As a savvy marketer, you understand that maximising returns while controlling costs is critical to running successful Meta (Facebook and Instagram) ad campaigns. One of the most effective tools in your arsenal for achieving this balance is cost controls, which include mechanisms like bid caps and cost caps. These tools allow you to manage your ad spend more strategically, ensuring you stay within budget while optimising performance.
In this white paper, we’ll explore why cost controls are essential for your Meta ad campaigns, how they help optimise budget allocation, and when and how to use them effectively.
What Are Cost Controls?
Cost controls in Meta advertising refer to settings that enable you to limit the amount Meta can bid for each impression or regulate the overall cost per action (CPA) in your campaigns. The two primary types of cost controls are:
- Bid Caps: These set a maximum bid for your ads, ensuring Meta doesn’t bid more than the specified amount in auctions for impressions.
- Cost Caps: These allow you to set a target cost per action (CPA), like a purchase or lead, and Meta’s algorithm adjusts bids to keep the average cost within your desired range.
By using these tools, you gain better control over your ad spend, allowing for flexibility in how you scale and manage your campaigns.
Why Cost Controls Matter
Meta’s advertising platform operates on a real-time auction system, where the highest bidder typically secures the best ad placements. Without cost controls, you leave Meta in charge of how much to bid on each impression, potentially leading to overspending. Cost controls provide the following key benefits:
1. Optimising Return on Ad Spend (ROAS)
Using cost caps ensures that Meta’s algorithm adjusts your bids to keep acquisition costs within a specific range. This enables you to optimise for the best Return on Ad Spend (ROAS) by maintaining acquisition costs that don’t erode profitability, ultimately maximising your profits.
2. Improved Budget Allocation
Cost controls allow for more efficient allocation of your ad budget. For example, a bid cap ensures that Meta doesn’t overspend on impressions that don’t align with your profitability goals. This means your budget is spent on impressions that are more likely to convert at a price point that works for your business.
Example:
If you set a bid cap of £50, Meta’s algorithm will never bid more than that for an impression. This ensures that your ads are served only when they have a strong chance of driving a conversion at your desired cost. Without this control, you could pay £60 or more for the same impression, reducing your overall effectiveness.
3. Controlling Customer Acquisition Cost (CAC)
With cost caps, you can directly control your Customer Acquisition Cost (CAC) by setting a maximum amount you’re willing to spend to acquire a new customer. This prevents overspending on impressions that don’t align with your CAC targets.
Example:
If your target CAC is £70, Meta’s algorithm might go beyond that without a cost cap, leading to unsustainable acquisition costs. By setting a cost cap, you ensure that Meta’s bids stay within a range that keeps your campaigns profitable.
4. Increasing upside potential and minimising downside risk
- Advertising is an auction, and we’re selling to real people. Performance fluctuates depending on real time events, and many different factors. By utilising cost controls, we can massively increase the upside potential of our campaigns, by setting an extremely high campaign budget, on good days in the market Meta will spend the entire budget at our target CAC. On the flip side, on quieter days in the market, public holidays/busy times etc, Meta will simply pull back spend, and remain efficient. Using highest volume/lowest cost, Meta will spend the entire daily budget on bad days giving us hugely unprofitable days. 1 inefficient day can wildly change our P&L for the whole month.
When and How to Use Cost Controls
While cost controls can provide excellent results, they must be used strategically to unlock their full potential. Below are some best practices for implementing cost controls effectively:
1. Scaling Campaigns
When scaling a campaign, controlling acquisition costs becomes critical. Cost caps help you increase your budget without disproportionately inflating your costs, ensuring that scaling doesn’t come at the expense of profitability.
2. Long-Term Profitability
For brands focused on sustainable growth, keeping acquisition costs under control is essential. Cost caps allow you to maintain profitability over time by ensuring that conversion costs stay within a manageable range.
3. Combining Bid Caps and Cost Caps
One challenge marketers face is balancing auto-bid campaigns with cost-controlled campaigns. If most of your budget is allocated to auto-bid campaigns, your bid cap campaigns may not receive enough spend. To avoid this, allocate at least 50% of your budget to campaigns using cost controls, ensuring they receive sufficient delivery.
Example:
If your total ad budget is £10,000, ensure that at least £5,000 is dedicated to campaigns with bid or cost caps. This allows Meta’s system to optimise your spend for lower-cost impressions, giving you better results for your money.
Pitfalls to Avoid with Cost Controls
While cost controls are highly effective, they can become counterproductive if not used carefully. Here are some common pitfalls to avoid:
1. Setting Caps Too Low
If your bid caps or cost caps are set too low, your ads may not get enough visibility, leading to limited impressions and poor delivery. Ensure your caps are realistic, aligned with historical performance data and industry benchmarks.
2. Over-relying on Caps During High-Competition Periods
In periods of high competition, such as during major sales events or holidays, strict cost controls may prevent you from competing effectively. Consider adjusting your caps during these periods to ensure you can still win prime placements while maintaining overall profitability.
3. Giving in too early
The most common mistake people make when using cost controls is giving in too early, a few days of £0 spend and moving back to lowest cost campaigns. We have to play around with the cap for some time before we find the sweet spot of profitable spend.
Conclusion: The Strategic Power of Cost Controls
Cost controls are a vital tool for ensuring your Meta ad campaigns run efficiently while driving profitable results. Whether you’re scaling your campaigns, optimising ROAS, or controlling CAC, cost controls allow you to manage your budget effectively and maximise the impact of your ad spend.
If you’d like to explore how to implement cost controls for your Meta campaigns or need help optimising your ad strategy, we’re here to assist. Get in touch, and we’ll work with you to drive sustainable growth and maximise your marketing budget.