Should I increase my Ad budget?

As a business owner, you’ve probably asked yourself at some point, “Should I increase my ad budget?” It’s a common question, especially when you’re looking to grow your brand, boost sales, or reach a wider audience.

In this blog post, we’ll explore when it makes sense to increase your ad budget, what you need to have in place before making that decision, and the criteria you should use to determine the right budget for your business. Even though this principle generally applies to running paid Ads on any platform, we’ll be using Meta’s ad platform (formerly Facebook) as a case study to illustrate these points.

FIRST THINGS FIRST – SHOULD YOU EVEN HAVE AN AD BUDGET?

I once heard a lot of opinions and counter opinions about having an ad budget from a Facebook group I belonged to a while ago. A lot of business owners argued that as long as they have a referral system or even organic system of getting recurrent business, they are good, they don’t need to keep giving money away. Well, that’s a counter productive logic/argument, whatever you’ll call it. You have enough business at the moment, doesn’t mean you always will, so Advertising just keeps the wheel rolling (among other things).

I couldn’t tell you how shocked I was seeing a google ad on Instagram a couple years ago… almighty google! They know how to remain top of mind and you should too. That’s one of the many things ads do for you and you should have a budget for it.

So, should you increase your Ad budget?

Generally yes, but! you must consider a lot of things before increasing your ad budget, we don’t want to go throwing money into the air, do we?

1. Performance Metrics – If the general performance of the Ad is great, then that’s a good sign. Meaning you are getting a good Return On Ad Spend (ROAS), your Cost-Per-Click (CPC) is low, and your Click Through Rate (CTR) is high. There are several things that determines this, so we are assuming you already have those in place before running your ads. A good performance Metrics helps you know what is already working and increasing your ad with it helps you scale it.
2. Market Conditions – What niche are you playing in? Are you in a low competitive niche or a high competitive niche? Niches like health and relationship could do with a low budget because the average cost to get a customer is low. If you play in more saturated niches like fashion and food, you will need to up bid, or even outbid your competitors.
3. Business Growth – Most people think they don’t need to increase their ad budget if the business is growing, or even run ads at all when the business is excelling. Bubble buster – that’s when you need to increase your ad budget the most, and that is to help you capture even more market share. That sounds about right, doesn’t it?
4. Budget Availability – This is business 101, so only increase your ad budget if you have the financial capacity to do so without straining other areas of your business. That should be common sense.

Criterion, Criteria?

Well, these are obviously different from the aforementioned, but will add a layer of surety:

1. Consistency – Have you seen consistent results from your current ad campaigns over several weeks or months? Consistency is key to knowing if your ads are truly effective.
2. Scalability – Heard of testing the waters with one leg? Test with a small increase first. If the increased budget continues to deliver strong results, you can gradually scale up.
3. Audience Saturation – Check if you’ve exhausted your current audience. If so, consider increasing your budget to reach new segments.
4. Return on Investment (ROI) – This one is primary. Be super sure your ROI is positive. If you’re spending more than you’re making, increasing the budget might not be the best idea. You might look into other parts of the machine to see where the lag is coming from before increasing your ad budget.

A Case Study then,

Let’s explore Meta’s ad platform as an example. Meta provides detailed targeting options, allowing you to reach specific demographics. The platform also offers robust analytics tools to track performance in real time. So –

1. Start Small – Begin with a modest budget to test different ad creatives and audiences. Meta’s Ads Manager allows you to see what’s working and what’s not.
2. Monitor and Adjust – Use Meta’s reporting tools to monitor the performance of your ads. If you see that one ad set is performing exceptionally well, consider reallocating more budget to that ad. Easy peasy!
3. Optimize for Conversions – Meta allows you to optimize your ads for specific actions like website visits or purchases. If you see consistent conversions, it might be a good time to increase your budget.
4. Retargeting – One of Meta’s strengths is its retargeting capabilities. If your initial campaigns perform well, increase your budget for retargeting ads to bring back potential customers who didn’t convert the first time.

A concluding thought,

Unarguably, increasing your ad budget can be a powerful way to grow your business, but it should be done strategically. Make sure you have the right foundations in place. Your product or service value proposition must be good and you need to be dressed for the occasion before running your first ad. Take time and assess the performance of your current ads and consider external factors before making any decisions.

Now, go kill it, even more!