Did you know that Facebook ads generate an average ROAS (Return on Ad Spend) of 2.11 across all industries? For e-commerce, this figure can skyrocket with the right audience targeting strategies. As an online store owner, you already understand the importance of targeting, but how can you take it to the next level?
In this updated guide, we’ll delve deep into Facebook’s Custom and Lookalike Audiences, breaking down which offers better ROAS and how you can leverage both to boost your online sales.
1. Deep Dive into Custom Audiences
What are Custom Audiences?
Custom Audiences allow you to target specific groups of people who have already interacted with your brand in some capacity—whether they visited your website, used your app, or engaged with your social media content. These audiences are perfect for retargeting, upselling, and creating hyper-personalized ads.
Types of Custom Audiences Most Relevant to E-commerce
- Website Visitors: Using Facebook Pixel, you can track specific page visits. For example, create an audience of users who added items to their cart but didn’t complete the purchase—perfect for cart abandonment ads.
- Customer Lists: Upload email lists of past customers or newsletter subscribers. Segment these audiences by purchase behavior, such as frequent buyers or users who haven’t shopped in six months.
- App Users: Track those who have downloaded your app but haven’t made a purchase recently, and retarget them with in-app offers or reminders.
- Engagement Audiences: Target people who have interacted with your content—commented on a post, watched a video, or clicked on an ad. You can build dynamic retargeting campaigns to guide them further down the purchase funnel.
Updated Strategy: Segment Your Audience by Intent
Create micro-segments based on users’ behavior. For instance, instead of retargeting all website visitors, focus on people who viewed a specific product category like “Winter Collection” and serve them ads with complementary products or a limited-time discount.
2. Lookalike Audiences: Expanding Reach with Precision
What are Lookalike Audiences?
Lookalike Audiences allow you to reach new users who share traits with your best customers. Facebook’s machine learning analyzes your source audience and expands it to people with similar behaviors and interests, making them likely to convert.
High-Value Source Audience Selection
- Top Spenders: Build your Lookalike Audience based on high-value customers—people who’ve made multiple purchases or spent above average.
- Engaged Users: Use your email list or app users who consistently interact with your brand. The more engaged your source audience, the better your Lookalike Audience will perform.
Updated Strategy: Lookalikes Based on Purchase Frequency
If your e-commerce business relies on repeat purchases, create Lookalikes based on customers who buy frequently. This method can drive higher CLTV (Customer Lifetime Value) rather than just focusing on one-off transactions.
3. Custom vs. Lookalike Audiences: Which is Better?
Targeting Methods and Sales Impact
- Custom Audiences: These are gold for retargeting and closing the deal with users who already know your brand. For example, use Dynamic Ads to show products from a user’s last visit to your site.
- Lookalike Audiences: Ideal for scaling your customer base. For example, when launching a new product line, create a Lookalike Audience based on people who purchased similar items from your store.
Data Freshness and Accuracy
- Custom Audiences: Regular updates are essential. Ensure your customer lists and Pixel data are refreshed frequently for accuracy.
- Lookalike Audiences: Quality depends on the source. If your original audience is outdated, your Lookalike performance will falter. Make sure to update your source lists every few months.
4. Maximizing ROAS: Advanced Tactics for E-commerce Success
ROAS: How to Calculate and Improve It
ROAS = (Revenue Generated / Ad Spend). For example, if you spend $200 and generate $800 in sales, your ROAS is 4:1.
Boosting ROAS with Custom Audiences
- Segment More Granularly: Go beyond broad categories. Segment users based on their purchase patterns, such as targeting users who’ve purchased discounted products and upselling them new arrivals at a discount.
- Personalized Creatives: Tailor ad copy and visuals specifically for Custom Audiences. For instance, for previous buyers, use language like “Since you loved our summer collection, we think you’ll adore our winter styles.”
Boosting ROAS with Lookalike Audiences
- High-Quality Source Audiences: Use data from your most loyal customers for best results. Even a slight improvement in the quality of your source audience can make a significant difference.
- Experiment with Audience Size: Start with a 1% Lookalike to maximize similarity, but as you scale, try 3-5% to broaden your reach without sacrificing too much relevance.
5. Expert E-commerce Strategies for Audience Targeting
Dynamic Product Ads for Seamless Retargeting
Automatically show products to users based on their browsing behavior. For instance, if someone viewed a red sweater, serve them an ad featuring that sweater, possibly with a “Last Chance” label to create urgency.
Advanced Testing for Lookalike Audiences
Continuously test different audience sizes (1% to 10%) and optimize based on performance. Tip: For broader reach, use 5% Lookalikes when promoting sitewide sales, but switch to 1% for high-ticket items.
6. Tools and Automation to Simplify Targeting
Essential Tools
- Facebook Ads Manager: Essential for managing campaigns and tracking performance metrics.
- Third-Party CRMs: Integrate with tools like Klaviyo or HubSpot to feed real-time customer data into Facebook Ads, ensuring your Custom Audiences stay updated.
Leveraging Automation and AI for Smarter Targeting
- AI-Powered Campaigns: Tools like AdEspresso offer automated campaign suggestions based on performance data. This helps in adjusting bids and targeting dynamically.
- Automated Audience Updates: Facebook’s automation allows you to set up auto-updates for Custom Audiences, keeping your lists fresh without manual uploads.
Case Study : Lookalike Audiences for New Customer Acquisition – A Subscription Box Service
Brand Overview: “Fit & Fresh” is a subscription service delivering monthly health and wellness boxes, targeting young professionals who value a healthy lifestyle.
Challenge: The brand wanted to scale quickly but struggled to attract high-quality leads that converted into paying subscribers.
Solution: Lookalike Audiences (High-Value Subscribers): The brand created a Lookalike Audience based on their top 1% of high-value customers who had an average subscription tenure of 12 months or more.
Campaign Strategy:
- Video Ads showcasing the unboxing experience and customer testimonials were used to create an emotional connection with new potential customers.
- Free Trial Offers were promoted to entice new customers with a “first box free” campaign, specifically targeting the Lookalike Audience.
- To enhance personalization, they tested a Product Quiz funnel, where users answered questions about their fitness goals, and received a customized subscription box recommendation.
Results:
35% lower CPA (Cost per Acquisition) compared to broader audience campaigns.
53% increase in subscription sign-ups from Lookalike Audiences.
ROAS improved from 3.2 to 8.4, particularly strong for the Lookalike Audience based on high-LTV customers.
