How Much to Spend on Facebook Ads Shopify Dropshipping?

Reading Time: 12 minutes
4.8
(143)

What is a Marketing Budget?

The marketing budget specifies how much money will be allocated to marketing and how it will be spent.

The marketing budget’s size can be measured in a variety of ways, for example:

  • Depending on the marketing goals (e.g., what management expect they need to spend to achieve the objectives)
  • Averages from the industry and competitors (e.g., some as a proportion of revenues)
  • Adjusted for documented improvements in the marketing campaign from the previous year

Whatever strategy is employed, a marketing budget must provide a contingency (a safety net) to enable the company to respond to unforeseen events or opportunities. A variety of factors can affect the size of the marketing budget per year, including:

The company’s financial situation

This is a critical topic. A company that is experiencing cash flow issues or poor profitability would typically have to cut its marketing budget while still cutting costs in other fields.

Competitor actions

To retain market share, a company whose rivals are dramatically increasing their marketing spending may need to react.

The price and demand for marketing services

The cost of marketing activities must be factored into the budget. For example, the UK’s economic recession in 2008/09 resulted in a substantial reduction in the cost of advertising on conventional media such as television and newspapers due to lower demand (advertisers also started switching budgets to online campaigns too).

The responsiveness and returns from marketing spending

This is always difficult to quantify, but it is crucial if it can be. Every dollar spent on marketing must yield a satisfactory return. This has proven impossible in many conventional types of advertisement. However, web marketing and direct marketing have advanced to the point that financial returns can be tracked and measured.

How to plan a marketing budget for 2021 in 6 steps

Establish your sales cycle

You’ll want to create your sales funnel while you’re creating your marketing budget breakdown. Since it decides where you’ll invest your money, your sales funnel is an important part of your marketing budget.

The phase your audience goes through to become a paying customer is referred to as your sales funnel. There are four phases in a standard sales funnel:

  • Your audience recognizes that they have a problem and begins searching for solutions at this stage.
  • Consideration: During the consideration stage, the audience begins to consider their choices.
  • As a lead hits the decision stage, they begin to concentrate on companies that provide the best solution or product for their requirements.
  • When a lead hits the action point, they decide to work with you and become a client.
  • Understanding the company’s sales funnel will help you see where you might need a digital marketing plan to prevent people from dropping out.

Let’s assume you find that a large number of people are in the consideration stage of your business’s funnel, but only a few make it to the decision stage. Although some deterioration is unavoidable, you find that it is more pronounced than you would anticipate.

As a result, you may need to set aside more funds for tactics that will help you move leads from the consideration to the decision stage. Video marketing, pay-per-click (PPC) advertising, and social media ads are all possible ways to move those leads down the funnel.

To figure out how many ads you’ll need, you’ll need to know how long your sales period is. Knowing your revenue cycle will enable you to predict which tactics you will need to invest in, allowing you to budget strategically for your marketing strategy.

Know your outside costs

Start by determining your external costs if you want to learn how to make a marketing budget. You must know how much it costs the business in order to determine how much money you can set aside for marketing. So, what are the external costs you must consider?

  • Costs of operations (creating products, shipping them)
  • Expenses for hiring employees
  • Expenses for running your business (electricity, water) and more

These expenses must be factored into the marketing budget plan.

It determines which resources you should invest in and helps you establish a benchmark for your return on investment (ROI).

Let’s say your product costs your company $10 to make. You charge $50 for your product. So, when it comes to choosing your company’s marketing strategies, you know how much you want to invest while still making a profit. This data will assist you in devising plans that will maximize the company’s return on investment.

Determine your business’s goals

Any guide on making a marketing budget will tell you that you need to figure out what your company’s priorities are — and this is real! It would help if you first determined what you want to accomplish to create a budget that will enable you to achieve your objectives.

You may set objectives that are focused on:

  • Earning more sales
  • Increasing the number of leads
  • Increasing the number of subscribers
  • Increasing brand recognition, among other things

Make sure the company’s objectives are clear and well-thought-out. Setting a target like “increase revenue” isn’t a good idea. It will not provide you with a specific goal to strive for.

Instead, make a goal such as “increase sales by 20% by the end of the year.” This target is easily observable and gives the team a specific goal to work for. It will also provide you with a concrete reference point when budgeting for marketing because you will know how much you want to increase revenue by and when you want to achieve the increase, rather than just knowing that you want to increase sales.

Start by putting your overall business goals in your marketing budget to invest in the right marketing strategies to help you achieve your objectives.

Understand your market

To create a successful marketing budget plan, you must first understand where you fit in your market. You will better determine which tactics you need to use to deal with your rivals if you know how you compare them.

To see how the competitors compete online, conduct a competitor study. You can also use competitor research software to see where the competitors are succeeding online right now. It will assist you in determining which tactics to budget for to achieve success.

You can use a competitor research tool like Competitor SpyFX to look at competitor campaigns and get ideas for your own, or you can use social media tracking software to keep track of what people are saying about competitors on social media.

