How to Reduce CPS on Facebook Ads

Facebook conquered the world a long time ago and became an endless source of content. The platform can be a game-changer if used correctly. Facebook policy and advertising rules have been changing continuously, particularly in the field of data privacy and censorship. So, advertisers have to keep up with all national and international changes. Although, no one can deny that the potential reach on Facebook is massive.

COVID-19 is still here in 2022 to influence our life. Many businesses suffer due to the global pandemic situation. More brands than ever enhanced their online presence. And while many advertisers reproach Facebook with very high ad rates, Facebook organized its own Small Business Grants Programme with ‘$100 million in cash grants and ad credits to help small businesses across over 30 countries’. Ok, the application period is closed now, but the fact still remains — the platform provided hands-on support to businesses.  

Facebook Statistics Every Marketer Should Know in 2022

With more than 2.7 billion monthly active users, Facebook is rightfully considered the biggest social network.

As you see on the chart below, around 73% of U.S. Facebook users access the network daily.

Note that 74% of high-income earners use Facebook.  

As of July 2020, most Facebook users prefer accessing the platform via mobile devices.

If you need to find customers, Facebook is a good bet. However, social media advertising is different from search ads: people do not search for your business; here you present your business in front of them in the form of display ads. These ads will be delivered in the newsfeed of your targeted audience, in between other posts.

Facebook Ads Manager guides advertisers through all the stages of creating an ad campaign, from setting the key objective, determining the targeted audience, and up to creating individual ads. Facebook helps to implement sophisticated marketing strategies to reach one of the marketing objectives, such as traffic, brand awareness, engagement, lead generation, reach, catalog sales, conversions, app installs, etc. You can use Facebook Ads for both warm-up leads and direct sales.

The selection of the targeted audience for the Facebook advertising campaign is one of the most advanced among various platforms. Facebook allows targeting by numerous criteria, including GEO, age, gender, education, language, work, relationship, ethnic affinity, interests, behavior, life events, and so on.  You can even create a custom audience, for example, import your existing contacts or create a ‘lookalike audience’. In other words, the platform helps you to tailor your campaign precisely to hit the right group of people.

How You Are Charged for Facebook Ads

If you are worried that you pay too much for Facebook ad campaigns and want to reduce expenses, first of all, you need to have a clear idea of how Facebook charges for ads. Basically, you have two options: link clicks or impressions. The most common choice is CPC (cost per click) bidding — you pay only when people click on your ads. Another option is to pay for impressions, even if no one clicked on your link. In this case, Facebook sets a rate for 1 000 impressions (CPM).  

Well, CPM is used usually by brands that intend to expand brand awareness. It’s more like an introduction. Many brands implement a two-step strategy with Facebook Ads. First, they use a CPM model to extend the brand reach and become more familiar to potential customers. Second, they introduce their products and services via the CPC model.

As for the price of Facebook advertising, the average cost of 1 000 impressions on Facebook is around $7.19 and the average cost per click is $0.97. Still, these are just average costs. Some factors influence your Facebook advertising costs.

Factors that Influence Your Facebook Ad Costs

To pay less for an advertising campaign you should puzzle out the key factors that might have a significant impact on the total budget of your campaign.

• Ad placement. Different ad placement means different CPC and CPM. We are never tired of repeating the importance of testing. You can easily eliminate low-performing ad placement and, therefore, increase the efficiency of your ads by running A/B tests.
• Ad schedule. The time of the day, a day of the week, and even seasons influence the ad cost. Having developed an ad strategy, you can schedule your ads to decrease costs and improve the results. According to SproutSocial, the best times to post on Facebook:
  • Wednesday, between 11 a.m. and 1 p.m.
  • Other weekdays between 9 a.m. and 3 p.m.

However, this is just a general suggestion. You need to analyze your potential audience and keep in mind time zones to figure out the most active times for better engagement.

Actually, setting a schedule for your ads is pretty simple with the Ads Manager:

• Target audience. Again, before running an ad campaign, you should realize who you target. Needless to say, some audiences are more sought after than others (it depends on your niche — some niches are very competitive), so bids on showing ads to certain groups might be higher.  

Applying the right optimization methods and controlling the key factors you can considerably improve the results of your ad campaigns.

