Maximize Your Ad Spend with Facebook Lookalike AudiencesWednesday August 31st, 2022
As third-party data disappears, Facebook lookalike audiences will become more important. Learning to leverage them strategically can help you cut costs and improve lead quality.
Facebook has been in the news a lot recently, especially when it comes to their marketing offerings. As one of the largest advertising platforms, and with an estimated $58.11 billion to be spent by advertisers this year on Facebook ads alone, any changes to the platform are big news to marketers and businesses.
Recently, Facebook has implemented small changes to their targeting capabilities that collectively add up to big shifts on the platform for marketers. At the beginning of 2022, the company removed options to target users based on health causes, religious affiliation, and more, to protect users from potential exploitation of targeting capabilities. As Facebook incrementally removes some targeting options, audiences based on interests or demographics will become less effective.
This is just one example of how the industry as a whole is shifting away from using specific identifiers, like with Google’s move away from cookie tracking. All signals point to platforms like Facebook and Google continuing to limit the ways in which marketers can find their audiences, making first-party data (the customer information you collect and own yourself that a user voluntarily provides, like an email list) more important than ever.
Aside from the direct targeting capabilities that first-party data provides, there is one other key way to connect with your audience using this information. With Facebook’s lookalike audience targeting, you can provide Facebook with a list of customers and they will work to find the attributes of that audience, then build an audience of similar people that you can display your ads to. Lookalike audience targeting will become the most valuable tool on the platform for reaching the right people as more targeting options disappear since it’s based on data that you already own. To find success with Facebook ads in the next few years, lookalike audiences are a must.
The Benefits of Lookalike Audiences
While Facebook’s targeting changes are a major piece of lookalike audiences’ importance, they also also have benefits for advertisers.
Target your ideal customer
When you provide Facebook with a list of your current customers, you’re showing Facebook a group of people who are already interested in your product or service to help them identify other similar users on the platform. You’re likely to find a higher value audience that is more engaged with your ads than if you go off of demographic research you have or buyer personas.
Plus, since lookalike audiences are based on your customer lists, you can tailor the information you provide to Facebook to be matched with their users. Instead of providing Facebook with all of your current customers, you can narrow it down to the most high value customers you have. Think customers who order from you multiple times a year, or customers who exceed average order value. We’ll dive into this later when we talk about using lookalike audiences to their full potential.
Facebook also makes it easy to provide them with your most high-value customer information with Customer Value Audiences. With these, you can indicate a customer’s value to your business by adding their lifetime spend or some other ranking. This helps Facebook narrow down your most valuable customers and find users most similar to them.
Many times when we launch campaigns for our clients, we start with general and broad audiences so we can test our targeting and find the best audience. Instead of starting from a wide pool that could return high cost per click or high cost per conversion as you test your audiences to find the right one, lookalikes can help you reach a higher quality audience faster.
While testing your audience is always a good idea, you can jumpstart your accuracy with lookalike audiences. Try launching campaigns with interest or demographic targeting then test against a lookalike audience. Or, separate out your customer list into segments and run those lookalikes against each other. With a lookalike-first approach, you may discover that finding the right audience is faster and cheaper than a traditional broad to narrow targeting approach.
Avoid impacts of industry changes
Facebook is not the only player to increase data privacy. With Apple’s launch of the privacy-focused iOS 14 last year, which requires apps to get explicit permission from users to track them, it’s getting harder to track potential audiences and engage with them. The customer lookalike approach lets you stay in control of what targeting parameters are available to you with your first-party data.
As other changes in data privacy head our way, focusing all your marketing efforts on first-party data is a good way to prevent big disruptions in your plans. While it’s impossible to prepare for every scenario, leveraging your first-party data where you can will help you reduce the impact of these new data policies and stay ahead of competitors.
How to Use Lookalike Audiences Effectively
Once you have a customer list with basic customer information, it’s easy to start using lookalike lists. But first, you need to think strategically to get the best results. Instead of lumping all of your customers together into one audience, you can segment your customers by action, value, or other criteria to make your lists, and ad targeting, more precise. Consider any of these approaches to help you narrow down your list to find people more likely to take specific actions:
- Match your lookalike audience to your business goals: Determine the most valuable actions your customers could take and create lookalike audiences based on those criteria. Is your business trying to increase average order value? Use a list of customers with high order values to find other Facebook users like them.
- Segment your audiences based on customer behavior: Determine important actions or characteristics of your customers, then build lists based on that. For example, if you know that someone submitting to your contact form makes them more likely to become a customer, use a list of customers who have contacted you through the form to build the lookalike audience. Another good place to look for behavioral segmentation is email lists. If you have an email subscriber list with high engagement rates (think 30+% open rates or 20+% click rates), try using those to find new users through ads.
