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Determining how to set appropriate budgets for social media advertising is not as simple as it sounds. Every social campaign strategy varies based on individual business goals, desired target audience and creative messaging plan.
All of these factors play a role in setting budgets, as do related elements like seasonality, competitive share of voice, other marketing promotional schedules, whether or not this is your first time investing in social ads, and inside business data such as sales figures or profitability. In short, depending on the circumstances, social ad budgets can vary from hundreds of dollars a day to hundreds of thousands (and then some.)
When your company begins budgeting for social media advertising, it's important to set the business goal and KPIs you are trying to accomplish first. For example, if you want to sell 100 widgets a month, the average price of a widget is $100, and you need to maintain a positive ROAS (return on ad spend): a starting goal of $10,000 a month might make sense.
However, let’s say your overall digital marketing budget for the month is only $10,000 in total and that also needs to cover creative production or campaign management assistance (in other words, it can’t all be considered ad spend). In that case, you'll need to adjust your paid media budget down to accommodate those fees.
While doing so is certainly possible, it will mean the performance of the media strategy is even more important than before, in order to meet your goal of selling widgets for under their $100 price point. A good strategy starts by identifying the right platform for the job.
While many social networks offer advertising opportunities, it’s often best to invest your time, resources, and budget into a select few. Select the platform that is most likely to be frequented by your target audience and the one that you have the capacity to design ads for. (For example: if video is not your strong suit, you might want to avoid TikTok for now.)
Speaking of target audience, it’s important to consider them before setting your paid social budget. Finding a very small, niche group of potential customers might cost more than if you’re targeting a very broad base of national users.
Those people could be in high demand from other advertisers (or competitors), who will drive up the price required to win an impression from them in the ad auction—however, in some cases, it may be worth it. If the only people likely to buy your widgets are within that target audience, it’s probably worth paying more to get in front of them.
At the same time, you’ll want to avoid spending money on cheaper impressions if they are wasted (meaning those individuals are not converting as you’d hoped). Take elements like reach and frequency into account, to project out how much budget will be needed in order to create impact within your target audience or market. Many of the social networks offer reach estimates for certain audiences in their planning and buying tools.
Finally, one of the most important factors in a successful social media campaign is the creative. Designing mobile-first ad formats that encourage engagement and action on the first go-around can be tough! By A/B testing different versions of ads within your campaign, you can gain insight into what motivates your audience to act.
While it’s important to brainstorm and test several options for each ad, if your overall paid social budget is limited, you’ll want to be thoughtful about keeping the volume of creative you run at any one time to a controlled amount.
This is important to avoid overwhelming the real-time algorithms that these platforms use to determine which ads are likely to generate the best response. While A/B tests are great, too many ads with too little budget behind them will produce little learnings for your creative team and could potentially damage the performance of your campaign.
Ultimately, the best formula you can use to set a paid social advertising budget is the one that takes into account general market conditions, business goals, target audiences, creative strategy, and additional fees you may need to cover as part of your advertising investment.
Interested in using native advertising as part of your social advertising strategy? Learn all about Native Advertising with Centro.