Almost all marketing experts have their own secrets on making the utmost of Facebook Ads — you can find tons of posts dedicated to this topic, full of advice and ideas on how to use Ads Manager and reduce advertising costs. Unfortunately, less experienced marketers and small business owners are still there — spending a lot on ads they are actually not satisfied with the results. Hence, high Facebook ad costs are the talk of the town. Actually, this isn’t entirely true. Once you learn all the ins and outs of Facebook Ads Manager and key factors influencing advertising costs, you will be surprised with hidden money-saving options you’ve never utilized.  

Today we will extend boundaries and go further — a detailed case study on how to reduce Facebook Ads costs and increase the efficiency of the campaign.

How to Lower Facebook Ads Costs

Facebook ad costs vary a lot and depend on several parameters, such as niche, audience, ad objectives, and optimization settings. Every case is very specific, but Dan Rohsler from Power Digital marketing notes that CPM (cost per 1 000 impressions) can vary from $5 to $10, while the common CPC (cost per click) is less than $2. These costs are competitive and affordable. So, how to keep within the budget and make your ad costs below the average rates.

Audience Targeting

Many experienced marketers highlight the importance of precise targeting. Ben Cook, the marketing director at JC Social media, noted that ‘by narrowing your target audience, you can drastically reduce the competition from other brands running ads to a similar audience.’ GEO and demographic characteristics coupled with a set of interests give you more clicks and conversions at a lower cost.

Relevant Advertising

Sometimes Facebook charges more if your ads are irrelevant to the target audience.  When ads are relevant to the targeted segment of users Facebook intends to reward advertisers for adding value to the platform with decreased ad costs. You can find your ranks in the Facebook Relevance Score, which measures your ads’ effectiveness and influences ad rates. To determine your ad relevance Facebook uses feedback from ad viewers on a scale from 1 to 10. With a relevance score below 3, you are unlikely to get desired results, while a score 7 and higher ensures better results and lower CPS. Check this parameter frequently. If you see that your ads are considered spammy by the chosen audience, you may adjust the target audience or change your creatives before you are left with the ruins.  

Overlapping Audiences

According to Facebook itself, overlapping audiences can lead to poor ad delivery, drive up costs, and inefficient use of your budget. To avoid that, you can use Facebook Audience Overlap Tool. If you have overlaps, you may bid against yourself. And this is the last thing you need. WordStream shows an interesting example: PBJ marketing ran a Facebook Ads campaign for the University of Maryland and targeted for the US residents interested in Entrepreneurship and Startup companies.

It is clear from the chart that 49% of the Startup audience is also interested in Entrepreneurship. Phillip Reinhardt, CEO and co-founder of PBJ Marketing, noted that "if we set up a campaign targeting these two audiences in separate ad sets without any audience exclusion and pay — let us suppose — $0.10 per click, we could waste up to $220 050 in the ad auction by bidding against ourselves." So, people interested in entrepreneurship were excluded from the Startup-interested audience, and vice versa.

Ad Placement

For the first campaign can be helpful to try all possible ad placements. After a short test, you will see what placements deliver the best results. Facebook Ads Manager provides advertisers with a detailed breakdown of performance across different placements on mobile devices and desktops. Based on results, you can adjust the campaign by excluding some placements or switching between mobile and desktop. However, there is one thing to remember. Your creatives can be not suitable or inefficient for some placements, so try to create unique ads for specific placements and run a test.

Cost Cap

To optimize your campaign and reduce costs, you can use Cost Cap to ‘maximize conversion volume while controlling your cost’. Cost cap has been designed to minimize cost by delivering the cheapest results first. Although cost cap helps to get lower-priced clicks or impressions, in some cases it slows down the results by preventing the ad to be shown to the right audience. Target cost bidding strategy might also help in reaching the goals and maintaining ad costs at the low level. Try different bidding strategies to discover the best option for every specific campaign.

Facebook Pixel

The Facebook Pixel is a piece of code for your website that allows you to measure, optimize, and build audiences for advertising campaigns. It helps better understand how your cross-device ads influence conversions, ensure that your ads are shown to the audience most likely to take action, and create custom audiences for your ad campaigns so that ads will be automatically shown website visitors the products that they have opened on the website, or similar ones. Facebook Pixel helps brands to track the most efficient ads.

Testing Creatives

Facebook Ads coach Monica Louie said that she always starts campaigns with testing images. She confirms that changing a single image "can have a dramatic effect on the costs." The right choice of creatives may increase click-through rate and conversion rate leading to higher ROI in the long term. The elimination method is the best and by far the easiest way to optimize the campaign. Let’s say, you create three variants of images with different call-to-actions. Run all three variants for a couple of days; then, you analyze the results. For the rest of your campaign, you continue with the most ‘catchy’ one. This way you prevent spending funds on inefficient creatives.

