Latest Pricing Trends and Strategic Recommendations on Facebook During the COVID-19 – ‘What’s Going On Out There (Week 6)?!’

Apr 20, 2020 | Industry News

The new reality of marketing under COVID-19 has entered week six. It’s time for our sixth edition of “Latest Pricing Trends and Strategic Recommendations on Facebook During the COVID-19”

Executive Summary (Full Details Below)

We are seeing a slow and partial return to “Business pre Covid” over the past few weeks.  CPM’s are gently creeping up as ad budgets return, and cost of acquisition overall is slowly rising.  This week, we recommend that our clients test their geographic cost and spend breakdown, large lookalike audiences, and creatives. We also urge clients to focus less on prospecting for new customers and look towards retargeting and retention.

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Summary of Changes

  • CPM rising ~5% per week, continuing our weekly trend.
  • CTR dropping 0.1% per week, this is showing that people are interested in interacting with ads.
  • CPC rising 10% per week, more customers are showing interest in purchasing.
  • Conversion rates are flat, continuing the trend for the last weeks.
  • Cost per Purchase up 15%, showing that customers are starting to show interest in purchasing. 

What Does it Mean?

  • CPM has bottomed and is now rising steadily. People are slightly decreasing the amount of time on Facebook and ad budgets for brands are stabilizing to increasing.
  • The “Prospecting Honeymoon” is over. In late March, prospecting got inexplicably cheap, but is now returning to a more normal level making it less of a bargain.

What Will Happen Next? 

  • Performance continues to be less jumpy each week, as things stabilize
  • CPMs will continue to rise since people are spending less time on social media.
  • Overall, we expect costs to continue to increase gently over time.
  • We expect the recent trend in prospecting to continue as many brands plan to retarget and retain this new audience.

Strategies to Adapt: 

  • Look at your geographic cost & spend breakdown, and start a campaign focusing on low cost, low spend cities.
  • Test creative that focuses on delivery speed & delivery visuals.
    • Include images with boxes on doorsteps to gauge interest in potential consumers. Try using a copy that says, “Shipping to anywhere in the US in 48 hours.” Phrases like this are testing very well.
  • In previous weeks, we advised clients to expand prospecting and add new audiences as prospecting was having a honeymoon. 
    • The relative performance of prospecting, retargeting, and retention is back to normal. Now is the time to consider bringing your budgets back to equilibrium.
  • Consider testing large lookalike (3% through 10%) audiences since they are strong performers half of the time, and customers may not be the same this month as last month.

Detail: What is ad performance like right now? 

Cost Per 1k Impressions (CPM):

Facebook CPMs have hit bottom and are increasing 5% each week.

  • What are we seeing?
    • CPMs had been dropping 20% each week in early March
    • Recently, CPMs have bottomed. They have been rising about 5% per week starting the week of 3/22. 

Click-Through Rate (CTR):

After an initial spike in “browsy” high CTR in late march, CTR have been dropping and are now back at pre-covid levels.

  • What are we seeing?
    • CTR has been dropping by 0.1% per week for the past 4 weeks.

Cost Per Click (CPC):

CPMs have been rising 5% weekly, and CTRs are dropping, therefore CPCs are rising at 10% per week.

  • What are we seeing?
    • Early on we saw CPC dropped aggressively due to the falling CPM
    • Recently, CPC has been rising 10% per week due to the increase in CPM and decrease in CTR

On-Site Conversion: 

Conversion rates fell aggressively during the beginning of the crisis but have been flat for the last 5 weeks

  • What are we seeing?
    • Conversion rates fell aggressively early in the month.
    • In the last 5 weeks, conversion rates have been broadly flat.

Cost per Purchase: 

The increase in CPM & drop in CTR on flat conversion means Cost per Purchase is up 15% Prospecting is up 20%.

  • What are we seeing?
    • Cost of Acquisition was dropping until 3/29 but recently has been rising.
    • This week we are seeing a large increase in costs for prospecting with a reduction in retention.

How can we improve performance?

Tip #1: Look at your geographic cost and spend breakdown, and start a campaign focusing on low cost and low spend cities.

In Normal Times:

  • If you created a Facebook campaign for “Whole U.S.”, Facebook would normally allocate the spend by city efficiently.
  • Facebook normally increases & decreases spend by geography until all locations have roughly similar costs.
  • Typically, running a hand-budgeted geo-specific campaign makes performance worse, not better.

Currently the Geo-Allocation System is not currently working:

  • For unknown reasons, the geo-distribution system at Facebook is not allocating everything properly (we think its using too long a trailing average so its using pre-covid data)
  • If you look at your spend and cost by geography, you will find that there are certain cities that have very low costs and low spend. This is a flaw and shouldn’t be happening.

You can fix it by launching a “Underserved Geography” Campaign:

  1. If you go to the “breakdowns” in your ad manager, you can look at your costs & spend. You will find the DMAs that have well below average costs, and have low spend per capita.
  2. Make a campaign that targets all your normal audiences, but only targets those underserved DMAs.
  3. Run this “Underserved DMA” campaign in parallel with your normal “Whole Country campaign”
  4. Adjust budgets between these two campaigns until they have the same costs

Tip #2: Start to re-allocate campaign budgets back towards retargeting & retention, as the strange “Prospecting Honeymoon” is over.

  • In late March, Prospecting became cheap relative to retargeting & retention.
  • At the time, we suggested an aggressive budget move towards prospecting.
  • The honeymoon is now over, and the relative performance of prospecting, retargeting, and retention is back to normal.
  • So now is the time to consider bringing your budgets back to equilibrium.

Tip #3: Test creative the focuses on delivery speed & delivery visuals

  • Include images with boxes on doorsteps to gauge interest in potential consumers.
  • Try using copy that says, “Shipping to anywhere in the US in 48 hours.” Phrases like this are testing very well.

Tip #4: Test large Lookalikes (3% through 10%) in prospecting just in case your understanding of the customer is out of date. 

We Normally Suggest:

  • We use lookalikes aggressively in prospecting in most of our accounts.
  • We don’t normally see useful performance with lookalikes larger than 2%.

In Light of COVID-19, We Recommend:

  • We have tested large lookalikes (3% through 10%) for a number of clients.
  • About half of the time they have been very strong performers.
  • We think they are doing well now because your customers today may be somewhat different than your pre-crisis customers, so larger lookalikes pull in the newer group better.

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