Ever wrestled with the frustration of an ad that's stubbornly underperforming and don’t know what to do? Welcome to the club— a common challenge many brands scratch their heads over.
Enter Cost Caps, a Meta bidding strategy that is a finely-tuned, profit-oriented guide to your media buying journey. No magic. No miracles. Just a well-crafted strategy where Meta only puts spend behind a creative if it converts at your target CPA (cost per acquisition).
Curious? We thought so. The game is about to change, and you're holding the winning hand. ♠️
The Great Ad Dilemma: Unpacking Low vs. High-Performing Ads
High-Five to High-Performers ✋🏽
Good-performing ads are like the star players on your favorite sports team: they score goals and make you proud. They bring purchases home at a profitable CPA. With cost caps in line with your CPA target, they make sure your cash isn’t burning in the wind.
But here’s the thing: Most of the time, 3 out of every 10 ads will hog the limelight. And that’s okay. Facebook's giving them a thumbs up, and so should you.
Here’s an example of this happening in one of our client’s accounts: Out of 331 ads, just 10 are the top performers, commanding most of the ad spend. Another 50 ads are still mingling, getting a slice of the spend.
Managing Low-Performing Ads
So shouldn’t you just ditch the low performers? Not so fast!
Low-performing ads fail to meet the targeted CPA or lack the hustle to lead to purchases. Despite being benchwarmers, they might just waiting for their time to shine. Recognizing these ads quickly is your first step to victory in the media buying field.
Then what? You start running cost caps.
Utilizing Cost Caps Effectively
Cost Caps play a vital role in managing your ad's performance. Yes, Cost Caps might seem to dance to its own rhythm at times, taking an overall average and sometimes spending slightly above target.
But that's why starting low is key, allowing you to control spending and ensure profitability.
Daily Monitoring and Adjustment
Before you overhaul an ad, you must understand why it's underperforming. A daily evaluation of your ads will guide your adjustments.
- If an ad receives spending behind the cost cap, increase the budget.
- If there's no spend, increase the cost cap.
The idea is to start low with your cost cap (say at $30 if profitability is $50) and gradually increase it, finding efficiencies at the right target. This way, you control spending and make sure it aligns with your profitability targets.
This daily game of adjusting cost caps is key to your advertising success, ensuring the ad never wastes money.
The Dynamics of Cost Caps
When an account is using Cost Caps, the constant becomes performance, and the variable becomes spend. Naturally, we prefer performance to be the constant rather than spend.
Cost Caps allow us to guarantee performance and solve for spend volume through deploying mass amounts of creative.
It addresses a very common fear within DTC: "I don't think this will work and I don't want to waste money to find out."
But Cost Caps fix this dilemma. Meta will only put spend behind creative if it converts at your target CPA, making more content equal to more opportunities for the algorithm to find winners. Launching everything at your disposal becomes no-harm, no-foul.
Analyzing and Crafting Creative
We look for similarities in at least 5 ad copies, cutting those that aren't winners, and iterating on the characteristics that make the winners work. Deciding on tones, messaging, and visuals is crucial, but at the end of the day we trust Meta’s algorithm to decide for us.
Using Cost Caps has only two potential outcomes:
- If the creative is perceived as "bad," cost caps will not allow that creative to receive any spend.
- If you were wrong about the creative being bad, you might miss out on something that would scale your ad account.
Let’s see this theory in action.
Taking over Wildbird’s Ad Account: Feeding Creative to the Algorithm with Cost Caps
Media buying and creative strategy go hand in hand. When executed well, they enable one of the most powerful business advantages you can have: Being able to scale profitable new customer acquisition with built-in downside protection. And this was exactly our approach when we took over Wildbird's ad account.
Wildbird's Winning Creative & Media Buying Strategy
The first thing we did? Turn on ads like these.
It's not a video; it's a screenshot of a video. And it became the winning creative in the ad account, achieving:
- $12 CPA
- 109 purchases
- $222.62 AOV
The main change that was made was switching from ‘Highest Volume’ to Cost Caps.
Understanding Highest Volume vs Cost Caps
When an account is using Highest Volume, the constant is spend, meaning getting the most volume regardless of how the ads perform. Unlike this approach, with Cost Caps, the constant is performance, and the variable is spend.
Wildbird’s Results Since Switching to Cost Caps
Since switching over to this strategy, the account showed a:
- 22% reduction in CPA
- 53% increase in AOV
- 50% increase in spend
Final Thoughts: Winning with Cost Caps
By feeding the algorithm with as much creative content as possible, and leveraging Cost Caps, you can ensure that Meta puts its effort behind the ads that truly convert.
This isn't merely about turning around low-performing ads; it's a strategy that allows for constant experimentation and refinement without risk. With the example of Wildbird, we saw how switching from 'Highest Volume' to Cost Caps led to significant reductions in CPA and increases in AOV and spend. It's not magic or luck; it's a strategic use of tools at our disposal.
With Cost Caps, you can boldly experiment, trusting that the algorithm will find the winners, scaling profitable new customer acquisition with control and efficiency.
Now, who's ready to optimize the underperformers and scale the champions? 🚀
Get in touch with our team —we’re here to answer your questions and offer a helping hand.