Scheduling

To avoid unnecessary expenses you can schedule your ads to run only during specific days of the week and time of the day. As you’ve seen above, there is prime-time for the Facebook audience, you just need to use it to your advantage. The following grid allows you to highlight the days and times. After testing and analyzing ad reports, you may identify the best time and change the schedule if needed.

By adjusting and tuning your ad schedule you minimize ad costs and use your budget reasonably.

Avoiding Ad Fatigue

A successful ad campaign is based on an effective strategy, which includes refreshing ad creatives regularly. Many businesses make the same mistake: once the ad campaign performs well, they do not monitor the settings or adjust anything. In fact, in the long run, one and the same ad can be shown to the same people four or more times. If people are familiar with the ad, the performance of the ad campaign declines. When fewer people click on your ad, Facebook loses money. In these unfavorable conditions, the platform should decide whether to charge you more or stop running your ads. This is called ‘ad fatigue’. To prevent this, you should follow results daily and refresh creatives (offers) before the fatigue point.  

Retargeting and Lookalike Audience

Many analytical tools help you to sort website visitors into groups by engagement levels for better retargeting on Facebook. Dynamic retargeting helps to generate clicks and sales at a lower cost. When you use retargeting, you hit the ‘warm’ audience which is more likely to react to your ads. Read the case study below for more practical insights.

Video Ads

For many industries, video ads cost less than carousel or single image ads. For example, Aspiro Agency, a digital marketing company, paid around $0.15-$0.50 per click on video ads, while CPC for single image ads for the same audience was $2 and more. Additionally, Facebook provides advertisers with built-in tools to create a slideshow from images as video content.

4 Tenets of a Successful Facebook Advertising Campaign

• Visual appeal. The attention span of Facebook users is short. You need to catch attention at once, otherwise users will continue scrolling. Visual information helps to engage your target audience more than plain text. Try different creatives, various image sizes and colors, videos, and carousels to determine the most appealing ones. Note that the human brain processes visual information 60 000 times faster than text, so images should be professional and relevant.
• Ad relevance. Your enemy is "Hide this ad" because it is "irrelevant". Nobody wants to get a lower relevance score and higher ad costs. Headline, images, and call-to-action should be relevant. So do your homework well: study your target audience in terms of behavior, interests, demographics, GEO, etc.

• Enticing offer. Again, your ad should deliver value to the audience. Captivating ads should explain why your product/services are better. The ad should excite curiosity and arouse a desire to click on the link to learn more about the offer.
• Call to action. An appealing ad without a call-to-action is useless. The ad should show the urgency and uniqueness of the offer. Limited-supply or limited-time offers usually deliver good results. Another trick often used in marketing is demonstration of the popularity and high demand for this specific product/service, in other words, using the peer pressure effect.  

The major difference between a traditional media campaign and social media ad campaign is that the latter one is much more dynamic — you may (and should) analyze the results regularly and adjust the campaign’s parameters and settings (budget, targeting, and creatives) to get better results.

Case Study: How to Generate an Extra $102 580.47 in Sales via Facebook Ads

Below there is an incredible example of reducing cost-per-sale and increasing sales via Facebook Ads. A marketer received a request to improve a failing Facebook ad campaign. Spoiler: he succeeded and transformed it into a very profitable campaign.

Initially, the e-commerce client was quite successful with his Facebook campaign with ROAS (a return on ad spend) of 4.1 – 5.8 (the result higher than 4.5 is typically considered great). Then, Facebook results began declining even with 15k+ expenses on ads. Traffic decreased and the ROAS dropped to 2.8 resulting in losses the breakeven point was a ROAS of 3.1)

The client achieved a ROAS of 3.43 a month before he asked a professional marketer for assistance. But at this level, he barely made any profit.

The very next week his results were even worse (remember, the breakeven is 3.1).

The task was to transform this failing campaign into the successful one with a ROAS higher than 4.5 with 35k for the 2-month campaign. Actually, the client was considering the idea of quitting a Facebook campaign.

The marketer began with a thorough analysis of the previous campaign in terms of three powerful parameters:

• Audience. This includes the list of targeted potential customers, gender, age, placement, and optimization goals (in this specific case, the client needed conversions, so this aspect stayed with no changes).  
• Offer. Facebook offers quickly get out of relevance, particularly for the same audience.
• Ad type.

