How Much Should You Pay for a Facebook Lead?
And why this is not the most important question to ask!
There’s no doubt that Facebook can be a highly effective medium for generating new customer leads, no matter what industry you’re operating in.
The reasons for this are fairly obvious. Firstly, Facebook puts a massive audience within easy reach. For many people, Facebook is where they spend most of their online time. It’s virtually a parallel internet for many South Africans. Hootsuite’ s January 2020 State of Social Media report shows that Facebook ads reach over 20 million South African consumers – and that was before the massive jump in online time that Facebook enjoyed after the Covid-19 lockdown in March. Small wonder that the number of advertisers on the platform has doubled in the last 18 months!
Secondly, Facebook’s targeting mechanisms allow advertisers to slice and dice their way to a relevant market segment of this audience pretty efficiently, as the platform allows for effective demographic, geographic and lifestyle filtering.
And lastly, Facebook’s lead generation forms – which are prepopulated with the user’s contact information – offer users a frictionless, in-platform method of responding to an eye-catching ad in a blink of an eye, allowing advertisers to build a list of new leads very rapidly.
So, how much should you expect to pay per lead?
Facebook itself does not offer any answer to this question. And surprisingly there is not a lot of credible research available online. The best we have found is provided by WordStream, a software platform for managing social media and search campaigns. Their well-researched study, initially produced in 2017 and last updated in August 2020, tracks various KPIs, including cost per acquisition statistics, generated across 17 different industry sectors in Facebook campaigns run by 256 US-based advertisers.
A more recent study by Linchpin, citing data from HubSpot, MarketingCharts.com, Matchcraft, Prospect Marketing, Pulse Local Marketing and Survey America, has calculated a much higher average cost per lead from the platform, an anomaly perhaps explained by the fact that WordStream campaigns would tend to be better planned and managed than the average Facebook campaign.
Here are the results, converted into ZAR at today’s conversion rate of R15,27:
WordStream US All-industry Average CPA: R285
WordStream US Real Estate Average CPA: R260
Linchpin US All-Industry Average CPA: R885
No stats are available for South Africa specifically, so we’re going to provide an answer to this question from our own local campaigns in the property development marketing sector, executed in late 2020 and early 2021. Please bear in mind before extrapolating to another industry that we’re talking about big-ticket, high-commitment, long-conversion real estate sales here – not discounted bags of braai briquettes from Takealot!
Here are the results:
Machete SA Real Estate Average: R32
Machete Best Single Campaign: R22
Machete Worst Single Campaign: R71
Of course, these appealingly low, feel-good figures need to be tempered by a number of important qualifying factors. Firstly, we clearly need to acknowledge that the market appeal of the development itself will have a critical impact on the results. Location, product and price all have to tick the right boxes.
Secondly, we can’t rule out the creative quality of the ads themselves , nor the accuracy of the campaign targeting, nor the effectiveness of the bidding strategy (modest ahem).
And lastly, before you make these figures the foundation of your next marketing budget, there’s another whole element to the debate: what is the quality of these leads?
Eliminating Useless Facebook Froth
There’s no doubt that Facebook ads, used properly, can excel at generating a high volume of leads, at a relatively low cost. However, you might find that many of the ‘leads’ seem to have forgotten all about it in the morning!
The problem is that the Facebook lead-gen machine, cranked up to the max, is just too darn efficient for its own good. The in-platform lead-generation forms allow users to convert without having to leave their Facebook feed. They simply click the ‘I’m Interested’ button and the form pops up, helpfully pre-filled with their contact details. From there, they just click ‘submit’ and go back to scrolling through their feed. Two clicks and you’re done.
The problem is that the process is so streamlined that your ‘lead’ amounts to little more than a ‘like’: a spontaneous expression of admiration or aspiration in response to the glowing visuals and attractive lifestyle portrayed in your ad. Which has the unpleasant side-effect of giving your sales team hundreds or even thousands of leads to plough through before finding the odd genuine potential buyer, thus wasting time and lowering morale.
One way to remove the thoughtless, uncommitted ‘leads’ who don’t answer your phone calls or open your emails is to add qualifying questions to the form that Facebook cannot pre-fill. And to make answering those questions mandatory.
Even something as simple as a checkbox that asks ‘Do you consent to being contacted by a sales agent?’ can go a long way to improving lead quality and eliminating the froth.
Other questions like ‘Are you looking for an investment property or a home to live in?’ are useful not only to eliminate useless leads but also to associate the prospect with a particular buyer persona in your CRM, thus initiating an appropriate lead-nurturing process that addresses their specific buying intent. Another good example of this lead kind of question is to force the prospect to choose a price bracket.
Of course, you might go old school and eschew Facebook lead-gen forms altogether, instead providing a link to a well-designed landing page on your own website. This will definitely reduce the total number of leads generated, but will increase their quality.
(Whatever you do, though, never just dump leads onto the homepage of your website and hope that they will navigate their way to a lead form somewhere on the site! That will really be wasting your ad spend.)
What exactly is an ‘Opportunity’?
Obviously, at the end of the day, it’s sales that count — that’s the gold you’re mining. But lengthy conversion periods in real estate acquisition can mean that two to three months can go by before these results become available – too late for assessing and optimising currently running campaigns.
There is however another KPI that occupies a happy middle ground between form fill and bond approval. What we call ‘opportunities’. In other words, leads who have been qualified as having a reasonably high probability of converting into actual buyers.
What qualifies as an opportunity? For us, there are three indispensable boxes to tick:
- Are they contactable? Do they answer their phone or reply to the emails you send them?
- Are they informed? about the product? Do they know what the product is, where it is, and how much it costs?
- Are they serious? Do they have the means and the intent to purchase?
Of course, establishing the answer to these questions does require some extra work, either in the form of a personal assessment by a sales agent, or through a carefully planned series of actions set up on a decent CRM and marketing automation platform. This can greatly reduce the workload on your agents and give them the time to concentrate on the leads who qualify themselves as opportunities by, for example, downloading sales packs, watching videos, and spending time on price list pages.
Naturally you will also need a good, sales-funnel oriented CRM – like SharpSpring or HubSpot– to close the information gap between marketing (your agency) and sales (your agents).
And you will also need sales agents who will promptly input their feedback into the system, so your ad agency can use that information in optimising the campaign. This means building a culture in your sales team that understands the benefits and the practice of up-to-date data capture into the CRM.
So, how much should you pay for a Facebook opportunity?
So, let’s reframe the question: how much should you be paying for a Facebook-generated ‘opportunity’?
According to DWA Media, the only research we could find that addresses this question, the answer is anywhere between R6000 to R24 000!
Once again, local results we have achieved are magnitudes more affordable than those wide-ranging results.
Our most recent campaigns in the local property development industry have achieved an average CPO of R580.
This figure is really useful in estimating how much you would need to spend to sell a certain number of units, as the conversion ratio of opportunities to sales is a far more predictable figure than the conversion ratio of leads to sales.
Only with a CPO-focused mindset can you really see how well your marketing is working as the campaign is running, allowing your agency to fine-tune the campaign on the fly, concentrate the budget on the ads that are achieving the most opportunities at the best price, and thus further reduce the CPO.
Of course, all of this underlines the importance of proper communication between marketing and sales, and highlights again the need for a good CRM platform that is properly used by your agency and your sales team. But ultimately in our book, there is no doubt that measuring CPO instead of CPL definitely offers a better way to maximise the return on your ad spend.