2022 Facebook Ads Bidding: Cost Cap, Bid Cap & Lowest Cost
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Cost cap averages out your bids to meet the desired cost-per-acquisition. Meanwhile, a bid cap places an artificial hard limit on what you're willing to spend ... Skiptocontent2022FacebookAdsBidding:CostCap,BidCap&LowestCostEvenifyou’reaveteranuserofFacebookAds,thereisalwayssomethingnewtolearn.Thetruthis,newandexperiencedFacebookAdsmediabuyersalwaysneedtostayontopofadjusting,pivoting,anddrivingbetterROIfortheirbusinessorclients.Otherwise,youriskwastingyourmoney,time,andotherresourcesonFacebookAdscampaignsthatsimplydon’tdeliver.Buthowdoyouknowwhattherightstrategyisandwhat’sworkingforyou?ContinuallytestingyourFacebookandInstagramadsisvital,forstarters.However,itisn’tonlytestingyouradsthatareimportanttoyoursuccess.FacebookAdsbiddingandpricingisanothercriticalelementofsuccess.Andunfortunately,nailingthiscomponentofFacebookAdsisoftenoverlooked.WiththeupdateofIOS14.5,FacebookAdsmanagementismorechallengingthanever.Thatmeanstheneedformorecontrolhasbecomeofparamountimportance.Nottomention,continuallyeducatingyourselfabouttheFacebookAdsbiddingandpricingstrategiesthatwillserveyoubest.Andifyou’reheretodojustthatwiththisguidetoFacebookAdsbidding,you’realreadywellaheadofthepack!WhichIsBetter:CostCapVs.BidCap2022PostIOS14.5EverythingYouNeedtoKnowAboutFacebookAdsBiddingandPricingIntoday’spost,we’llbreakdownallofyourtopquestionsandconsiderationsforFacebook’sAdsbiddingandpricing.Thisincludesthingslike:BidcapbiddingHowbidcapsworkTargetcostbiddingCostcapvs.bidcapLowestcostbiddingOvercomingcommonchallengeswithFacebookAdsbiddingandpricing…andsomuchmore! So,readytogetstarted?Let’sdigin!BidCapBiddingForFacebookAds:AnOverviewSo,exactlywhatisbidcapbidding?Let’sturndirectlytoFacebookthemselvesforanexplanationofthisstrategy: “BidcapisoneofFacebook’sbidstrategyoptions,meaningittellsushowtobidintheadauction.Whenyouuseabidcap,we’llsetamaximumbidacrossauctions(ratherthanallowFacebooktobiddynamicallybasedonyourcostorvaluegoals).Bidcapismeantforadvertiserswhohaveastrongunderstandingofpredictedconversionratesandcancalculatetherightbid.”Whilethisprovestobeasuccessfulstrategyformanymarketers,itisn’twithoutitschallenges.Forexample,itrequiresregularbidchangessinceyoucan’tcontrolthecostperactionyouseeinreporting.HowDoBidCapsWorkonFacebookAds?Marketerswhouseinternalbiddingorlifetimevaluemodelsoftenoptforbidcapbiddingovercostcapbidding(moreonthatsoon).IthelpsthemcontrolhowmuchFacebookcanbidinauctions,andkeepaclosereyeontheiradspendthisway. Asforexactlyhowitworks,Facebookalsosharesagreatexamplethat’sworthreading:“Askincarecompanyhasconductedextensiveresearchanddeterminedthatnewcustomersthatpurchaseaspecificlineofproductsspend$135onaverageeachyear.Thiscorrespondstoaprofitof$41forthecompany.Whiletheteamiseagertoacquirenewcustomers,theydon’thaveasetbudget.Theydecidethataslongastheyspendlessthan$41toacquireacustomer,it’sbesttocontinueadvertising.Sincetheteamknowswhatvaluetheycanexpectfromanewcustomer,theydon’twanttobidmoreforconversionsthanthisexactvalue.Thebidcapbidstrategywillworkwellforthem,andtheycapthebidat$40.”UnderstandingCostCapBiddingNowthatwe’vediscussedbidcapbidding,let’smoveontocostcapbiddingandhowitworks.Here’showFacebookexplainsthisstrategy:“Thecostamountyouprovideisanaverageamountwetrytodeliveragainstoverthecampaignlifetime,whiledynamicallybiddingashighasneededtomaximizeresults.Thismeansthattheaveragecostperresultmayexceedthesetamount.Forexample,aretaileroptimizingforpurchasesmaysettheircostamounttoacostperpurchasethatwill,onaverage,keepthemprofitable.”WementionedbeforethatiOShasmadeFacebookAdsbiddingandpricingmorechallenging.Whenitcomestocostcapbidding,you’llwanttoensureyouradsetisscheduledtorunforaminimumofthreedaysifyouwantyouradstobeseenbyiOS14users.Bonus:bestpracticesforbidcapsCostcapshouldonlybeusedwhenusingAdSetBudgetOptimization,NOTCBO(CampaignBudgetOptimization.)WhenusingCostCapBidAdjustments,themediabuyers’audienceshouldremaintheexactsame,sothesameLookalikeaudience,thesameinterest,thesamecreativeetc.Theonlydifferenceshouldbethecostcapbidadjustment.Spendincrements:Costcapsshouldbeincreasedby$2foreachincrementaltesttodeterminewhichcostcapdrivesthebestresults.So,let’ssayfor$40costpercustomeracquisitionisthedefault.Thenextcostcapbidadjustmentshouldbe$42,then$44,then$46.WhenShouldYouOptForCostCapBidding?Next,let’stalkaboutwhentochoosecostcapbiddingoverbidcapbidding.Mostnotably,thisstrategyispreferablewhenyouwanttokeepyourcostperaction(CPA)roughlythesameregardlessofmarketconditions.Assuch,itcanhelplimitcomplexitiesinmanagingbidswhilesimultaneouslymaximizingyourcampaignresults.Asformakingthemostofthisstrategy,intheirbestpracticesforcostcapbidding,Facebookexplains:“Whencost(averagecostperoptimizationevent)isanimportantmetrictoevaluateperformance,werecommendusingcostcaptooptimizearoundthatcost.Costcaphelpsyoumaximizeconversionvolumewhilecontrollingyourcost.Forexample,ifyou’relookingtoscaleyourbusinessbydrivingasmanysubscriptionsorpurchasesaspossible,andaretryingtostayaroundacertaincostperoptimizationevent,werecommendthatyouuseacostcap.Onceanadsethasexitedthelearningphase,we’lltrytokeepcostsaroundyourcostcap,butanexactspendamountisnotguaranteed.”However,likeotherbidstrategies,itisn’twithoutitschallenges.Forstarters,Facebook’s“learningphase”cantakelongerwiththisoption.Whatisthelearningphase,youask?Here’showFacebookexplainsit:“Thelearningphaseistheperiodwhenthedeliverysystemstillhasalottolearnaboutanadset.Duringthelearningphase,thedeliverysystemisexploringthebestwaytodeliveryouradset–soperformanceislessstableandcost-per-action(CPA)isusuallyworse.Thelearningphaseoccurswhenyoucreateanewadoradsetormakeasignificantedittoanexistingone.”WhyDoesYourBidStrategyMatter?Abidisabid,right?Notexactly.Thetruthis,differentbidstrategiesworkbetterthanothersdependingonthetypeofadsyou’resharing,yourgoals,yourbudget,andanumberofotherfactors. WhenmarketerssetouttorunFacebookAds,theyhavedifferentmeasurablebusinessoutcomesinmind.Perhapstheywanttoincreasesales,boostwebsitetraffic,getmoreclicks,oranyothernumberofdigitalmarketinggoals.Thesekeyperformanceindicatorsmatchcertainbidstrategiesbetterthanothers.Andwhatdoesthatmeanforyou?ItmeansthatchoosingthebestFacebookAdsbiddingandpricingstrategyisincrediblyimportantifyouwanttogetthespecificresultsyou’rehopingforwithyourcampaign!So,thatbringsustowhatweknowisyournextquestion…CostCapVs.BidCap?Costcapaveragesoutyourbidstomeetthedesiredcost-per-acquisition.Meanwhile,abidcapplacesanartificialhardlimitonwhatyou’rewillingtospendforeachauctionitembeingsoldinordertomaximizeprofitwhilestillengagingcustomerswithcompetitivepricingpointsthatwillbringthembackagainsoonaftertheirinitialpurchase.Thismeansthatifyouwanttomaximizeyourprofitswhilestillbeingabletouseeitherbidorcostcaps,thenit’simportanttounderstandthepricepointsoneachindividualacquisitiongoalsotheylineupwithoneanother.Forexample:IfIhaveahigh-endproductrequiringmoremoneythanwhat’savailableinmybudgetbutlow-endonescanbepurchasedbelowcostduetotheirvolatilenature(theyvarydependingupondemand),balancingbothwillrequireadjustments;however,whenlookingatoverallperformanceacrossdifferentgoalsovertime,thesuccessofourcampaignisbetterwithcostcapbidding.Thebetteroption,asyoucanprobablyguess,dependsonyourgoals.However,formostpurposes,costcapbiddingcomesoutontop. Understandably,manybuyersorclientshaveastrictbudgetinmindandthey’refearfulofinvestingtoomuchinFacebookAdsandnotgettingagreatROI.Tohelpmanagethesefears,it’susefultogetaclearunderstandingofeachuniquebusiness’costofacquiringacustomer,aswellashowthatcostwillpayoffinthelongrun. Asamediabuyer,youandyourclientneedtofullyunderstandhowmuchthey’rewillingtospendinordertogetacustomertopurchaseorsubmitalead.Withthisnumberinmind,weencourageyoutochoosecostcapbiddingoverbidcapbiddingforthebestchancesofFacebookAdssuccess. So,whilecostcapbiddingscaressomebuyersoffbecauseitrequiresabiggerinvestment(inmanycases)ittendstopayoffinthelongrun.However,it’sstillabeneficialstrategybecauseittellsFacebook“wewanttoacquirecustomersfor“X”butwearewillingtopayalittlebitmoreifnecessary. ThisadditionalwiggleroomisoftenthedifferencebetweenagreatROIonyourFacebookAdsandonethat’slessthanimpressive. KeyFactorstoConsiderWhenChoosingBetweenCostCapandBidCapButnow,let’sgetintoevenmorefactorstohelpyouchoosebetweencostcapandbidcaptomakesureyouendupwiththerightoptionforyou. Costvs.Conversions:Formorecampaignsatalowercost?Optforacostcap.Forfewercampaignsbutwithmorecertainconversions?Goforbidcapbidding.Yourtestingresults:Besuretotestbothstrategiestodiscoverwhichoneworksbestforyou,ratherthansolelyrelyingonwhatworksforotherpeople. Controlvs.convenience:Costcaptendstobelowermaintenanceandmoreconvenient,butyou’llhavelesscontrol.Bidcapbiddinggivesyoumorecontrol,butitalsotakesmoreworktomanage.Yourtargetingfocus:Costcapisidealforabroadertargetingfocus,whilebidcapbiddingisbettersuitedwhenyouhaveamoreparticularaudienceinmind.Yourupperspendinglimitperad:Needtokeepanupperlimitonyourspendinglimitperad?Inthatcase,it’susuallybesttochoosebidcapovercostcap.Cost-effectivenessvs.predictability:Mostmarketersarehopingtowalkthatfinelinebetweencost-effectivenessandcontrol.Whilecostcapbiddingmightbemorecost-effective,bidcapbiddingoffersyoumorecontrol.So,dependingonyourprioritiesbetweenthetwo,you’llfindoneoptionthatsuitsyourneedsbest. Yourcampaigntimeframe:Thelengthofyourcampaignwillalsoaffectwhichstrategysuitsyoubest.Forexample,long-termcampaignstendtosuitcostcapbidding.Ontheotherhand,atightertimeframesuitsbidcapbiddingbest.LowestCostasFacebook’sBidStrategyOptionAnotherstrategyweneedtodiscussingreaterdetailisknownasthelowestcostbidding. Here’showFacebookexplainsthisformofspend-basedbidding:“LowestcostisoneofFacebook’sbidstrategyoptions,meaningittellsushowtobidintheadauction.Whenyouusethelowestcostbidstrategy,we’llaimtogetthemostresultspossiblefromyourbudget.Forexample,aneventplannercouldusethelowestcostbidstrategytogetasmanypeopleaspossibletoattendanupcomingmusicfestival,wherethecostperattendancedoesn’tmatter.”Ontheotherendofthespectrum,wehavewhat’sknownashighestvaluebidding:“Spendyourbudgetandfocusonhighestvaluepurchases.Forexample,afloristmayusethehighestvaluetosellasmanybouquetsaspossible,whilefocusingonsellingmoreexpensivebouquetstomaximizevalue.”Planningtogivethisbiddingstrategyatry?Hereareafewthingstokeepinmindwithlowestcostbidding:Thisstrategyisidealifyoucareaboutspendingyourfullbudget.OptforthisstrategyifyouwanttomostpossibleresultsforyourcampaignLowestcostbiddingworkswellforthosewhodon’thavestrictcostperaction(CPA)requirements(also,keepinmindyourCPAcanstillfluctuatethroughoutyourcampaignswithlowestcostbidding)Thosewhohavespecificgoals(forexample,a120