- Track important events with a Facebook Pixel: Lookalike audiences can also be made with Pixel data. If you track important conversions or actions people make on your site, you can use Pixel data to find people similar to those who have engaged with your site. This is a great way to start a lookalike audience if you don’t have an extensive customer list yet.
- Try including customer value: Facebook allows you to add customer value information when you upload customer lists to create a lookalike audience. Take advantage of this and show Facebook who your most valuable customers are so they can find other users who are likely to be high value customers for you. Including the information can help Facebook determine characteristics that could make someone a high or low value customer, as opposed to pre-segmenting the customer information before uploading it to Facebook.
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Examples of Success with Lookalike Audiences
Our marketing team has found success when testing out lookalike audiences, compared to our traditional approaches to targeting based on demographics and interests. Here’s why we recommend you include lookalike audiences in all of your Facebook ads.
Improving Cost per Acquisition
While updating the paid media strategy for one of our HVAC service clients, we decided to replace their demographic-based targeting on Facebook with lookalike audiences. Instead of targeting homeowners who were 30 years and older in a certain area radius, we started using customer lists segmented by the service our client provides them. This way, we could target people more likely to need a specific service and show ads that spoke to those specific needs.
The main goal of these campaigns was to drive traffic to the site so people could learn more about our client, with the secondary goal being increasing new appointment signups. With our old audience, we were seeing cost per clicks (CPC) on ads around $1, with a 1.05% click through rate (CTR). Once people were on the site, we saw a 0.7% conversion rate for scheduling appointments with a final cost per acquisition (CPA) around $200, which was enough for our client to call it a success, but we knew there was room for improvement.
After implementing the lookalike audiences and making our ads more targeted to people looking for specific services, we were able to reduce our CPA by half to $110, allowing our client to get more leads at a cheaper cost on a brand awareness campaign. With the updated targeting, we saw a drop from to $0.24 CPC and increase in CTR to 1.2%. At volume, that is a significant difference that will save our client money on ad spend while driving more leads to their business.
Improving Lead Quality
Another one of our clients is a B2B company that works specifically with nonprofits and associations. When we launched ads for them on Facebook, we started with interest-based targeting to try and reach people in the nonprofit sector. But, because of how Facebook’s interest targeting works, we had no way of knowing if people in that audience worked for nonprofits, or just expressed interest in supporting their causes.
With this first attempt at finding the right people in a top of funnel campaign, we collected four leads in two weeks at an average cost of $64.14 per lead, which was still within the client’s acceptable CPA. However, as marketers we are always looking for ways to optimize and improve, so we decided to try a lookalike audience with the goal of increasing the lead volume, lowering the CPA, or ideally, both.
After we had collected leads across various sources and verified that they fit our criteria, we created a lead lookalike audience. This new audience allowed us to be more specific in who we were looking to reach on Facebook, especially since the leads had already proven that they were ready to take a valuable action (provide us with their email). We were able to drop the CPA to $34.34 on 15 leads in two weeks, while improving the quality of leads and increasing the volume.
Increasing Website Traffic
For a client in the medical space, we continued to experiment with lookalike audiences on a traffic campaign to improve the quality of traffic to their site. The ultimate goal of the campaign was to have people sign up for more information through a contact form, but we also focused on getting people onto our website and engaging with page views and clicks.
Our initial audience was a broad location-based audience for the area that our client operates in. With that audience, we saw a 4.42% CTR at $0.21 per click. Once those users were on our site, we saw a 1.02% conversion rate on our sign up form. While the numbers were solid for our goals, we wanted to improve our targeting based on customer lists to find higher quality traffic.
Our team launched a lookalike audience that combined our client’s customer list and leads from previous marketing efforts to find a more engaged audience. We were happy with the results with a 5.05% CTR at $0.21 per click, and especially the increased 1.16% conversion rate. While the numbers were not a drastic change, they were proof that we were on the right track with our more specific targeting.
Whether you’ve never used a lookalike audience or you’ve just started dipping your toes, it’s important to get familiar with their capabilities and how to use them. As demographic targeting options on Facebook are likely to disappear in the next few years, taking a first-party data-centric approach on all advertising platforms will become extremely important. To make the most of your owned data and Facebook’s targeting capabilities, you need to start thinking strategically about how to leverage everything at your disposal.
Need help leveraging your data? Get in touch with our marketing experts to start leveraging the changes in the digital advertising landscape to get ahead of the competition.