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Why Scaling Campaigns Can Become Costly
Regina explains why your CPA increases and your ROAS decreases when you increase your budget. She also shares when you should take action and what actions you can take.
Scaling your campaigns by increasing your spend isn’t all about growth. Like all things that are growing, growing pains are inevitable.
While growth pains can’t be avoided while scaling your campaigns, Regina helps you understand why this is happening, why it’s doing more good than bad for you and your business, and the steps you can take so you can easily transition into scaling your campaigns.
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Transcript
Hey everybody.
Speaker:It's Regina at solutions eights.
Speaker:I'm here to talk about the age old question of why does my CPA go up?
Speaker:Or my ROAS goes down when I'm increasing budget.
Speaker:Should I freak out?
Speaker:And what should I do about it?
Speaker:So first of all, don't freak out.
Speaker:It is inevitable.
Speaker:Uh, You can see here, this is a client where the.
Speaker:Line is showing costs and we have more than doubled the cost over
Speaker:the past two and a half months.
Speaker:And CPA is in blue, which is going up right alongside it.
Speaker:So unfortunately this is an inevitable side effect of increasing.
Speaker:Spent I know I've made a video on a similar topic before, but this
Speaker:comes up so often with clients.
Speaker:I thought I would make another one and go into a couple of details around,
Speaker:you know, wha how do we battle this?
Speaker:When should we battle this?
Speaker:And you know, what what's causing it?
Speaker:I think that small businesses feel like maybe they're the only ones
Speaker:that are experiencing this, right?
Speaker:When you try to scale all of a sudden you're.
Speaker:Your profitability diminishes what larger companies understand is that when
Speaker:they are pushing more money into their marketing, there's going to be two major
Speaker:phenomenons that, that take effect one.
Speaker:The profitability diminishing is some of it is temporary.
Speaker:And I'll explain why in a second.
Speaker:So you kind of just have to wait it out and understand that that's going
Speaker:to be part of the growing pains.
Speaker:The larger companies also understand that when you.
Speaker:As you grow your metrics kind of change, right?
Speaker:You're you're getting conversions at scale.
Speaker:And so your overhead costs don't scale.
Speaker:Along with your other costs.
Speaker:And so your your overhead costs become a smaller percentage
Speaker:of the whole, of your costs.
Speaker:So you, you can afford to pay slightly more for a lead.
Speaker:You can afford to operate at a slightly lower ROAS.
Speaker:That's why some of your larger competitors are able to outbid you on
Speaker:those keywords that you so want to play.
Speaker:First in the search results for but they are, unfortunately they're able
Speaker:to outbid small businesses sometimes because at scale they know they can
Speaker:afford to bid more aggressively.
Speaker:They can afford to get that first spot because they don't really need the same
Speaker:margins that small businesses need.
Speaker:So some of it is kind of just a, a shift in the way that you
Speaker:think about your CPA goals.
Speaker:Cost per acquisition goals, right.
Speaker:Or ROAS goals, depending on if you're an e-commerce company, I'm talking ROAS.
Speaker:If you're a lead gen company I'm talking CPA.
Speaker:okay.
Speaker:So to back up, part of the reason why this happens is because the
Speaker:algorithm, you know, we're telling it, Hey, here's more money.
Speaker:To spend.
Speaker:And so it has to go out, find new people, new, new pockets of the market.
Speaker:Oftentimes it's going up the funnel rate.
Speaker:So it was just doing a lot of remarketing.
Speaker:It was doing a lot of the people that are searching for the keywords
Speaker:that have less competition.
Speaker:Now it has to go up the funnel to people that, you know, maybe maybe
Speaker:need to click on ads multiple times before they're ready to convert.
Speaker:Maybe it has to go after keywords that are highly competitive, things like that.
Speaker:So.
Speaker:That's why it's getting more expensive as you grow.
Speaker:Now.
Speaker:Part of it is just that the algorithm doesn't know what to
Speaker:do with all that money, right?
Speaker:It has to go through a learning phase again, because you're saying here
Speaker:double the spend, or, or even if you add 20% more spend it, doesn't
Speaker:have the patterns at that bigger.
