How to Win With Facebook Ads When You Don’t Have a Big Ad Budget

Getting marketing budget approvals is tough, while expectations for growth keep increasing. According to December 2016 E-Marketer study, the biggest goals for digital marketers were to increase revenue, leads and traffic, while the biggest obstacle was to secure enough budget to achieve the goals.

 
Catch 22 of Budget Shortage and Growth Expectations

Catch 22 of Budget Shortage and Growth Expectations

 

One of the reasons behind the difficulty to get budget approval is ROI. CEOs demand higher accountability and have expectations for proving the ROI of marketing budgets.

In fact, 93% of CMOs say that they are under more pressure to deliver measurable ROI. This of course, trickles down to the SVP of Paid Media, then to the VP of Business Development, and finally to the Director of Marketing.

 

The Pressure Piles On (via GIPHY)

 

Facebook ads are the most promising social advertising platform for E-Commerce with 1.86B users, an average ROI of 152%, an average conversion rate of 1.85%, and 85% of social media orders.

Despite the promising stats, you still need to prove that Facebook Ads works for your E-Commerce business. Otherwise, getting approval for a substantial budget will be tough.

So, the question is how do you maximize the ROI for Facebook Ads channel when you don’t have a big budget?

Start Customer-Centric Campaigns and Reinvest

When you have a limited Facebook Ads budget, focus on selling to your loyal customers first.

You will maximize the customer lifetime value first, which will help you build a strong case for reinvestment in customer acquisition on Facebook.

 
On average, loyal customers are worth up to 10 times as much as their first purchase.
— White House Office of Consumer Affairs
 

To do this effectively, your campaigns have to give your customers what they want, before they know what they want.

I call them Customer-Centric Campaigns.

Here is proof that customer-centric campaigns work.

Our team at SCUBE used customer centricity to achieve 4,660% ROI on Facebook Ads for an E-Commerce education company.  

Customer Centric Campaign Ad

Customer Centric Campaign Ad

4,660% ROI. Can’t beat that.

In addition, the client started receiving comments like this from their customers:

 
Love your reminders that my course work is about to expire.
— Happy Customer
 

Most importantly, Customer-Centric Campaigns helped us build a case for reinvestment of our Facebook Ads budget into new customer acquisition campaigns.

Let’s explore Customer-Centric Campaigns in more detail. They involve two components: Customer Centricity and Facebook Custom Audiences.

Customer Centricity

Your customers is why your company is in business in the first place.

Businesses that better adapt to customer needs win. Deloitte and Touche research proves that customer-centric companies were 60% more profitable than other companies.

In Teradata’s recent survey on data-driven marketing, 90 percent of marketers said that customer individualization is a priority, and that’s because they’re learning that the more personal the approach, the greater the chance of a positive response.

This leads to the second component.

Facebook Custom Audiences

Facebook Custom Audiences allow you to reach your customer segments (more on them later) and deliver a highly personalized message in a way that makes them feel like the advertising is relevant and helpful.

Before we dive in, let’s clarify the conversation with a couple definitions.
Facebook defines a Custom Audience as “an ad targeting option that lets you find people who already know your business on Facebook.”

There are four types of custom audiences based on the touchpoint source with your business:

  • Customer File

  • Website Traffic

  • App Activity

  • Engagement on Facebook
Four Types of Facebook Custom Audiences

Four Types of Facebook Custom Audiences

In this article, I am talking only about Custom Audience from Customer File.

Facebook defines a “Custom Audience from a customer list as a type of audience you can create made up of your existing customers.”

In reality, customer list is broader because it refers not only to customers, but to first-party contacts, which can be leads and newsletter subscribers.

3 Steps to Launch Customer-Centric Campaigns

Step #1. Create Customer Segments

Every E-Commerce company has customer data. Data can tell a lot about your customer base.

Every customer is different, but when you segment your database into specific customer segments, you start seeing similarities between each segment. There are many ways to segment your customers, here are few segmentation models to start with:

 
Different Customer Segmentation Models (via Ometria)

Different Customer Segmentation Models (via Ometria)

 

Best of all, you will start getting a deeper understanding of each segment and launch more personalized Facebook Ads for that audience versus casting a general message for everyone.

