Managing Ad Spend: Cold Traffic vs. Warm Retargeting

Managing Ad Spend: Cold Traffic vs. Warm Retargeting

Watch the video below to learn all about managing ad spend on Facebook.

Video Transcript:

Managing Ad Spend: Cold Traffic Vs. Warm Retargeting

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Jordan: What is up everyone here with my business partner and co-founder in Automate & Convert Academy and the owner of Automate & Convert the agency, David Nadler. In our Facebook agency blueprint program, we had a question from one of our students. Really great question around she has an existing account, she has $12,000 in ad spend that she can use, and she’s wondering, okay, what’s the best way to deploy this ad spend? Is it to put it all towards warm traffic? Is it to put it all towards cold traffic? This is just an incredibly common question that we get with clients. It questions that we ask ourselves. And it’s just the question that I see a lot. David does as well. So we just decided to shoot this training to really kind of cover this and answer it one and for all and wanted to shoot this training to just bring as much value to all of you. So David, you want to take it away?

David Nadler: Yeah, for sure. So like you said, managing ad spend and determining how much budget do we put toward cold traffic or warm traffic. Depending on how you talk about this, it could even be cold traffic versus warm versus hot versus retargeting. There are lots of different words that people use, and sometimes that can get a little bit overwhelming and a little bit confusing. It’s like, okay, I’m going to end up with two, three, four campaigns. How much of my budget do I put to each one of those campaigns? That can be kind of a stymieing question for people. I know it was for me when I first started, especially as retargeting became more of a thing. It’s like how much of my budget should I put into retargeting and how much should I put into cold traffic?

To your point, I have developed what I think is a very solid and very universal answer to this question, because I think a lot of people maybe assume that this question is dependent on their business, and it’s really not. So let me give you the easy answer. The easy answer to how much you should spend on cold versus warm is that you should spend as much as you profitably can on hot. Then you move your budget to warm, and then you move your budget to cold.

For all of you out there that are a little bit weirding out when I’m saying that, they’re like, “Yeah, but I love cold traffic, and we want to scale.” Yes, absolutely. As you are profitable with your hot traffic and your warm traffic, you take those profits and you reinvest those things into cold. That’s how you win the cold traffic game. You don’t win it by starting with cold traffic.

Jordan, what do you think about that? Am I right? Am I wrong? Is this how you manage ad campaigns? I mean, I know this is an easy answer to a complex question. What do you think?

Jordan: Yeah, I completely agree. I think that it’s a common mistake that most people make. It sounds really sexy to say, “Okay, cool. We’re just going to launch this ad to cold traffic, and we’re going to scale to the moon in cold traffic and scale,” right? Just sexy buzzwords.

But the reality is, if you’re not maxing out your, then your warm … We’re going to map all this out to make sense and make it concrete kind of what we’re saying. But if you’re not maxing out your budgets to your hot traffic and then your warm traffic, you’re literally lighting money on fire. It’s so easy as marketers and entrepreneurs to just forget about that. It’s kind of almost like if you were walking along a road, and there’s a sign that says $100,000 this way, and all along the road at every step is a hundred dollar bill, and you’re just forgetting about the $100 bills, you’re just laser-focused on that $100,000 down the road. So incredibly important. Completely agree.

David Nadler: Awesome. Okay, so let’s get into the detailed answer. So the easy answer is you just basically work your way through hot and then warm and then cold. More specifically, you’re going to kind of do this in four phases. We’re going to do funnel retargeting, then we’re going to do hot traffic targets, then we’re going to do warm traffic targets, and then we’re going to do cold traffic targets. Basically, you’re going to flow your budget down through these things until your budget runs out.

You may be in a situation where if you’re just getting started, to do funnel retargeting well, that’s all the budget you have, right? Until that works and you create a return on ad spend and, all of a sudden, you have no more money. Once that starts working, you have revenues coming in, then you bring in some more hot traffic. Once that is up and running and working, then you’d basically just flow your budget down. But basically, you should not be doing cold traffic targeting until you’ve maxed out your funnel, your hot, and your warm.