Speaker:Portion of the market to know who to target and when and
Speaker:where and how and why yet.
Speaker:so here's what I would recommend.
Speaker:First roll out the budget increases that you've planned without battling,
Speaker:without battling the CPA or the ROAS.
Speaker:Right.
Speaker:Don't.
Speaker:Don't try to keep a target CPA goal or keep a target ROAS goal on the
Speaker:campaigns and, and control that and push it down while you're rolling out
Speaker:budget increases because the algorithm needs this opportunity to learn and the
Speaker:target CPA goal and target ROAS goals.
Speaker:To be honest, might restrict the spend anyways.
Speaker:So.
Speaker:Probably can't even have it on because this is technically a learning
Speaker:phase that you're going through.
Speaker:Similarly don't make big changes, right?
Speaker:Don't shut off half your keywords.
Speaker:To try to push money into the half the keywords, roll out the budget
Speaker:increases first, roll them out.
Speaker:20% of the at a time.
Speaker:If you're at a higher spend, you can, you can do 20% increases.
Speaker:Every few days, if you're at a lower spend, I would recommend
Speaker:one 20% increase a week.
Speaker:If you're at a really low spend, maybe one every other week, and
Speaker:then give it a little bit of time.
Speaker:After you're done with the budget increases at that heightened
Speaker:spend, just to get familiar, right?
Speaker:You want to gather some conversion data before you start trying to drive
Speaker:that CPA down or the ROAS up again?
Speaker:Once you're there.
Speaker:And try to breathe through it.
Speaker:Don't forget once you're there, then you can start making some adjustments, right?
Speaker:Target CPA, goal, target ROAS goal.
Speaker:Yes.
Speaker:You know, try adding, adding that back in.
Speaker:I would suggest adding a target CPA goal.
Speaker:That's just slightly lower than what the average is that you've
Speaker:been seeing now that you added by.
Speaker:So slightly lower and see if the algorithm can learn how to make that happen for
Speaker:you without restricting the spend.
Speaker:If it does do it again, same thing goes with target ROAS, put a target ROAS goal.
Speaker:That's slightly higher than the rows you've been seeing with them
Speaker:higher budget and see if it's able to make that happen to you with it,
Speaker:with the, without restricting this.
Speaker:Rinse and repeat then you can do some other things, right?
Speaker:Like minor, minor bid adjustments on things like audience signals
Speaker:or audiences, ad schedules devices minor bid adjustments on Mac CPCs.
Speaker:These are all fine tuning type strategies that.
Speaker:You know, might not help the performance in a large way, maybe
Speaker:a nominal performance increase, but it is a way to start to try
Speaker:to, you know, battle that CPA.
Speaker:Now that you've increased your overall market share.
Speaker:You can also try to finding new keywords, right?
Speaker:Maybe you can afford to take on some more top of funnel keywords.
Speaker:You were just doing the low hanging fruit keywords before,
Speaker:but now you're at a higher market.
Speaker:So it might be profitable for you to add some keywords.
Speaker:Similarly, you can turn off some of your old keywords that, you
Speaker:know, you've tested, tried and tested, and you know that they're
Speaker:bringing in a high CPA for you.
Speaker:That's unaffordable.
Speaker:I would also rework your, your goals, right?
Speaker:So if you do significant budget increase and you find that your CPA
Speaker:has gone up, or your ROAS has gone down, it could be because that's,
Speaker:what's affordable for the market.
Speaker:That's, what's affordable for your competitors, and that
Speaker:should be affordable for you too.
Speaker:So at that scale you might need to rework your numbers and see if
Speaker:you know, now that your overhead is a smaller portion of the whole.
Speaker:And you have a bigger remarketing list, right?
Speaker:More people who have converted and who are visiting the website
Speaker:so that you can remarket to maybe it's possible that you can operate
Speaker:at that higher CPA or lower ROAS.
Speaker:So
Speaker:You can try also changing your keywords to exact match changing the match type of
Speaker:the keywords can sometimes help to focus the campaign and drive the cost down.
Speaker:All right.
Speaker:So let us know if you have any questions in the comments and don't forget to
