to make a conversion. 
• CTR of 1% means that out of 100 people seeing your ads, 1 of them will visit your website. So to get 50 visits, 5000 people need to see your ad. 

• With the CPM of 3 EUR, you will be most likely paying 15 EUR for one conversion.
• 50 visits will be enough for a traffic campaign to have enough data per week, so your minimum would be around 60 EUR per month and per ad set. 

It will be of course influenced by other factors, such as how good your targeting is, what your pricing is, etc.

For conversion oriented campaigns, let’s say you are generally able to get CPA per purchase of 10 EUR: 

• To keep this campaign running long term and to be able to grow its budget and performance, you would like to get 30-50 conversions per week. Less if you have just one product, more if you have different categories. 
• That means 200 conversions per month, equal to 2 000 EUR you should have ready for that campaign.

In remarketing, you will be taking in an amount of visitors per certain time period. Let’s say you have 10 000 visitors weekly:

• That means an audience of 40 000 people you want to cover with 7 days remarketing. 
• For remarketing you will need to take into account desired frequency. You do not want to be below 3, but also not over 10. So let’s aim for frequency 5 with an audience of 40 000, which leads us to 200 000 impressions. 
• With CPM of 3 EUR, that means 600 EUR necessary for remarketing.

The rest is just combining your strategy with testing, and you can easily budget the level, where you will not negatively impact your performance.

With the usual setup and same numbers as above – let’s say we will have:

• 2 different interest targeting optimized for traffic, but with ambition to reach a level of switching to conversion optimization. That means for 20 conversions on each of them, you will be paying 300 EUR a month.
• 1 lookalike audience with high probability of conversion, optimized for purchase spending 2 000 EUR a month.
• 1 remarketing campaign for 600 EUR per month, that will try to improve your overall conversion rate. Proper exclusions will make sure you are not spending twice.

There you are – we reached the 3 200 EUR budget that we recommended in the beginning. You can scale it based on the results or re-combine if one of the options is underperforming or overperforming the others.

Results

Just a quick note regarding results – usually, both types of conversions are included: After view and after click. 

There’s vast research saying that after view conversions are really happening. And while we’re not disputing that, if you are a small business and you are also investing in other channels, the share of after click and after view conversions can be the first indicator that you are tapping into an audience that you already have covered.

On the other hand, if you are a small business, there’s a lower chance that you attribute all your organic conversions to your social media activities mistakenly, just by reaching a large audience with your ads. But once you scale your budget and want to properly calculate target ROI/ROAS, you might want to dive deeper into this topic.

Channels

Last – but not least – is the right selection of social media channels to advertise on. For most brands, the first choice will be Meta (Facebook and Instagram). Good news is that most social media platforms work in the same way – in the sense of technical approach and capabilities (like lookalike audience), so you can use the same approach anywhere. Be it TikTok, Pinterest or LinkedIn. 

On the other hand, spreading across too many platforms too fast can make your budget really tight. 

Therefore, think hard about where your audience is. What is the specific platform based on – is it text, video or amazing visuals? Consider what kind of content you are able to produce in good enough quality and quantity. At first, choose one platform, make it work and only then jump to testing a new one. 

We will make your social media ads shine!

We hope this deep dive into social media advertising answers the most important questions for you. If you are still not sure, our team of pros will be glad to help you and your brand grow – feel free to reach out!

I want better results!