Get an idea of what strategies you want to use

Choosing the tactics is an essential part of planning a marketing strategy for 2021.

You don’t have to be 100% certain about the tactics you want to use, but you should have a good idea of the ones that seem to be the best fit for your business.

You can use a variety of digital marketing techniques, including:

  • Search engine optimization (SEO) is the method of improving your website’s search engine rankings to attract more relevant, organic traffic to your blog.
  • PPC (pay-per-click) ads appear at the top of search results pages and on other web pages. These ads help you to hit a larger number of ready-to-convert leads.
  • Social media marketing allows you to engage with your customers on a one-on-one basis and offer relevant content to them. This technique helps you to nurture leads into customers by building relationships with them.
  • If you invest in social media advertisements, you’ll concentrate on writing persuasive ad copy that’s aimed at unique leads. These ads blend in with their newsfeed, helping you to increase brand awareness and generate more leads.
  • Email marketing allows you to cultivate leads for conversion by giving them personalized content that matches their interests. You can submit promotional emails, exclusive offers, cart abandonment reminders, and more.
  • Content marketing: By sharing useful information with your audience, you can increase your website’s number of leads. You can share your knowledge with your audience through blog posts or videos and establish yourself as an expert in your field.
  • Local SEO: To help push more local traffic to your company, you optimize local keywords and assert your Google My Business page. An example of a GMB listing can be found below! And there’s more!

When planning a marketing budget, you should know which tactics you want to use for your business. If you’ve decided which tactics to invest in, you can figure out how they’ll fit into your marketing budget. That takes us to the next crucial aspect of marketing budget planning.

Research strategy prices

You need to know how much it costs to run your campaigns independently, employ a freelancer, or hire a digital marketing firm. The cost of each plan should be the subject of your marketing budget breakdown.

First and foremost, you must decide who will be in charge of your campaign:

  • In-house: If you plan to keep your in-house staff, the burden will be borne by the wages and materials used to carry out your campaigns. It’s possible that you’ll need to recruit outside support or invest in software to handle your campaigns.
  • Freelancers are individuals who specialize in one form of technique or dabble in many. You’ll usually pay a freelancer by the hour or per job if you contract them. If the freelancer has more experience or uses software included in their cost, the rates will be higher.
  • A digital marketing company will provide you with everything you need, from software to staff if you employ one. Unless you’re working on a one-time project, you’ll have to pay a monthly retainer fee to keep a digital marketing firm on retainer.

If you’re busy running your company, you’ll probably want to hire a digital marketing firm. It enables you to reap the benefits of having a marketing strategy and someone to handle your budget while focusing on other aspects of your business.

What are the costs of specialist digital marketing services? To give you an idea of what you can expect to pay for online marketing strategies from a digital marketing firm, here’s a range:

  • Monthly SEO costs range from $500 to $20,000+.
  • PPC accounts for 5-20% of the monthly ad budget.
  • $2000 – $20,000 a month for content marketing
  • Monthly social media marketing costs range from $250 to $10,000.
  • $300 – $2500 a month for email marketing

These costs can vary depending on the nature of your company and the services you need. However, this is a rough estimate of how much you can expect to pay if you work with a digital marketing firm.

Knowing these costs will help you better plan a marketing strategy, allowing you to focus on the tactics that will yield your business’s best results.

There are a few things which you need to know before starting to work with Facebook ads. Things like what type of audience to target or the design of your ad or your investment on first campaign should be pre planned. We will talk about the right amount of money you should spend on your first campaign and the good number to aim for your campaign or your product. If you are concerned with the things mentioned above then you are at the right place.

How to get started?

The first thing that you need to figure out even before starting out the ad is the profit margin of your product. So, you must calculate the difference between the price of the product that you want to sell and the expenses from AliExpress. Doing this is very important because you can only afford to spend more money on ads only if your product price is higher. In this way you can balance out your expenses. So, its very important to figure out your profit margin.

Second thing that you need to decide is the maximum amount of money you are willing to spend before you start making adjustments. We suggest you to aim for double of your profit’s margin amount. For example, if your profit margin is $20 you can spend $40 before making any adjustments on the ad. You can end the end if it is being a failure. Do not confuse this money with your daily budget. Depending upon the price of your product this will last for a few days or even a week. Set your budget to $5 to $10 when test the ads at first. In case you are on tight budget you can stick with $5 and $10 dollars to speed up the process if you think your product holds a good potential to get sales. Basically, you have to keep your budget to $5 to $10 a day until your profit margin turns double. After this you can make adjustments accordingly.