Okay, so what does this look like? I’m going to give an example of funnel retargeting for a webinar. So this would be a pretty typical webinar funnel. Left hand side, and I apologize for my handwriting, it’s just not that great. I should’ve been a doctor. On the far left hand side, you’ve got a landing page, right, your landing page for your webinar. Then you’ve got a confirmation page, that page people see after they enter their email address and register for the webinar.

Then in a typical webinar funnel, you’re going to have a live room, which is where people actually watch the webinar, whether it’s a real live or a simulated live, doesn’t really matter. There’s going to be some form of a live room. Then you’re going to have a sales page, which is where the details of your offer. So on your webinar you’re saying, “Hey, go to this page to buy our product.”

David Nadler: Then the last step of this funnel is going to be the thank you page after someone’s given you money, right? So this is the money thank you page. Okay. So if these are our steps, then we start to overlay on top of this, we’ve got some audiences. So anytime you map out a funnel and you map out your steps, between each step, you’re going to in essence be … An audience is basically created, a discreet audience is being created. Now that does not mean that you always retarget every one of them individually, but it is a good practice to go through to take a look at this and go, okay, here are my funnel steps. Between every step, I have an audience that’s been built based on people who have not taken the next action.

So let’s say we start driving cold traffic into the landing page. Well, some of those people are going to do what we want. They’re going to register, but some of those people are going to hit the landing page and not register, right? So that’s that second blue circle there, which is basically hit, no registration. That’s the list that people that have hit the page but didn’t register.

Next bucket there, people that do confirm. So they do register, but they don’t make it to the live room. These are people who reg, no attend. The next one, people that attend but don’t hit the sales page. That’s another bucket. And then we’ve got people who hit the sales page but don’t buy. 

Jordan: Makes perfect sense. And David, real quick, just because I know we’re going to get this question is, obviously this is a webinar funnel, but does this same process apply for any funnel in any industry?

David Nadler: Yes, absolutely. This is going to apply to really any funnel that you build, whether it’s a webinar funnel or a free plus shipping funnel. Whatever funnel you have set up, there’s always going to be people as they move through the funnel, there’s going to be drop-off, right? There’s going to be people that take the first action you want, but don’t take the second. That’s going to create these subsets. This is what we want to do is identify those so that we can spend money to try to get those people to take the next step. This funnel retargeting is typically going to be where your highest return on ad spend ads can be placed.

Okay, so now that we’ve got these discreet groups, let’s take a look at like real money, right? So how would this actually look if we’re spending real money? Again, the question came in, somebody said, “Hey, I’ve got a budget of $12,000. Where do I put this?” So that’s kind of where we’re starting.

David Nadler: If you see down below in red, I kind of made some assumptions based on maybe some best practices, what I see in funnels. Let’s say we’re spending $12,000, and we’re getting $2 clicks. Now some of you might freak out and say, “We should be able to get clicks for way less than that.” Yes, but if you’re using conversion optimization, there’s going to be a good chance that Facebook knows what they’re doing, and you’re going to see higher than 50 cent clicks. So let’s say we get $2 clicks, it means we’ve got 6,000 clicks, right?

And then just as we work through the funnel, just doing some quick math, let’s say we get 20% of those people to confirm, to actually opt in for our webinar. That means we’ve got 1,200 people in that group. 35% of those people show up. That means we’ve got 420 people in the live room. 50% of those people click through to the sales page. That means we’ve got 210 people that hit our sales page. 5% of those people actually buy. That means we’ve got 10 buyers.

Okay, so what does that look like then in terms of our retargeting lists? Well, again, keeping on with the simple math, we add in the green numbers, and really these are each of the prior two numbers just subtracted, right? So we start with 6,000 hits and 1,200 of those people actually did the action. They actually registered. That means we have 4,800 people that didn’t take the next step. So we’ve got 4,800 people that hit the page didn’t register. We’ve got 780 people that registered but didn’t attend. We’ve got 210 people that attended but didn’t hit the sales page. And we’ve got 200 people that hit the sales page but didn’t buy. These are your groupings. These are your number one groupings that you want to make sure that you retarget. So this is funnel retargeting, going to that list of 200, then the list of 210, then the list of 780, and then the list of 480. Make sure that you have an ad that moves them through the funnel.

