How Bid Caps on Meta Ads Can Lead to Lower CPAs In First-Time Purchasers 

When it comes to optimizing ad spend and maximizing conversions, a strategic approach can make all the difference. At Socium Media, we’ve found tremendous success by leveraging bid caps in Meta advertising campaigns, particularly for driving first-time purchases. One of our standout campaigns for a DTC eCommerce lifestyle brand is a perfect example of how setting a bid cap combined with an inflated budget strategy can efficiently scale efforts while achieving impressive results.

Why Are Bid Caps Important?

Bid caps empower advertisers to control costs while maximizing the efficiency of their campaigns. By setting a bid cap, you communicate to Meta the maximum amount you’re willing to pay for a specific conversion event. This approach allows advertisers to participate in auctions strategically without overpaying for results.

This strategy is particularly useful for advertisers with a clear understanding of their predicted conversion rates and the value of each new customer.

The First-Time Purchase + Inflated Budget Strategy

The DTC eCommerce lifestyle brand’s recent campaign focused on maximizing prospecting by optimizing for a custom “first-time purchase” conversion event. This approach aimed to reach as many new customers as possible while controlling costs effectively. 

We had a few goals: a  blended CAC (all device sales), garnering new customers, and the final goal of consistently selling products, vs. remarketing and subscriptions.

To scale efficiently, we:

• Set a bid cap: This allowed us to define the maximum amount we were willing to pay for each first-time purchase.
• Used an inflated budget: With the bid cap locked in ensuring that each new first-time purchase was profitable, we set a high daily budget to give Meta room to scale and drive high volume if it was able to find new customers.

The results were impressive:

• Triple Whale Attribution: The campaign achieved an $83 New Customer CPA based on total impact attribution.
• Meta Platform Reporting: To date, the campaign has driven 1,047 first-time purchase events at a $48 CPA.

Cost Per Result Goal vs. Bid Cap: Which Should You Use?

Both bid cap and cost per result goal have their place in campaign strategies, but understanding when to use each is crucial:

• Bid Cap:
  • Sets a maximum bid across auctions.
  • Ideal for advertisers with a firm grasp of their conversion value and a need to control costs tightly.
  • Ensures bids never exceed a defined value, making it ideal for campaigns focused on specific profitability margins.
• Cost Per Result Goal:
  • Targets a blended cost per result.
  • Uses machine learning to dynamically bid as high as needed to maximize results, keeping costs near the target amount.
  • Best for campaigns with flexible budgets focused on maximizing outcomes within a certain cost range.

How to Calculate the Right Bid Cap

Determining the appropriate bid cap involves understanding your business’s customer lifetime value (CLV) and profitability thresholds. For example, a skincare company may know that each new customer’s average annual spending translates to $41 in profit. To ensure profitability, they set a bid cap at $40—just below the profit threshold—to maintain positive returns. Another type of business that doesn’t have a high repeat customer rate might want to set their bid cap so they are profitable on the first purchase. Ultimately it comes down to the specific business and their goals.

Why This Strategy Works

This approach allowed us to efficiently scale prospecting efforts without sacrificing the quality of conversions. By setting clear boundaries on ad spend while targeting first-time purchases, we ensured the campaign delivered meaningful results for the client. This highlights the importance of:

1. Data-driven decisions: Using historical performance data and predictive metrics to set appropriate bid caps.
2. Scalable strategies: Leveraging higher budgets while maintaining cost controls.
3. Outcome-focused optimization: Targeting conversion events that drive long-term business growth.

The success of this campaign demonstrates the power of thoughtful strategies in Meta advertising. If your business is ready to optimize ad spend and drive meaningful conversions, let’s work together to craft campaigns that deliver results.