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Facebook bid strategies: Lowest cost or target cost?

One of the most important factors that directly affects Facebook Ads performance is choosing the right bid cost strategy. The lowest cost or the target cost? Which strategy is the best solution? We ran tests on these strategies and will share the results with you.  

What bid strategies can you use on Facebook? 

You can choose from two main bid strategies. The first one is called the lowest cost bid strategy and the other one is the target cost bid strategy. 

If you use the lowest cost bid strategy (automatic bidding), Facebook bids with the goal of getting the lowest possible cost per optimization event. The set budget (either on the campaign or ad set level) will be spent at the end of the day or throughout the entire schedule. 

When using the lowest bid cost strategy, you can also set “a bid cap”. This is the maximum amount that Facebook can offer for a particular optimization event in an auction. What is important is that if you set a bid cap, Facebook might not spend the entire budget you set (campaign or ad set level) as in the previous case.  

As mentioned above, you can also choose the target cost bid strategy (manual bidding). You basically set a target cost you would like Facebook to come as close as possible to. This means that Facebook will then bid to reach the price around for the optimization event and around the target cost on average. The target cost bid strategy is available for the following marketing purposes:  

  • app installs,
  • conversion,
  • lead generation,
  • product catalogue sales.

Bid strategy test No. 1 - Lowest cost vs lowest cost with a bid cap 

We tested the lowest cost bid strategy against the same strategy with the exception of setting a bid cap. 

We ran this test for 7 days using the “traffic marketing objective” for a remarketing campaign. The settings of the campaigns, ad sets and ads remained the same. There was only one difference – setting a bid cap. We set two hypotheses before testing, which we wanted to either confirm or not.  

Hypotheses: 

  1. The lowest cost bid strategy with no bid cap will deliver more results (landing page views) than the lowest cost bid strategy with a bid cap.
  2. The lowest cost bid strategy with no bid cap will deliver a higher price for a result than the other campaign.
https://b.cz/media/blog/facebook-bid-strategies/bf-web-blog-facebook-strategies-screeny-1.png

You can see from the results that both above-stated hypotheses were confirmed. The campaign with the lowest cost bid strategy achieved 546 results (landing page views) in total, while the campaign with a bid cap only 199. In other words, the lowest cost bid strategy without a bid cap reached 174% more results in comparison with setting a bid cap. 

The CPA  differed as well. When setting up a bid cap, the CPA (landing page view) was 1.15 CZK, without a bid cap, the CPA was much higher – 1.91 CZK. Basically, without setting any bid cap, the price was 66% higher. 

What is also very interesting was the amount of money spent.  The campaign with the lowest bid cost strategy spent its daily budget each day of the test, the other campaign with a bid cap did not.  

What are the conclusions of the test? 

The campaign with the lowest bid cost strategy without a bid cap achieved more results, however, if you want to have the CPA under control, we recommend the same strategy but with a bid cap. In this is, it is important to bear in mind that you campaign will probably achieve fewer results and will not spend the entire budget.  

Bid strategy test No. 2 - Lowest cost vs target cost 

In the second test, we tested the lowest cost bid strategy against the target cost bid strategy. 

We ran the test for 7 days using the “conversion” marketing objective. The settings of the campaigns, ad sets and ads remained the same. We derived the target price from set KPI as well as previous campaigns. For a second test, we also set two hypotheses.  

Hypotheses: 

  1. A campaign with the lowest cost bid strategy will achieve better results (conversions) than a campaign with the target cost strategy.
  2. A campaign with the lowest cost bid strategy will achieve an average cost per action (conversion) +/- 10% round the target cost.
https://b.cz/media/blog/facebook-bid-strategies/bf-web-blog-facebook-strategies-screeny-2.png

One from the above-mentioned hypotheses was confirmed and it was the first one. The campaign with the lowest cost bid strategy achieved 145 results, while the other campaign (target cost bid strategy) achieved only 21 purchases

The average CPA was less than 1 EUR in both cases, which means that the difference between CPA was not that big as in the first test. However, the second hypothesis was not confirmed. The target cost for the second campaign was set at 1,5 EUR, but the final average cost was 0,76 EUR, which is more than 10% difference from the set target cost. 

What we found very interesting was the spent. When using the lowest bid cost strategy, the daily budget was spent every day. However, the campaign with the target cost spent only 15 EUR in total! This accounts only for 14% of the total budget set at the ad set level. 

What are the conclusions of the second test? 

Unfortunately, we have to admit that the target cost bid strategy did not prove to be useful. We run similar tests for a couple of times with different campaigns and with different target prices to make sure that the test was set correctly. However, the results were always very similar.

Published: 18. 3. 2019

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Nikola Stankovičová

Facebook Ads Specialist

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