David Nadler: Jordan, what numbers would you put to these? I mean, just looking at these audience sizes, because I know that’s going to be a question that comes out of this, is like, “Okay, so I’ve got these four audiences. How much am I spending typically just based on audience size?”

Jordan: Yeah, great question. Looking at these audience sizes, if you have an audience of roughly 200 people, not much, right? So that’s probably 500 bucks a day. Or not 500 bucks a day, $5 a day.

David Nadler: I was like, whoa!

Jordan: We are going to make sure they see our ads. So $5 a day to those audiences of 200 people apiece for an audience of 780. I don’t know, $5 to $10 a day, probably still $5 a day. And then for that audience of 4,800, maybe 20 bucks a day, right around there. So yeah, it’s not going to take much to retarget these audiences. But the reality is that combined, call it $50 a day in ad spend, retargeting throughout this funnel may very well generate more revenue. Well, probably not $50, but it’s going to generate a significant amount of revenue. Assuming as you start pumping in more traffic and those numbers grow, your retargeting budget is also going to grow with it. There’s a good chance that within a couple weeks, that retargeting ads is going to generate more revenue than all of your cold traffic budget combined.

David Nadler: Exactly, and that’s why getting this in place from the beginning is so important. Even if these groups of people are small, as you go out and you start to pour fuel on the fire with cold ads, all of those cold ad people are going to drive through this, right? So once we start spending money on cold ads, all of a sudden, these populations go from 4,800 and 780 and 210, they start to double and double again. We want to make sure that we’ve got the baseline to make sure that we’re moving them through the conversion funnel.

Jordan: A couple of other things to note on this if you mind, David. I know we’re going to get a question around, “Okay, well how do we know what these benchmarks look like? How did you come up with these percentages?” So number one is just rely on past data, right? So if you’re working with a funnel, you’ve had other traffic move through it. Look at the past data, use those for benchmarks.

Jordan: If you’re looking for a generic rule of thumb, just call it 30% at every stage of the funnel, and that’ll be a good conservative number. Typically, it’s more than that. Typically, you’re looking at 20% at the opt-in stage, and then you’re looking at roughly, call it 30% to 50% every stage after the opt-in that happens. So that’s a generic rule of thumb; but honestly, at the end of the day, you as a marketer don’t really need to worry about this math as much. All you need to do, and really all this is designed to do, is to give you a sense of, okay, how many people are coming into this funnel at the top, and how many people are at each stage? You can just kind of gut check what that budget looks like based on how big that traffic is.

Jordan: So all this is telling me really is that, okay, I have relatively tiny audiences at the last two stages of the funnel, not going to spend much there. I’m going to start ramping up as it goes. Then as you’re managing these campaigns, you can look at the frequency in your business manager. If you have a frequency of 48 in a week, you know to scale that down. Really, we’re shooting for a frequency of no more than seven to 10 in a week. So you can kind of operate that way as well if you don’t actually know these numbers.

David Nadler: Absolutely. So we’ve got a budget of $12,000, and we’re saying, “Okay, based on our retargeting, we’ve given you 35 bucks a day or max 50 bucks a day. So we’ve spent 1,500 bucks of our $12,000.” And the question is, okay, where do we spend the next? So we’ve given you the tool to, this is how you make sure that you’re putting your money into the most profitable thing first. We’ve done that.

David Nadler: So now where do we go? Well, now we go with hot traffic and then warm traffic and then cold traffic. So again, here on the model up in the top left where you’ve got cold, I probably shouldn’t have even put cold there, because it should actually be hot then warm then cold. But the idea is that this is non-funnel traffic that we’re driving into it, right? So now we’re going to go hot, warm, and cold. Well, how do we decide what budget we put where? We still have that question. The key to this is the audience targeting grid. Again, in the training that we do, we talk really in detail about this, but you’ve got three basic levels of audiences.

