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[GTM Analyst Insight Report] Over-Investing in Facebook Ads Channel is Hurting Near Term Bookings

[GTM Analyst Insight Report] Over-Investing in Facebook Ads Channel is Hurting Near Term Bookings

Originally published in August 2020

Note: This is an actual scaleMatters analyst insight report delivered to our customer's executive leadership team in August 2020. To protect customer privacy, their company name has been hidden from all charts. At the time of this writing, our customer was a $15M ARR marketing software company serving SMB home services businesses.

 

🚨Over-investing in Facebook Ads Channel is Hurting Near Term Bookings [APR-JUL 2020]

 

Summary Findings

  1. Current amount of both SDR and AE resources applied to working leads/meetings/opps from Facebook Ads channel are not sustainable unless Bottom of Funnel pipeline conversion rates improve substantially.
  2. Facebook Ads cost of acquisition is 5X higher than SDR Prospecting and the SDR/AE resources being applied to Facebook Ads are pulling away from SDR Prospecting efforts. It's a double whammy.

Analyst Recommendation

  1. Use less costly resource than existing SDR team to process leads into meetings (offshore, automated screening)
  2. Enhance the sales team's skills at selling to prospects from Facebook Ads.
  3. Facebook Ads spend and associated SDR/AE resources should be scaled back until overall conversion rates improve dramatically. Otherwise, short term aggregate bookings will continue to be at risk.

 

Pipeline Quality Comparison: Facebook Ads vs. SDR Prospecting

 

Before Pipeline Comparison

 

Facebook Ads Cost of Acquisition 5X Higher Than SDR Prospecting

 

Facebook Ads total cost: $22,342 per deal or $1.82 per $1 ARR
SDR Prospecting total cost: $4,577 per deal or $0.44 per $1 ARR

 

 

Problem 1. Bottom-of-funnel conversion rate drains AE resources

The April-July combined conversion rate from Meetings Set to Deals was 3.3% for the Facebook Ads vs, 17% for SDR Prospecting.

This implies that ~31 Meetings Set are required from Facebook leads to generate a deal while only ~6 Meetings Set are required from SDR Prospecting to generate 1 new deal.

With a ramped AE capable of handling 52 set meetings per month, this implies the Facebook Ads channel requires 0.59 ramped AE per deal which equates to ~$7,062 at a $12K/month fully-loaded cost, while the SDR Prospecting channel requires only 0.11 ramped AE per deal which equates to ~$1,355.

 

Facebook Ads Bottom-of-Funnel Cost: $7,062 per deal
SDR Prospecting Bottom-of-Funnel Cost: $1,355 per deal

 

 

Problem 2. SDR Prospecting resources also being drained by Facebook Ads lead follow-up

It takes ~78 calls against the Facebook Ads leads to set a meeting.

It takes ~111 SDR Prospecting calls to set a meeting.

Given the BoFu conversion rates, this implies ~2379 calls to get a deal via Facebook Ads vs. ~655 calls to get a deal via SDR Prospecting.

At roughly 1,300 calls/month/SDR, it requires 1.83 SDR staff-months to generate a deal via Facebook Ads vs. 0.50 SDR staff-months via SDR Prospecting.

At an estimated $6K per SDR staff-month, this implies $10,980 to source a deal via Facebook Ads vs. $3,000 in SDR Prospecting.

The ad spend to generate the Facebook leads for the period was ~$17,200 (not including agency costs) which translates to $4,300 per deal.

The lead costs for the SDR Prospecting strategy were ~$8,000 which translates to ~$222 per deal.

Accordingly, top-of funnel costs are:

Facebook Ads Top-of-Funnel Cost: $15,280 per deal
SDR Prospecting Top-of-Funnel Cost: $3,222 per deal

 

 

These resource drains are at the expense of more productive strategies

CAC associated with the Facebook Ads channel has been quite high relative to other strategies.

The real risk is that as the charts below show, we've allocated more SDR and AE resources to the Facebook Ads channel and that has come at the expense of the SDR Prospecting strategy and accordingly has probably resulted in less total deals closed.

 

Supporting analysis and trend charts below ⬇️

 

 

Before Facebook Ads Calls

Before SDR Prospecting Deals


 

UPDATE: Customer took action on our analyst recommendation

  1. Redirected SDR and AE resources to focus almost exclusively on outbound prospecting.

  2. Huge improvement in full funnel performance via SDR and AE Prospecting from March - July 2020 vs. August - December 2020.

After - AE Prospecting

 

After - SDR Prospecting

 

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