Social Media Ad Spend
It’s one of the most common questions we get asked at SERV Agency, “How much money should we invest into social media ads?”
In this post, I’ll explore how we approach creating a reasonable budget.
Where does the value come from?
Understanding value creation is an important concept when setting the appropriate ad budget amount. Being able to answer the above question, in quantifiable terms, is critical.
Let’s look at an example:
A restaurant owner wants to explore social media ads in an effort to increase F&B revenue by $10k / month.
Where does the value come from? The obvious answer is the additional revenue. It’s not something intangible like increase awareness.
Set an ad budget appropriate to the value
An easy way to approach this to look at the two extremes.
1) Ad spend creates zero additional revenue and ROAS (return on ad spend) is 0:1
2) Ads perform miracles and ROAS is 10:1. $1k returned for every $100 invested
It’s certainly possible that ROAS can be more than 10:1 but let’s keep our feet on the ground and set that as the best return.
To increase revenue by $10k we’re looking to invest at least $1k and more as the ROAS decreases.
As ROAS decreases, there will be a point where it’s no longer immediately profitable to run ads, taking in to account COGS and other costs - this represents the risk factor.
Can you measure results from social ads?
Yes and no. Sure, if you ran a specific social media ad campaign, selling a specific event, that was only visible via social those social media ads, then it would be easy to attribute sales to those ads.
But tracking general bookings, over long periods of time, and trying to accurately track where those bookings come from isn’t possible.
Here’s an example:
Mel sees your restaurant ad on social and recommends it to her colleague as a place to try. They both go together and walk in without a booking. There’s no way to attribute the revenue of that booking to the social ad.
Mel’s colleague, Tanya, noticed that your restaurant also does a vegan menu. She recommends it to her partner, Tom, and they go again for date night. Tanya’s partner made the booking this time and he found it via a Google search after being told about it.
That original social media post was the source of revenue for at least 4 covers over two separate visits. Impossible to measure.
Take a pragmatic approach
Understanding your ad strategy - and the key data points around performance - can be useful for benchmarking. But don’t overlook the obvious. Read the comments on these ads and verify that people are responding with intent. With restaurants, in particular, it should be immediately obvious that ads are profitable - just from reading the comments.
Synergies & value creation
When running a multi-channel marketing campaign, there’s greater opportunity to increase what we call, CLV, Customer Lifetime Value.
In the example above, the restaurant captured Tom’s email when he made a booking online. Through email marketing, the restaurant can seek to increase Tom’s CLV. Given the cost of email marketing is so cheap, the ROI of email marketing can be very high - but it’s limited to the size of the database.
We’re now starting to look at a secondary source of value. There’s the initial ROAS from the social ads but secondary, is the database size increase.
If you’re not already a client of ours, and you want to improve your restaurant marketing, let’s set up an informal chat or a coffee.
