Why Benchmarking Your Social Ad Performance Gives Marketers The Competitive Advantage
Measuring and benchmarking are practices embedded into our daily business lives. In e-commerce, we compare our fulfillment and delivery speed against key competitors. The sales performance is judged well beyond simply meeting targets and growing year over year — comparison to rivals is also considered.
The same applies to marketing, where over the last 10 years, we have seen a lot of evolution in marketing-driven demand generation. Thanks to funnel benchmarks set (and regularly monitored and updated) by SiriusDecisions, HubSpot and other players, marketers can assess whether, in a certain industry and geography, their leads are converting at a healthy rate to qualified opportunities and other stages of the funnel.
Benchmarking is an established practice in all aspects of our lives and businesses. But is it really the case when it comes to advertising on social media? Up until now, the answer has been no, and that absolute budget spend and return versus budget are sufficient. This limited analysis may lead to not only a waste of money but, more importantly, lost business opportunities.
Let’s dive deeper into the world of social media advertising.
Businesses are actively and successfully advertising on Facebook, but the number of advertisers is growing and the ad space in the news feed is limited. Competition is growing and cost is naturally rising. Should marketers be discouraged and invest less in Facebook ads? The answer is absolutely not.
Instead, I recommend that even before you determine how much you want to spend in social ads to achieve your desired ROI, it’s important to look at your competitors’ ad spend level. You should also make sure that you are producing content that is targeted and personalized to your audience. Once you have evaluated that your content will resonate and be relevant to your audience, you should feel comfortable investing the same budget or even more.
Justifying a budget increase for ads is tough unless you can prove ROI. However, driving a sustainable ROI requires benchmarking. Measuring yourself against your own historical performance gives you only part of the story. You need a precise understanding of competitive ad insights within your target industries and countries. But what can you learn by benchmarking your ads against the ad performance of your competitors in a certain vertical or geography?
Let me give you an example. If you have a low-cost level due to your great content (i.e., you have a high Facebook relevance score) but are spending less compared to other ad accounts in your target geo, this means a missed opportunity to maximize the impact of your great content. Therefore, you should consider spending more. So, if your total spend is lower than the industry standard while your engagement is far higher, your content quality is taking your budget far. Imagine what you could do with more budget. Ask for more with confidence.
If your cost level is low, engagement performance is high, and your spend level is higher than your industry and geography, your ROI is high. This means that spending more will give you a competitive edge.
If, due to poor content performance and weak engagement, your cost level is high and your spend is also high versus your competitors’, this is a red flag. My advice would be to invest more time in better understanding your audience, creating better segmentation and creating and posting better content.
Being able to see your ad spend and performance against a benchmark might tell a different story. For instance, if your cost per click (CPC) is low, you may think you are on track. But the real question is: How low is your CPC compared to other ad accounts in your industry? If you see that you’re paying more than other brands in your industry or country, be sure to also look beyond your ad strategy by assessing whether your content strategy could be optimized. Creating more relevant content will increase engagement.
Social media advertising, when based on a data-driven approach, will yield a return for your business. Facebook offers a wealth of opportunities to advertisers. Maximize this opportunity by understanding how you compare in benchmarks against your industry, country and region and tweaking your activity to get the best possible performance. By doing this, you’ll see the greatest impact for your business.
Article written by: Dr. John Malatesta