Pencil's Core Pillars For Growth

Customers always ask us what matters most when getting their ad accounts to scale. There are 100 different opinions on this. Most of the people sharing them are very smart 🧠. Test what they have to say and learn for yourself.

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Remember though that your business is the same and different to the situation in which they are describing what worked for them. Context is paramount!

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What I am going to share now has played across hundreds of ad accounts of varying sizes and sophistication. These core principles that Pencil has synthesized have been hard won, but in a broad sense can work for you.

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In future posts we will share frameworks to employ these principles based on the type of business you have.

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TLDR

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• You need to consistently run ads, and not try to "hack Facebook" or any channel give it what it wants; new creative tests that deliver value to their users and drive engagement.
• If you are fast, you have an advantage in winning more customers, simply by testing what works best for them.
• The process is simpler than you think, make sure you execute consistently to uncover the impact they are having on the business.
• Know your numbers, they will give you a north star on types of outcomes you are looking for from your ads + how to leverage your new customers into the future.

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All of this is predicated on the 3V's:

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• Volume
• Variety
• Velocity

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We want to help make sure you can leverage each of those by using Pencil, your chosen media channel, and a few key models.

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Ad Account Setup

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1) Broad Targeting + All Placements

• We want to give the algorithm as much liquidity as possible to find scale and efficiency. (check out: this video on the breakdown effect) * Liquidity → a state in which every dollar can flow to the most valuable impression. (learn more here)

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2) Test Budget Always On

• 20% of total budget
• A test budget is a budget allocated to testing new ads on weekly or bi-weekly cadence; 🔥 tip: many brands neglect this piece, focusing only on scaling spend, without having a backlog of ads capable of scaling. Fact is you need those battle tested new ad ideas, and you need to test to find them.
• 🔥 tip: Don’t fight algorithms → focus on doing what the platform wants most for the brands that advertise with them to engage their customers through VALUE EXCHANGE, so they keep their time on platform HIGH.

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To Zuckerberg, “time well spent” means independent research showing that people value the time they spend on Facebook, and feel better about themselves afterward. To Harris, it represents a shift away from measuring comments and shares to emphasizing companies’ positive contributions to users’ lives. (from the Verge)

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Test Creative Weekly

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• This sounds posh and passé at the same time. We’ve shared our data many times on why this is still and will continue to remain relevant. (Our performance review)

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1) Create Weekly

• With Pencil you can create ads in minutes, you don’t have to wait for a designer, all you need is assets. Why would you create is the question? Especially if the algorithms are craving new ways to deliver value.
• Use Predictions to test the right ads: you’ve already tested, why not use your data to better inform how you make decisions.

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• Export + Launch Weekly 🚀 - your cadence might be different but you need to get passed 10 ads per month to find your winner.  Seem like a lot based on how you’ve been running the business? What if you did it bi-monthly in bigger batches of tests?
• Like I said before, context is important, these principles are broad strokes and can’t solve for your unique business case and needs, but the main point of them is to be a consistent flow of tests and reservoir of content to draw on that delivers value to the end consumer, who you are trying to win.

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Weekly Actions

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The simplicity of this will easier excite or disgust you. 🤢 or 😍?

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1) Pause Losing Ads

• Defined as → any ad that is below your account baseline (review breakdown effect to understand what you should be looking for)

2) Scale Winning Ads

• Defined as → any ad that is above your account baseline

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You are spending precious media dollars and will be watching this hawkishly to determine what is working. A few things to ask yourself:

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1) What is scaling? This is a great little thought exercise to demonstrate what we are trying to accomplish when scaling (bonus: it's an example of the breakdown effect)

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• Ad A in the above example will always be better when measuring for scale than B because the paid channel algorithm has determined it can handle scaled spend. If you decided to turn it off due to inefficiency and push Ad B, the metrics would degrade rather quickly to the point of being worse than Ad A.

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2) What is my payback period on the ads?

• First, what is this: The payback period is the amount of time that it takes to earn back the cost of acquiring a new customer. For example: if it costs you $100 to acquire a new customer (e.g. running FB ads) and you make $25 per month from that customer, your payback period is four months.

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How quickly you are ROI neutral is determined by:

• the quality of users you bring in
• the products they start with
• the COGS on those products
• Your lifecycle process: email, push, SMS

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Why this matters: the quicker the payback period, the quicker you can reinvest the capital to scale the business in a cost-efficient way.

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3) Can I continue or speed up this trend?

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• Test more/better ads -> Do you see how many different variants of messaging and creative the your competitor brands test? That's because they do not know what will work and neither do you. So keep testing, keep iterating and you'll get there.
• Review your landing pages -> Even if your ads are working and your getting clicks; if you don't have an optimized landing page, or unclear offer, you won't convert.
• Test your offer -> Is what you are selling good enough? Is the price right? Your customers will tell you what is appropriate.

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Phew, if you made it this far, you are the 🐐. We will have more on how this works for your specific business case. Please let us know if you have any questions and make sure you let us know if you start leveraging any of the above content, we’d love to hear how it goes! 🚀

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