Segmentation is a strong contributing factor for better campaign ROI. Aaron Orendorff of Shopify Plus agrees:

 
Segments are more profitable and have greater growth potential than the traditional outbound marketing that casts a message at everyone, hoping it resonates with some.
— Aaron Orendorff, Big Gun Blogger & Content Marketer, Shopify Plus
 

Direct Marketing Association attributes 77% of ROI to segmented, targeted, and triggered campaigns.

The email marketing industry has found huge value from segmentation for years. In fact, Lyris has reported that 24% of marketers who segmented their email lists experienced greater revenue, 24% increased sales leads, and 21% experienced greater customer retention.

 

The Lyris Annual Email Optimizer Report

 

Here is how customer segments and Facebook Ads fit together.

Create Customer Segments

Analyze your customer database around common data points (more examples later) and create segments.

For example, in the client case study mentioned earlier, customer segmentation revealed how often the client’s customers repurchase their products and when when they re-start the buying process for their product. This helped us to create customer segments based on the client’s customer behavior:

  1. The product they bought
  2. When they bought it
  3. When they will be buying it again

On top of that you better understand the behavior and the ROI of each segment.

Create Custom Audiences

After the segments are created, you have to upload them to Facebook. You can upload emails, phone numbers or Facebook UID from each segment.

Facebook will match them against its user base and return you an audience ready to use for targeting advertising containing only the people in that list. Match rates vary, but expect about a 50% rate. For example, Wordstream got a 48.99% match rate on their customer list.

 
Email Match Rates (via Wordstream)

Email Match Rates (via Wordstream)

 

To create your customer segments, start with the following 4 data points. You probably have them, so make sure to use them.

Data Point #1. Purchase Date

The most basic data you collect with each purchase is the purchase date. However, the value is in the context that will be used for Facebook Custom Audiences. With purchase date you can:

  • Understand how often your customers buy your products.

  • Understand the seasonality of your products.

  • Predict when your customers may need additional products.

Data Point #2. Product Type

The second data point you likely have in your company is the product type. It comes with your transaction data. Segmenting your customers by product type gives you a better understanding about:

  • The additional product groups your customers may need (upsell/cross-sell opportunity)

  • The timing for the need to repurchase your products

Data Point #3. Purchase Value

Purchase value data point is great because it helps you segment your customer base by value to your business.

For example, “one of the primary ways marketers can increase sales with Custom Audiences is to re-engage with existing, high-value customers,” suggests Dan Morris, Director of Product Marketing at Marin Software.

To segment it even further, break down your customers into 3 groups by purchase value. You will quickly see how your database is divided and understand the price consciousness of each segment:

  • Top 20%. Buying the best

  • Bottom 20%. Buying the cheapest

  • Mid 60%. Everyone else

Once your segments are ready, you will start developing ways to engage each segment.

Data Point #4. Newsletter Segments

Newsletter segments can become a hot topic if you have a discussion with an email marketing manager, who’s trying to protect his/her turf. They might argue,

 
What’s the point of using Facebook Ads to your newsletter subscribers, if I can send emails without paying the ad spend?
— Uneducated Email Marketing Manager
 

Fair enough. Let’s look at the stats.

The average email open rate in E-Commerce industry is 16.75%. That means on average 83.25% of your sent emails are not read.

That raises the question back to the email marketing manager:

What's the value of a non-read email? To me it's 0. Case closed.

Let’s get back to business.

If you have a strong email marketing team, you will likely have advanced segments available for your newsletter.

However, if segmentation is a new topic, I recommend to start with 3 segments prepared by the GetResponse team:

  1. Frequent respondents. “Find out exactly who opened your email, followed a CTA, clicked a link, and visited your website for further interaction. These are your ‘respondents’ as we call them”.

  2. Newbies. “We recommend that you segment recent subscribers. They are brand new to your list and need to get used to your communication cycle and style. On top of that, you won’t have enough information to apply any other targeting criteria.”

  3. Sleepyheads. “You’ll notice that certain subscribers never respond. There may be hundreds of reasons. Inactive email addresses should be placed in their own segment, so you can try to reactivate them or ask them to re-subscribe.”

Step #2. Perform Customer Research

At this point you have customer segments. The next step is customer research.