Once you get to know your profit margin and figure out your daily budget then it’s the time to figure out the direction in which you want to test split your product. You can either test one product with multiple audiences or you can test multiple different products with one kind of audience. Decide what you are confident in. Whether it is the product or the audience. For example, if you sell jewellery on your site and you are not confident about which product is going to get maximum sales on running Facebook ads for it. In such case we suggest you to test multiple products with the like audience. In this case you are trusting your audience more than your product. By doing this you will get to know that which product goes best with your audience and you will get your winning product. Say you have a winning product that has your confident. In this case you should not test different products because you already have the winning product that has the best potential. Once you have the winning product, you can test it with different audiences. If you do this you will get to know which audience will work best with which audience.

If you still want to test more products even after getting the winning product remember not to mix the two. There are many people out there who are not confident about their audience and their product both. What they do is that they try to test multiple products with multiple different audiences. You are doing a big mistake by doing this as you are not really testing anything at this point of time. You need a common denominator or a baseline in order to test so that you can get to know what is working and what is not. So, make sure you have same products or the same audience so that you can figure out issues in one of them in order to make adjustments.

A Few things to remember

We suggest you to test five to ten different ads at a time. Say you have five or six necklaces that you think can do well, you can run five or 6 different ads and test all of them. If you have one winning item you can test that one product with as many different audiences as you want. Don’t test for less than five or more than ten audiences at one time. You should aim between five to ten.

You must figure out the amount you want to spend for your first run of ads. Being on a conservative side if you run five five-dollar Facebook ads, it will cost you $25 per day. If the product that you are selling has the profit margin of $10, you must wait for at least four days to make adjustments. So, the total amount on that campaign will cost you around $100. Say you have eight ten-dollar ads, it will cost you around $80 a day. If the product has a higher profit margin of like $30 you can spend $480 before you make any adjustments. $480 is a lot of money when you are only utilizing it for testing but you have to remember that you only need 16 sales to maintain a balance between price and the profit margin by running 8 ads for just 6 days. It might look a huge amount for some people but it is relative to the ad in the product that you want to sell. So, you might get an idea yet that how much you need to spend on your very first Facebook campaign or any other campaign in the future. You need to keep in mind that there is no particular guide to how much money you need to spend on Facebook ads.

People do a lot of experimentation with their Facebook ads ad they can get different results based on how much money spend. As we have already said that there is no hard and fast rule for how much money to spend on Facebook ads. We have tested with few products and ran ads for t-shirts on a Dropshipping store. We sold those t-shirts through the Shopify store. We have Dropshipped those t-shirts via printful. We have then created Facebook ads that pointed to the t-shirt on that Shopify store from Facebook. The amount that was spent on that ad per day was $3. It got very much success as we got profit of at least $7 on each sale. Basically, we got more than what we spent making it one of the biggest reasons to be put in those ads.

The most important element for deciding how much you should spend on Facebook ads is the price of the product that you plan to sell. For example, if you are making a profit of just $2 per product sale you should not spend $3 per day for Facebook ads and if you are getting a profit of say $100 da day, you can spend any amount as you want in a hope that you will get at least one sale a day.

Product margins and how many sales you are getting in a day are both very important to know. If you are getting back more money than you spend on ads then it means every penny you spend on ads is worth it. It is very common for beginners to spend $10 a day for Facebook ads and not getting back any profit. You will be in total loss if you do this.

It is very important to put out some tests out there when it comes to Facebook ads. In this way you can figure out what works and what doesn’t work. Firstly, you need to figure out the amount you are willing to spend on these tests at the very first stage. It is very common to lose money on some ads so you need to keep some money in hand so that you can put it on stake. You need some money for the whole process of putting out the ads first and then you wean out some ads which don’t work and focus on ads which get success. What you should do is to choose a product and different variants of an ad and target the different audiences. Put a $5 ad a day for each variants of a same ad. It will cost you $50 a day in total. Now you have to see if any if those ads are making any conversions and point out which are getting maximum number of clicks, most engagements and diverting traffic to your website. Stop those ads which are not getting you any benefits.

Keep running ads which are making profit. Duplicate and scale these ads up. Foe example, if you are sending a $5 per day on a ad and it is making a few sales and giving you profit, make a similar ad and spend $10 a day on that ad which is making money. The second ad will most likely get success. Basically its not about how much money you are spending per day but it is more about how much money you are ready to spend, what is the profit margin on your products that you can spend on ads and can still make a profit, finding those two numbers doing testing at the early stage, weaning the things down and growing the ads that are successful and losing the failed ones.

You can get success at $3 a day and also at $10 a day. Less than $3 will not get you any profits as in such low amount your ad will not reach to enough people and Facebook will not be able to get you enough test data for you to make decisions. If your ads are not reaching out to enough people and you are not getting any sale it might be the case that your ads are not reaching out to enough people making chances of your sale less. So, make sure that you don’t go below $3 a day for testing big enough audience to figure out if it will really work out. Many Dropshippers suggest $5 a day. You can go for $5 a day depending upon your budget.

Conclusion

Being flexible and to be able to experiment with the results that you get is more important than the final monetary figure that you get. You should grow on your successful results.

Average rating 4.8 / 5. Vote count: 143

No votes so far! Be the first to rate this post.