David Nadler: You’ve got level three, which are primarily custom audiences. These are going to be what are typically your hottest audiences. Again, hot, warm, and cold. There’s no like Moses didn’t come down and put that in stone on tablets. Like this is exactly what hot traffic is and what warm traffic and what cold traffic is. This is something that you got to kind of know your funnel. But here are some benchmarks that you can say, you should be spending as much money as possible on your level three audiences. Once you’ve done that, then you move into your level two audiences. Once you’ve done that, then you move back into your level one audiences.

David Nadler:Couple of notes here on your level three audiences just to run through these. I think most people are really familiar with level one. So probably spend a little bit less time on that. But a couple of notes here on level three. First thing you want to do is you want to target your best customers, export your best customers from your database and target those people with a new offer. Cart abandons, if you’ve got people coming through any sort of a cart system that aren’t targeted for any other offer, pull those people in.

David Nadler: Then you’re going to see a couple of things, your one to three day visitors and your four to 30 day visitors in there. You can merge those two together, but the idea is that the more recently someone has been on your site, they’re far more likely to convert. So make sure that you start with like, okay, let’s start with one to three day visitors, and if those people convert, then okay, let’s move it out to 14 days and move it out to 28 days. Keep moving up until you’re starting to run out of profitability. So you’re trying to maximize scale and profitability, but start small with a small retargeting window, and work it up as you have profit.

David Nadler: All customers, your recent opt-in lists, your entire opt-in list. All of these things, I think, are pretty straightforward. But basically, you want to start on level three audiences before you start spending money on level two.

David Nadler: Jordan, thoughts or additions on that? And then maybe you can kind of take it into level two.

Jordan: Yeah, no, completely agree on all of that. Starting out with that, just the hottest customers first, the hottest prospects first. Then moving into level two audiences, which is really your lookalike audiences, right? So always whenever you start with a business with an ad account, whatever, you upload your level three audiences, and then you just create lookalikes based on all of them. That’s really all level two audiences are. So it’s starting with, again, first your customer lookalikes, then your email list lookalikes, your opt-in lookalikes, your unsubscribed lookalikes, which is actually, it sounds really weird, but you can actually see a lot of success targeting people who look like people who have unsubscribed from your email list. Then just other owned audiences. So it could be specific cohorts of an email list. Again, it’s going to depend on how big of an email list you have. Could be people who look like people who have engaged with your ads in the past, who’ve watched your videos in the past, etc. Kind of just working your way down the list.

David Nadler: For sure. Again, as we’re trying to get to this question of how much budget do you spend in one place versus another, as you go through and you build out these level three audiences, with the example of a $12,000 budget, well, I don’t know what these level three audiences make up. If you have an email subscriber audience of a million people, you may very well be able to spend the rest of that $12,000 just retargeting a level three audience, right? And if you can, you should, right? So if you can keep spending money on a warm list and be profitable at that, there really is no reason to move into a level two. The only reason you move into a level two is when you’re spending appropriately with your hot traffic and you basically run out of money. Like your frequency gets too high, your return on ad spend starts to come down. It’s like, okay, now we need to go find fresh traffic. That’s when you’d move into level two.

David Nadler: Not going to cover level one audiences at this point. That would be kind of moving more into some of the truly cold, and worst cold than level two. So get what you can with your hot audiences, then go to your lookalikes. That’s primarily where we’re going to scale.

David Nadler: So again, just to bring it back around, the answer to this question of where should I put my budget, whether it’s $1,200 or $12,000 or $120,000 a month, it doesn’t matter. The answer to this question is you spend as much as you profitably can on hot traffic. Remember, hot traffic starts with funnel retargeting and then your best lists, and then you move into your warm lists, and then you move into your cold.