Remember, to give your customers what they want before they know what they want it, you have to know what they want and communicate it in their words.

 

You Want This (via GIPHY)

 

Start with the Voice of Customer (VOC), which Gerry Katz of Applied Marketing Science Inc. defines as “the study of customer needs” through qualitative and quantitative research. VOC covers four areas: customer needs, a hierarchy, priorities, and segmentation.

You will be able to understand:

  • Customer motivations when buying your products

  • Why customers bought your products at certain times

  • How often your customers buy your products

The next step is to state what customers want in their own words. John Hauser, the author of one of the 25 most influential articles in the field of Marketing Science by the Journal of Marketing Science agrees:

 
It is extremely important that these customer needs be stated in the customers’ own words.
— John Hauser, Kirin Professor of Marketing, MIT
 

Your customer research will fuel your offers and messaging for each customer segment when developing Facebook Ads campaigns.

So how do you find out what your customers want? I recommend 4 tools to start. Begin with what you have and only then perform additional research.

Method #1. Customer Review Sites

Customer review sites like Feefo and TrustPilot resonate well with E-Commerce companies because they help to improve customer trust and sales. Reevoo reports an average 18% uplift in sales from customer reviews.

 
Customer Reviews Increase Revenues (via Reevoo)

Customer Reviews Increase Revenues (via Reevoo)

 

There are few other areas where customer review sites add value:

  1. Customer demand. Your customers don’t trust you and want to verify you are legit. Graham Charlton from E-Consultancy agrees “61% of customers read online reviews before making a purchase decision, and they are now essential for e-commerce sites.”
  2. Better click-through-rates. You expect to improve click-through-rates on paid search campaigns, resulting in more traffic at a lower cost per click.
  3. Customer research (what we care about right now). Find out what the customers care about in their own words.

Here is how we analyze customer feedback on review sites:

  1. Group feedback into two groups: positive (5 and 4 stars) and negative (1 and 2 stars). Both will give you a perspective from both sides. Ignore the short feedback such as great, because it doesn’t give you any context.
  2. Dive deep into qualitative feedback and highlight the words customers mention (See the example below of how we did this for a client).
  3. Group customer feedback into recurring themes.
 
Customer Review Analysis

Customer Review Analysis

 

Method #2. Live Chat and Help Desk Logs

You are likely using some sort of customer service software (Live Chat or Help Desk) to solve customer problems. It can be a goldmine of information for customer research. This is direct feedback at critical points within the relationship with your customer that can be used for customer research.

Customer research is similar to using customer feedback on review sites.

  1. Begin with the two opposite sides of feedback: extremely positive and extremely negative.
  2. Dive deep into qualitative feedback and highlight the words customers mention.
  3. Group everything into recurring themes. Jacond Firuta, Content Manager at LiveChat states that “you should monitor what kind of cases appear on these channels. If many customers report a particular problem often, it’s a warning that it may be a potential pain point.”

Method #3. Customer Survey

Let me start with the quote from the Google Analytics man himself Avinash Kaushik:

 
For the fastest way to understanding customer problems, there is nothing like asking the customer herself/himself.
— Avinash Kaushik, Co-founder of Market Motive
 

Survey Monkey, Typeform or Google Forms probably come to mind. Any other tool your E-Commerce business has used is fine. As long as you have data from your customer surveys.

If you haven’t surveyed them, do it this week. Start with actionable customer feedback. Jennifer Havice, website copywriter, recommends 4 questions for pulling out voice of customer:

  • “When did you realize you needed a product/service like ours?”
  • “What problem does our product/service lessen or fix for you?”
  • “Did you consider any alternatives to buying/working from/with us?”
  • “What concerns or hesitations did you have before you decided to buy/work with us?”

Once you have the feedback,

  1. Dive deep into the words of your customers and highlight the important
  2. Then group everything into common themes.

See an example below of how we analyzed customer survey responses:

Customer Survey Analysis

Customer Survey Analysis

Method #4. On-Page Surveys

You may be using on-page surveys for conversion rate optimization. These tools offer non-intrusive surveys for your website’s visitors that will pop up at the bottom of the page, so you can collect customer feedback when they are taking action on your site.

