It's tempting to think of the relationship between ad spending and conversions as linear—spend more money, get more conversions.
Unfortunately, the reality is far more complicated. There’s a sweet spot where you’re spending enough to get conversions but not so much that you’re wasting money.
Shoelace CEO, Cory Dobbin, tweeted the following last month, inspiring this article:
Spending more makes your ads more expensive.— Cory Dobbin 🙇 (@CoryDobbin) October 14, 2022
As you increase spend, ad platforms have to stray from your ideal segment. The larger the budget, the larger the required audience, therefore the further you move from high purchase intent audiences, which drives up costs (CPA, etc). pic.twitter.com/iJlxT35pX0
The Relationship Between Ad Spend and Conversions
The reason many people believe that increasing ad spend is a surefire way to increase conversion is that… well, it is. When you grow your ad spend, ad platforms will serve your ad to more people, and more people will convert.
So, what’s the problem, then? Three words—target market saturation.
What Is Target Market Saturation?
Your target market is finite. Your secondary market is limited, too.
If you increase your ad spend indefinitely, the platforms you advertise on will serve your ad to less and less interested markets. In other words, your ad spending will become less and less efficient as your target market becomes saturated and you’re forced to move outside the boundaries.
Here’s a quick example—say you’re selling a SaaS product that helps small landscaping companies manage their businesses. You’ve done your research, and you know that your target market is small businesses in the US with 2-10 employees.
You create a Facebook ad campaign and set your budget at $500/day. Your ad is served to people who match your target market, and you get some conversions. So far, so good.
Now, you increase your ad spend to $1,000/day. You’re still getting conversions, but the cost per conversion (CAC/CPA) is starting to rise. This is because Meta will have to serve your ad to people who are less likely to be interested in your product—businesses with 50-100 employees, for example.
The same principle applies even if you’re not selling a physical product—whether you’re selling a service or trying to get people to sign up for your email list.
The Solution: Increase Ad Effectiveness
So, we’ve established that increasing your ad spend to a point where your target market is saturated leads to inefficiencies.
But what’s the alternative? After all, you still want more conversions.
It’s pretty simple—serving ads to your target market will always be the most efficient use of your ad budget. So, instead of spending more money to serve ads to people outside that market, you’re better off spending money to create better ads for that market—at least at first.
Maximizing the effectiveness of your ads before expanding past the boundaries of your target market is vital if you want to maximize the effectiveness of your ad spend—something that many lean businesses aim for.
How can you do that? Let’s discuss this.
3 Ways to Create More Effective Ads for Your Target Market
Now that we know that increasing ad spend is one of many ways to increase conversions let’s discuss a few ways to make your ads more effective.
Hippoc is an excellent example of this. Hippoc is an AI-powered ad testing tool that analyzes your ad designs and provides detailed insights on what will (and won’t) resonate with your target market.
Hippoc uses thousands of data points from real-world ad campaigns to deliver an easy-to-understand Impact Score. Impact Scores is a proprietary KPI that uses data from attention and recall datasets to predict how your audience will respond to an ad at the click of a button.
To get started, just upload your ad design(s) and set your objective – Hippoc will help you pick winning iterations, A/B test multiple designs, and grade key areas like your CTA, headline, and copy.
That said, the most effective ads are usually the result of close collaboration between creatives and copywriters. A great ad should be designed with ad copy in mind and written with design in mind.
Breaking down this creative silo might mean pushing some desks around or setting up a weekly joint meeting. Or something as simple as creating a shared Google doc for ad concepts. Whatever form it takes, the collaboration between creatives and copywriters will help ensure that your ads are designed and written in a way that’s optimally effective for your target market.
User feedback is essential for understanding what your target market loves (and hates) about your product, service, or brand. And when you know your target market’s needs and wants, you can create ads that speak to those needs and wants.
There are a few different ways to collect user feedback. For example, you could send surveys or use customer service as a data-gathering tool. You could also use Hotjar, which allows you to collect feedback from website visitors through on-site surveys and reports.
What To Do When You’re Done Optimizing
Once you’ve optimized your ad, it’s time to roll it out to your target audience.
Eventually, you may increase your ad spend to a point beyond target market saturation. That’s fine—just be sure that you’re not in the process of optimizing during this phase.
If you launch an ad that’s just “okay,” you may find that your conversions drop to an unsustainable level when your ads start getting pushed out to a larger audience.
It’s better to have a small, well-targeted ad campaign that converts well than a large, poorly-targeted one that doesn’t. So make sure your ads are as effective as possible before expanding your scope.
Start Optimizing Your Ad Spend With Hippoc
If you’re ready to start optimizing your ad spend, we can help.
Hippoc is an AI-powered ad testing tool that analyzes your ad designs and provides detailed insights on what will (and won’t) resonate with your target market.
We use thousands of data points gathered from real-world ad campaigns to deliver easy-to-understand impact scores for critical areas like your CTA, headline, and copy.
Sign up for a Free Plan today to see how we can help you create more effective ads.