The Perfect Funnel is a Fraud: The Real Ecomm Facebook Advertising Funnel Allocation Journey
Academics and reality frequently differ, and as marketers raised at universities, we all have a common image of the ideal funnel. However, if we are talking about Facebook advertising, is this composition the most optimized funnel for ecomm marketers, or is this is just a fraction of the image?
Let’s piece it together by digging into each of its most important components: leads, prospects, and clients. We can also call these components demand generation, demand capture and customer retention. In Facebook Ad terms, these can be translated to lookalike targeting, retargeting website visitors, and retargeting website clients.
The best performing allocation model for your ecomm business will depend on multiple parameters. Some of the metrics that impact the three levels of the funnel include CAC, organic monthly visitors, average order value, repurchase rate, and LTV.. For example, if your company’s repurchase rate is very low because of the essence of your product, it does not make sense for you to invest ad dollars in reaching out to clients as they are not going to convert. But for the purpose of this analysis, we’ll follow our academic spirit and imagine an ideal company as a study model and focus on the 3 usual stages of an ecomm company’s journey through the Facebook ads.
An assumption that we already validated in this white paper is that the lower on the funnel a person is, the lower the cost is to convert them on a purchase. But this is a process that needs a high budget, time and patience.
The Funnel Journey
Stage 1: All About REACH
The first stage is all about brand awareness and driving highly-qualified leads to your site. Most of your ad dollars (80% lead gen, 15% retargeting visitors, and 5% retargeting clients) should be invested in campaigns targeting large lookalike audiences based on your clients/prospects. Usually, this stage of the journey is likely to be your biggest bet in terms of ROI. It’s very expensive to convert a lead into a client with one campaign, so you can’t expect a high return on your advertising investment. Focus instead on metrics such as cost per person reached and their conversion rate from lead to visitor. Try multiple lookalike audiences, placements, creatives and copy to iterate and lower the cost of acquiring a new prospect.
Stage 2: All About ROI
The second stage is the perfect time to boost your ROI metrics. You managed to lower your cost per qualified lead, and now it’s time to remarket to them! Remember that the cost of converting a prospect is lower than converting a lead, so your advertising spend will bring a higher level of return. This it the perfect time to re-allocate a large amount of your ad dollars from lead-gen campaigns to retargeting solutions like Dynamic Product Ads. The larger your inventory is, the better they’ll perform. The funnel composition model will be around 50% lead-gen, 40% retargeting product visitors, and 10% retargeting clients.
Stage 3: All About LTV
This is now the perfect funnel! It’s a funnel that allocates most of your ad dollars to retargeting clients. Your cost per conversion will be the lowest, and the return highest. Focusing on generating up-selling and cross-selling campaigns with DPA or discount codes is key in this stage. You earned a big client audience and retargeting them is the best option in terms of the cost of conversion. It’s hard to get there, but if you manage to do it, you will validate that the perfect funnel you learned about at your university has been flipped around!
Unfortunately, this is not the end of your journey but just the end of one cycle. Once you’ve reached the third stage of the funnel and your customer retargeting campaigns have been running for a while, their performance may start to decrease. This could be a sign that it’s time to feed your funnel with fresh leads, and you’ll need to circle back to the first stage again.
This is how advertising spend cycles would look:
The ROI evolution, with 3 stages included in each cycle, would look like this:
This is of course a very sophisticated approach and requires you to track many variables daily before you decide how to reallocate your ad dollars. It’s also the reason why automation is so important when it comes to the funnel allocation journey for your ecommerce business. But have no fear, Funnely can always help! ;D