Why does Facebook ROAS decrease when you increase budget?
This happens oftentimes, and is scary, and upsetting. Why does the Facebook ROAS drop when we increase the ad budget of a winning campaign or ad set?
The good news is that it is not a Facebook bug, but an advertiser obstacle. It can be fixed.
Before getting into tips and strategies to mitigate this, it is necessary that advertisers accurately understand the true meaning of the lowest cost bidding strategy.
The lowest cost bidding strategy name is kind of deceptive, as it sometimes encourages advertisers to think that they will get results at the lowest costs no matter what. But here Facebook prioritizes consuming the daily budget, rather than keeping the ROAS/cost per purchase in control.
“The lowest cost bidding strategy gets results at the lowest cost, WHILE ENSURING THAT IT CONSUMES ALL OF THE DAILY BUDGET.”
The point being getting results at the lowest cost is the second priority. The first priority being that the daily budget is consumed.
The best way to ensure that ROAS does not drop, is to take the ad creative and communication to the next level.
When we increase the budget, we end up competing with more ads for conversions.
If the ads do not resonate very well with a large buying audience, they start getting delivered to audiences that are not right now in the buying mode (based on the intelligence and predictions of Facebook algorithms).
Only the best performing ads get delivered to audiences that Facebook has predicted will buy now.
A good way to diagnose this is to keep an eye on the checkouts initiated to purchases ratio. If this ratio increases, it would suggest that the ads are not winning and thus failing to get delivered to audiences that buy now.
So creating a better version of the campaign and ads is essential, as the competition rises with an increase in budget.
Here are some more tips to mitigate this –
- Do not make edits to a winning campaign, instead simply duplicate, make necessary edits, publish and see if it takes off.
- Make sure your audience is large enough for your budget and the ad frequency does not rise too much (i.e same people getting to see more of your ads)
- You can use target cost, cost control, or target ROAS bidding strategy, but in my experience it really slows down the delivery of ads and minimizes the number of purchases. But it makes sure that the ROAS/cost per purchase is in control, if it is not, the ads will almost stop delivering.
- If you are using lookalike audiences, recreate them.
- In ad communication, focus first on the value, then the product.
- Promote the best sellers.
If sales do not increase proportionately with the budget, simply focus on the creative and communication, with the above 6 tips in the back of your mind, and you should be able to control ROAS as you scale your campaigns.
Related post: What is a Good ROAS for Facebook Ads?
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