%returnonadspend)tendtopreferotherstrategiesoverthelowest-costbidding. CommonChallengesinChoosingaFacebookAdsBiddingStrategyMarketersoftenfaceadilemmawhenthey’rechoosingbetweenFacebookAdsbiddingandpricingstrategies.Weknowthere’salwaysabalancebetweencostandcontrol,andthattendstobethebiggestconsiderationfortheirfinaldecision.Toovercomethischallenge,werecommendgettingveryclearaboutthegoalsofyourcampaign.Atthesametime,considerhowmuchtimeandeffortyou’rewillingtoputintomanagingthesecampaigns.So,let’sdoaquickrecapofthechallengesandbenefitsofdifferentstrategiestohelpwithyourdecision.Butremember,it’sstillagoodideatotestdifferentstrategiestofindoutwhatworksbestforyou! Afterall,there’salwaysthatoneunicorncampaignthatendsupthrivingwithasurprisingbidstrategy!So,don’tjustassumeonebiddingstrategyisrightforyouwithoutexploringyouroptionsfirst.Optforcostcapbiddingif…YouwanttomaximizeyourresultswhilestillstayingwithinthebenchmarkCPAYouwanttogetthemostvolumeforyouradspendKeepingyourCPAatorbelowacertainamountregardlessofmarketconditionsisimportanttoyouAsforchallengestokeepinmind,rememberthisstrategyispronetoalongerlearningphaseandmorecostfluctuationsatfirst.Optforbidcapbiddingif…YouwanttomaximizeyourresultswhilestayingwithyourbidcapYouwantmorecontrolofyourbidsinanauctionIdealformarketerswhouseinternalbiddingorLTVmodelsKeepinmind,withthisstrategy,doesn’tcontrolthecostperactionyouseeinreporting.Itwillalsorequiremorefrequentbidchanges.Optforlowestcostbiddingif…Youwanttomaximizeresults(deliveryandconversionvolume)foryoursetbudgetYourgoalistogetthelowestpossiblecostperoptimizationeventBlueWaterMarketing:OurFacebookAdsBiddingandPricingStrategyWe’vetalkedabouttheprosandconsofdifferentFacebookAdsbiddingandpricingstrategies.ButasFacebookAdsexperts,canyouguesswhichoneweprefer?Foralmosteveryclient,welikeusingcostcapbiddingovertheotheroptionsoncewe’vedeterminedawinningaudienceandwinningcreativeassetforthatclient.Andkeepinmind,withtherisingcostsofFacebookAdsandtheneedforabiggerinvestmenttostandoutfromthecompetition,spending“test”moneytoensurethesuccessofyouradsismoreimportantthanever.So,thatoldadage,“You’vegottospendmoneytomakemoney”reallyringstruehere…Regardlessofthestrategyyouchoose,FacebookAdsbiddingandpricingisalotofwork.Andeventhiscomprehensivearticleonlyscratchesthesurface!Butyoudon’tneedtofigureitoutonyourown.ThemediabuyersatBlueWaterMarketingwouldlovetheopportunitytoprovideyouwithafreecampaignaudit.OurteamhasmanagedhundredsofthousandsofdollarsinFacebookAdsthisyearandunderstandshowfrustratingitcanbetodeterminewhythingsaren’tgoingright.Wehaveaprocessthatwehavedevelopedovertheyearsthathasastep-by-stepapproachtocreating,optimizing,andscaling.We’lltakethatsameprocessandevaluateyourFacebookAdscampaigninordertosetyouupformoresuccessinthefuture. Wanttobookyourfreeaudit?Clickheretogetstarted.FacebookTwitterLinkedInChrisMarranoLeaveaReplayAboutBWMOurdigitalmarketingstrategyisbuiltonthefoundationofdrivingmeasurableresults. Wetakeafull-circleapproachtoonlinemarketingwithafocusonincreasingconversions,repeattrafficandgeneratinggreaterbrandloyalty.Facebook-fTwitterYoutubeInstagramRecentVideoRecentPostsShopifyStoreNotGettingSales?ThisCouldBeWhyReadMore»7StrategiestoMarketYourOutdoorBrandEffectivelyReadMore»HowtoIdentifyYourTargetAudiencewithDigitalMarketingReadMore»GetMonthlyMarketingTipsMonthlytrafficandrevenue-increasingtipsdirectlytoyourinbox.Getourbesttips,tricks,andvideos.FollowUsThiswebsiteusescookiestoensureyougetthebestexperienceonourwebsite.Pleasereadourprivacypolicygotit
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