The marketer notes that the ad optimization system is much more complex but these three key parameters have been proven many times to be the major ones to improve sales. So, the first step was to check the efficiency of the previous campaign in these three areas. The results were as follows:

Audience. The client used only general interest targeting. There was no proper retargeting for video views and website visits. Moreover, age and gender weren’t analyzed thoroughly to target precise groups. In fact, previous campaigns totally ignored the lookalike audience option, which can be extremely powerful, particularly in the e-commerce vertical.

Age and gender stats from previous campaigns:

In fact, the client was ready to stop targeting women at all.

The stats clearly show that the age in focus is between 18 and 45. By limiting the age group the ROAS could increase from 3.43 to 3.94.

This brief analysis took around 5 minutes but it could help to increase sales by 15% with no expenses. So, the marketer conducted an age and gender breakdown:

Note that women aged 18-24 showed the highest return on ad cost. This is a solid reason not to exclude females from the targeted audience.

Next, the ad placement was analyzed. The breakdown was pretty insightful:

Mobile newsfeed traffic was obviously dominant and accounted for 92.98% of all traffic and 92.6% of sales.

The client’s campaigns were based mostly on a single video with a featured product; from time to time different videos were tested. Image ads were used for some offers but over 95% of the ad cost went to video ads. At that point in time collection ads were still new, so the client didn’t try them and kept sticking to his videos. The marketer offered to try new collection ads. He conducted a split test of the single video ad and Facebook collection ads. More work was done with offers. Besides the existing $177 free shipping offer, two new offers were tested: one offer without free shipping ($157 offer when $20 shipping costs are added later) and the original free shipping offer with a bonus item (the freebie would cost the company less than $3). Tests demonstrated that fresh and updated offers on Facebook indeed facilitate sales.

Besides, offers were also analyzed and optimized ‘to perform at the highest possible level’.

Here is the marketer’s plan on how to improve the campaign:

• Targeting both genders (despite the client’s intent to limit ads to males only). Adsets were split to match both genders.
• Focus on mobile traffic only.
• On non-website retargeting lists an age limit was applied, 18–40-year-olds. As for retargeting, the marketer created the following audiences: added to cart retargeting (180 days); product category retargeting (except added to cart, 180 days — people who viewed the product and the product category but didn’t add to cart); video view retargeting (those who viewed the Facebook video for more than 3 seconds).
• Lookalike audiences were added: product buyers lookalike audience 1%; product category buyers lookalike audience 1%, and lookalike of all other product buyers 1%.
• Interest-based targeting.

After two months the company received an extra $102 580.47 in sales. Below you will find the overall results for the new campaign. The campaign took 2 months with ad costs $35 392.41.

With ROAS 6.33 the client achieved a 105% ROI on ad costs. Thanks to a well-developed strategy, the client moved from ‘barely breaking even to profiting over $16 000 per month, on the same monthly spend!’ With the same ad costs and ROAS 3.43, the sales would be $121 395.97 vs the achieved sales of $223 976.44. Applied changes led to additional sales of $102 580.47 in two months without any additional ad costs.

A new campaign vs old campaigns:

• The ROAS was increased by 85%.
• Lower cost-per-sale (CPS) by 43.42%.
• An average order value (AOV) increased by 4.47%.

Offer analysis

Offer 1:

Offer 2:

If you remember, the client considered excluding women from the targeted audience as the product was more appealing to men. However, the results of the new campaign were shocking — the female audience did better than the male audience (women: ROAS of 7.1 vs. men: ROAS of 6.14). So, if the marketer would agree with the client’s suggestion, he would make a huge mistake. The result was impressive — CPS (cost-per-sale) declined by almost 60%. Actually, the combination of enhanced offers and ad types, age limitation, and audience targeting led to a significant net increase.

Overall summary:

• ROAS 6.33 (the client has never had such a result)
• Additional $102 580.47 in sales during two months with no extra ad costs
• An average drop in CPS (cost-per-sale) by 43.42%
• An increase of an average order value by 4.47%
• Sales growth by 84.65%.

As you see, thorough research and consistent implementation of strategy can result in a successful campaign and incredible returns.

Conclusion

It is absolutely safe to say that Facebook Ads stay as solid as ever before. To stay on top of all trends, make sure you develop and implement the up-to-date strategy that allows reducing CPS.  Facebook ad campaign optimization is a never-ending process of trials and errors. In fact, it is much easier than it seems. If it’s done right, your business will benefit a lot.