Most notable tools are Qualaroo, Hotjar Incoming Feedback, and VWO On-Page Surveys. Here is how Hotjar Incoming Feedback looks:

 
 

These surveys are a goldmine for insights. Make sure to collect enough data so you can get meaningful insights. As Peep Laja of ConversionXL suggests:

 
Get in at least 100 responses before even reading any. 200 is better. 500 responses will only slightly add more value, but is way more work – diminishing returns.
— Peep Laja, Founder, ConversionXL
 

Once you collect the data, the analysis is no different than analyzing customer feedback above. That is:

  1. Dive deep into qualitative feedback.
  2. Highlight common frustrations and positive traits customers mention.
  3. Group them into larger themes.

Step #3. Build Customer-Centric Campaigns on Facebook

Before we launch, let’s stop for a moment and recap where we are:

  1. You segmented your customer base and have audiences ready in Facebook for each audience.
  2. You developed a better understanding of your customer segments by doing a customer research.

Now it’s time for the final step:

Build customer-centric campaigns.

That means developing offers, ads, and landing pages that speak directly to each segment. Here’s how everything looks:

 
 

A few tips for connecting the dots:

1. Context & Intent. The main data point that represents the segment, which will help to develop a hypothesis for intent.

a) For example, a customer segment that purchased your product in the past 12 months and is eligible for an upgraded version.

b) Another example, a segment of the top 20% of customers by the amount spent with your business. They have a higher affinity to purchase additional products and represent upsell and cross-sell opportunities.

2. Gap & Opportunity. Where you can add value based on the context and intent. Map your offer to each segment. Let’s take the Top 20% segment as an example. You have many options to engage this customer segment. Few ideas to start: 

a) Product usage campaigns

b) Customer appreciation campaigns

c) Exclusive deals for top customers

3. Messaging. Incorporate the positive and address the negative feedback in your ads and landing page.

If you are new to Facebook Ads, use these beginner guides for technical details on setting up new campaigns:

Here is how other companies incorporated Customer-Centric Campaigns into Facebook Ads.

Example #1: Purchase Date Segment

To encourage new game ticket sales, Orlando Magic used purchase date to create Custom Audiences for fans who had purchased tickets to previous games. This campaign resulted in 52 times ROI.

Orlando Magic Facebook Ad

Orlando Magic Facebook Ad

Here is what Traci Mistarz, Director of Digital Strategy, Orlando Magic said about the approach:

 
The greatest impact we’ve seen from our Facebook campaign is the positive result of this targeted approach. By leveraging insights both from our analytics team and Facebook, we’ve delivered highly targeted and personalized ad experiences. This has enabled us to deepen the relationship with past and present customers, as well as grow our market reach to find new customers.
— Traci Mistarz, Director of Digital Strategy, Orlando Magic
 

Example #2: Newsletter Segment

The Museum of Science in Boston ran Facebook campaigns to promote their museum memberships. They segmented their newsletter list into a few categories such as subscribers to the Museum’s monthly email update, previous gift membership buyers, current and lapsed members. Their campaign resulted in 3 times ROI.

The Museum of Science, Boston Facebook Ads

The Museum of Science, Boston Facebook Ads

Example #3: Product Type Segment

The San Jose Sharks used the product type data point successfully to drive 33 times ROI for their Facebook Ads campaign. They created a previous season ticket customer segment, which was used to upsell SharkPak ticket packages (11 and 21 games).

The San Jose Sharks Facebook Ad

The San Jose Sharks Facebook Ad

Conclusion

That’s it. Now you have a process to win with Facebook Ads and can prove to your leadership that this channel works for your E-Commerce business.

Customer-Centric Campaigns will help you maximize the ROI with the existing budget. This is because you will maximize your customer lifetime value by giving your customers what they want before they know what they want it using segmentation, customer research and personalized messaging.

The early success will give you momentum and a clear case to add more budget to the Facebook Ads channel.

Share your success stories with Customer-Centric Campaigns in the comments below.

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Tom Bukevicius

Tom Bukevicius (boo-ka-vicious) is a Principal at SCUBE Marketing, E-Commerce marketing agency delivering results through PPC & CRO. Tom’s motto is “Magic bullets are for losers. Execution is key.” Check out Tom’s new SCUBE Rating self-assessment to improve paid search campaign efficiency.