FB Bidding: Target Cost & Lowest Cost



Bidding is an important factor in any auction or ad, be it Google, Facebook or anywhere. Are you not getting the cost per event that you’d like? Are you having trouble maintaining a stable cost when raising your budget? Bid strategies could help. Okay, now let’s take a closer look at these bid strategies, how they work, and how you might use them.


So What Is Bidding Strategy?

Facebook distributes ads based on an auction format. The costs that you spend to reach a user will depend, at least partly, on the bid that you make to reach that user.

In most cases, Facebook automates bids (this is the default option). But advertisers can choose to manually bid in an effort to better control their costs. The primary goal of a manual bid is to get cost per desired action (typically a conversion) down.

Facebook offers 2 bidding strategies that can help advertisers achieve lower or more stable costs: “Lowest Cost” (the default) and “Target Cost.”


These are very derent things and they work in different ways. Lets take a look at them!

Target Cost Bid Strategy



This was formerly known as “manual bidding,” is only available for the following campaign objectives:

  • App Installs

  • Conversions

  • Lead Generation

  • Catalog Sales

Facebook recommends using this bid strategy for achieving more stable results as your spend increases. This also means that Facebook will always try to get you a cost per event around your target cost, even if they could have found you lower costs. This can result in significant waste if you don’t set this target cost judiciously. When using this bid strategy, you are required to set a target cost based on the chosen conversion window (7-day click or 1-day view by default).


What should you use for your target cost?

As a starting point, use the amount you’d like to average on a cost per event basis. Find the lowest possible costs by lowering this amount until you are no longer able to spend your entire budget.


PROS:

Okay so the primary benefit of this bid strategy is cost per event stability. Especially useful when scaling.


CONS:

You may see higher fluctuations in cost until the learning phase is complete (50 events in a week) using this approach. You might also find that your overall cost per event is higher when compared to using “lowest cost.” That is all i can say for the cons! Now lets talk about the Lowest Cost


Lowest Cost Bid Strategy




For this strategy, Facebook designed, formally known as “automatic bidding,” to get you the lowest possible cost per optimized event while spending the entirety of your budget.


How About Lowest Cost Bid Cap?


Also in this strategy, You can also set a bid cap or limit if you want to control how much Facebook will spend for an event while using the lowest cost bid strategy.


Please note that if you are going to set a bid cap, you might be limiting your ads or its potential reach and Facebook may struggle to spend your budget if you get cute and try to set it too low. However, setting a bid cap can help prevent an ad set from overspending for an event.


For example, if a particular conversion is worth no more than PHP100 for you, it prevents a cost per conversion of PHP105 or more. In that case, not spending your full budget may be a good thing. When setting a bid cap, keep in mind that this is the most you want Facebook to bid for a single event. Since a bid is the most you’ll spend for that single event, you’ll usually spend less than that. So a bid cap can stand to exceed the value of an event to your business.

PROS:

The primary benefit of the “Lowest Cost” bid strategy is efficiency. Facebook tries to get you the lowest cost per event in the short-term.


CONS:

The major cons or disadvantage of this bid strategy is that achieving those low costs may be short-lived. Results may be unstable as you spend more or competition increases.


Before Setting A Bid Cap:


Facebook recommends using an average cost per result from prior campaigns as a starting point. Also consider the most you can pay for an event (not target, but maximum) while turning a profit.


Facebook recommends a daily budget that is at least five times higher than your bid cap. This is because Facebook needs at least 50 events (the learning phase) within a week to properly optimize. After completing the learning phase, you may decide to raise the bid cap if you’re having a difficult time getting the distribution that you want.

Whether you set a bid cap depends mostly on the results you’re seeing. Facebook doesn’t know the value of an event to your business. If you need to prevent Facebook from overspending for an event, this gives you control. At the same time, you may want to set a higher bid cap to increase distribution on a high-value event.


Happy FB Ads!


Which one worked for you most? Share in the comments


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