Facebook Ads Manager is one of the best advertising channels for engaging target buyers and driving revenue, accounting for 18% of total digital advertising spend in 2023. With over 3 billion users worldwide, Facebook offers marketers a unique opportunity to engage their audience with targeted campaigns.
But as average Facebook Ads Manager costs have increased significantly since 2019, it’s important for paid media marketers to manage their spend in the channel strategically. By calculating Facebook customer acquisition costs (CAC), marketers can understand the efficiency of their Facebook campaigns and make the most of their investment.
Customer Acquisition Cost (CAC) is an essential marketing metric that allows businesses to understand how much budget they are spending for every new customer acquired.
By calculating CAC and comparing it with other key marketing metrics, such as Customer Lifetime Value (CLTV) and payback period, you can analyze the efficiency of your acquisition model and ensure you’re maximizing your marketing budget.
Total Customer Acquisition Cost is calculated by dividing total sales and marketing spend for a given time period by the number of new customers acquired during that time period.
Total Sales & Marketing Cost
_______________________________ = Customer Acquisition Cost
Number of New Customers Acquired
For example, if your business spent $25,000 on sales and marketing in 2023, and acquired 1000 customers in 2023, your CAC for the year would be $25.
$25,000
______________ = $25
1000 customers
To calculate Facebook CAC, simply divide the amount of budget invested in Facebook advertising programs during a given time period by the number of new customers acquired that are attributed to your Facebook campaigns.
Total Facebook Marketing Spend
__________________________________________________ = Facebook CAC
Number of New Customers Attributed to Facebook Marketing
Note that your Facebook Marketing Spend should include not only advertising budget spent on Facebook Ads, but also any personnel, creative, and tooling costs required to run campaigns on Facebook.
If your Facebook CAC isn’t where you’d like it to be, don’t fret. Here are 5 things you can do to lower your customer acquisition costs.
Customers engage with your brand at various stages of the customer journey. While some may be exploring their problem for the first time, others may be evaluating your solutions alongside your competitors’.
As you structure advertising campaigns, ensure that you are investing an appropriate percentage of your advertising budget in campaigns that drive high-intent users to convert. Capturing the interest of high-intent users enables you to acquire more customers per dollar invested, lowering customer acquisition costs.
While certain channels, such as Google Ads, enable you to design campaigns based on user intent data, Facebook’s interest-based targeting does not provide the same level of insight on user intent. You can, however, target high-intent users by running retargeting campaigns on Facebook. Retargeting campaigns engage audiences of users that have previously explored your products or services but haven’t yet purchased. Retargeting these high-intent users on Facebook enables you to translate that intent into conversions.
To create retargeting campaigns, you can install the Meta Pixel on your website or app to track user engagement and create retargeting audiences directly within Facebook Ads Manager. Alternatively, you can use an Analytics solution, such as Amplitude, to create audiences of users that have browsed your digital properties and connect them to Facebook Ads Manager, where they’ll be available as Custom Audiences. Alternatively,
On a related note, it’s also important to ensure that you’re not over-investing in advertising to low-intent users.
Developing top-of-funnel engagement is important, but you may consider employing a mix of paid and non-paid Facebook strategies in order to optimize ad spend.
Encouraging customers to create User Generated Content on Facebook and Instagram, for example, can introduce authentic stories about your product into the market and build a sense of community around your brand. Developing your brand profiles on Facebook and Instagram can provide educational and/or entertainment value to your target audience, creating a positive brand association and increasing product awareness.
While these programs may require upfront tooling and personnel costs (which should be included in your Facebook CAC calculation!), they will scale over time and allow you to allocate more of your advertising budget to high-intent users.
Capturing your target customers’ attention with compelling Facebook campaigns is a great start, but for most businesses, clicks do not equal revenue. To lower Facebook CAC, you can also focus on improving the post-click user experience.
Two key ways that you can improve the post-click experience are:
It doesn’t matter how great your user experience is if your campaigns are targeting the wrong consumers. Serving ads to consumers that aren’t interested–or worse yet, customers that have already purchased–will result in wasted marketing budget and high Facebook CAC.
One of the biggest drivers of high Facebook CAC is not poor revenue generation, but rather inefficient campaign spend. When a campaign audience is defined using Facebook’s interest categories alone, the audience may end up including active or recent customers that are not interested in the product on offer. This inefficient targeting can result in a poor customer experience for your active customers and wasted ad spend.
Fine-tune your Facebook Ad campaign targeting by creating customer segments in a first-party data platform and syncing them to Facebook as a Custom Audience. Once these Custom Audiences are created in Facebook Ads Manager, they can be leveraged as suppression lists on your campaign, ensuring you’re only serving ads to your target users. When syncing audiences to Facebook from any external or internal system, it’s important to ensure that you have the necessary privacy controls in place to support user consent management and data privacy.
Bonus: Wherever possible, sync suppression audiences to Facebook Ads Manager in real time. This will ensure that customers are removed from your advertising campaigns as soon as they have converted, optimizing campaign costs and improving the customer experience. If you’re interested in lowering Facebook CAC with real-time audience suppression, see how you can get started with WasteNot in just a few minutes here.
As discussed in our article on lowering Customer Acquisition Costs, testing and optimizing your ad creative is critical for increasing the number of target users that engage with your campaign. The average Facebook user is served thousands of advertisements per day. By continually testing creative and copy, you can identify the ad variants that capture your target audience’s attention, and reallocate your budget accordingly.
A great way to get started is to use Facebook’s A/B testing capabilities, which allow you to compare two variants of an ad strategy by changing variables such as ad images, ad text, audience or placement. Once you’ve created and launched your A/B test, Facebook will serve each variant to a distinct segment of your target audience, then determine which variant performs best.
One of the benefits of leveraging Facebook’s A/B testing functionality, as opposed to creating two campaigns and comparing them manually, is that Facebook A/B testing helps ensure that your audiences will be evenly split and statistically comparable.
To learn more about how to run an A/B test on Facebook, you can read the set up instructions here.
John Joe Smith, founder and CEO of WasteNot, is hosted by Tom Triscari, founder of Quo Vadis, for a Q&A conversation on the future of audience suppression.
Many advertisers waste up to 40% of their ad budgets due to inefficient targeting, and they aren't even aware of it. In this article, we'll walk through how brands can use modern audience suppression strategies to improve advertising efficiency and performance.
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