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How to Create Facebook Ads That Convert

How to Create Facebook Ads That Convert

Regardless of what business you are in, Facebook offers the best solution for creating low cost and high converting advertisements as long as you are doing it correctly. According to Pew Research Center, 68% of the U.S. adult population are using Facebook and 74% of those users check the platform every day. That means there is a ton of opportunity for getting your ads in front of people.  

However, creating Facebook ads can come with its challenges. 

Perhaps you don’t consider yourself to be much of a copywriter and the thought of writing an ad is nauseating. Or maybe you are a fairly decent copywriter and you already have some Facebook ads running, but they are not converting no matter how great your copy is.

Don’t fret, there is a solution to your Facebook ad woes. Creating Facebook ads that convert isn’t as difficult as you might think. You just need to have a grasp on the following: 

Understanding Your Target Audience

Facebook advertising all starts with understanding exactly who your target audience is. If you haven’t identified who your target market is, you will need to start by creating your customer profile

Creating ads for your target audience holds a lot of power because these users will resonate with your offer and lower your ad costs. If you are targeting the right people on Facebook, they will be significantly more likely to engage, click, or even share your message. 

To give you some better data on who your audience is currently, you can check out your Facebook Audience Insights. This gives you some great information on exactly what kind of people are already interested in your page. 

The Purpose of Your Ad

If you didn’t already know, your Facebook ad serves one purpose, and one purpose only. That purpose is simply to get your prospect to click through to the landing page and convert on that page. Your ad does not need to sell your product, talk about yourself, your business, or your brand. The number one purpose is to get your prospects to click through to the landing page with the intention of converting. 

In this case, a conversion could mean a number of things. It could mean making a sale, but it doesn’t have to. It could just getting them to read an article and pixeling them for retargeting purposes. 

Conversion = DOING the action you are optimizing your ad for. It doesn’t always mean making sales. 

What does this mean?

As we are creating our ads, it is very easy to get caught up in all of the features and benefits of our products and services. However, none of those things matter. The only thing that matters is getting our prospect to click on the ad and convert on the landing page. It almost seems too simple, right?

In order to achieve this, you will want to refer back to your ideal customer (or customer profile). The idea is to twist the knife of their biggest pain, and emphasize how great their life will be after they purchase your product. This helps you hone in on why your product or service will benefit them and help solve their problems. You can think of this in terms of pain versus pleasure or anxiety versus ease. 

Elements of a Facebook Ad That Converts: 

  • Compelling copy that gets the click and pre-frames the prospect for the landing page (tells them what to expect once they click) 
  • Continuity between the ad and the landing page (same headline / similar messaging) 
  • Ad creative (image or video) that catches the prospect’s attention and looks native to Facebook (ie: stay AWAY from stock images of people… usually) 

The ad creative typically has the greatest impact on your click through rate. Changing and testing the CREATIVE is generally the biggest lever you can pull when creating ads. 

The ad headlines and post text are the second most important elements in an ad. These elements should serve to “call out” the prospect and give the prospect something he/she wants, as well as telling the prospect what to expect on the landing page. 

Split Testing

The best way to create Facebook ads that convert is, without a doubt, by split testing your ads. Ad performance is extremely data-driven and takes out all of the guessing of which ad will perform better than the rest. With low spend, you can find out which ad is the winning one with a split testing service like Adespresso

Split testing is a marketing strategy where you take two ads of a marketing campaign and test them against each other to analyze which one will deliver the best results.

When you split test your Facebook ads, it is important that they each generate a good amount of data before you make any decisions on which ones to delete. The data can be in the form of likes, comments, clicks, conversions, or other. It is best that you do not immediately start testing ads with multiple elements. Instead, start with a headline variant or just a different image. You can optimize your ads little by little, slowly eliminating those that have very low performance. 

By using data and split testing, you can continually optimize your ads for better performance. It doesn’t even matter if you’re the best copywriter in the world. If you aren’t testing your ads, you won’t be able to improve them. Data always wins the race in the world of Facebook advertising.