This article describes a simple systematic approach to adjusting and scaling your Facebook Ad Set budgets.

Some assumptions:

  1. You are using daily budgets at the Ad Set level
  2. You have an ROI focused e-commerce business
  3. You are tracking sales and know your incremental profit margins
  4. You have a well defined Ad Set structure that changes infrequently
  5. You are adjusting budgets at most once per day, and ideally only once a week. (If adjusting budgets hourly, a different approach needs to be taken)

The General Approach

  1. Determine an acceptable ROAS range. (eg: Between 3.0 and 5.0 ROAS)
  2. Review and adjust budgets once per week.
  3. If your ROAS is below the minimum range, decrease budgets by 10%
  4. If your ROAS is above the maximum range, increase budgets by 10%
  5. Do NOT increase budget if the frequency is greater than 10
  6. Do NOT decrease budget if the total cost is very low
  7. If ROAS is 0 but cost is high, decrease budget by 10%
  8. Consider multiple time periods when deciding on budget adjustments

Increasing Budgets

  1. Set your date window to the last 7 days
  2. SELECT any Ad Sets with an ROAS greater than 5.0
  3. UNSELECT any Ad Sets that have a frequency > 10
  4. Change date window to 30 days (your previous selections will remain)
  5. UNSELECT any Ad Sets with an ROAS less than 5.0
  6. Edit > Edit Budget and increase budgets of the remaining Ad Sets by roughly 10%

Decreasing Budgets

  1. Set your date window to the last 7 days
  2. SELECT any Ad Sets with an ROAS lower than 3.0
  3. SELECT any Ad Sets with an ROAS of 0.0, and a total spend of more than 100% of average order value.
  4. Change date window to 30 days (your previous selections will remain)
  5. UNSELECT any Ad Sets with an ROAS greater than 3.0
  6. UNSELECT any Ad Sets that have zero sales, and a total spend less than 50% of average order value.
  7. Edit > Edit Budget and decrease budgets of the remaining Ad Sets by roughly 10%

ROAS and Cost of Sales Targets

It is important to know your profit margins, and to determine what percentage of your sales you are willing to spend to acquire a customer.

For past customers and remarketing audiences, I like to keep cost of sales below 30%, and ideally around 20%. (eg: If I sell a $100 product, I want my cost of acquisition to be below $30; and ideally around $20). This translates to a ROAS of between 3.0 and 5.0.

For new brand unaware audiences, I am willing to spend more to introduce that customer to our product. In these cases, I am willing to spend up to 50% of sale price. This is an ROAS of 2.0.

Audience Target
Cost of Sales
Min ROAS Target ROAS
Past Customers 20%-30% 3.0 5.0
Remarketing 20%-30% 3.0 5.0
Prospecting 30%-50% 2.0 3.0

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