Facebook Ads: How to Scale With a Tiered Bid Cap & Lookalike Audiences

Published: October 21, 2019
8 min read

Facebook Ads: How to Scale With a Tiered Bid Cap & Lookalike Audiences

Are you looking to drive higher-converting leads for your Facebook ads campaigns? Do you need a strategic framework that will help you scale your lead generation efforts while seeing more cost-effective results?

In this article, you will learn how to scale a lookalike audience strategy like a pro, while driving leads that see higher conversion rates and are more qualified.

Image by Vivi Image

The Current State of Facebook Lookalike Targeting

Since 2013, advertisers running Facebook ads have benefited from the power of lookalike audience targeting. Not only are lookalikes more effective, but they are also time-saving for businesses who don’t have a crystal clear picture of their audience profile.

Lookalike targeting allows advertisers to bypass the arduous process of testing interest & behavior options on Facebook, and all their owned properties (i.e. Instagram, Messenger). Instead, you can simply upload an email list from previous purchasers of your product or service, and/or choose to model an audience from high-intent website activity (i.e. Top 25% time on site), amongst other options, to increase audience traffic into your funnel.

The Complication with Scaling Lookalike Audiences

Image the following scenario.

For the last 6 months, your business has been seeing a consistent flow of leads from your Facebook ads campaign that has been converting at an average rate of 12%. As the business grows, you decide it’s time to add an additional sales agent to your team so that you can continue to scale your pipeline while sustaining your current lead-to-sales conversion rates.

Your goal now is to generate another 15 leads per day, and you decide to create a broader lookalike audience segment, expanding from a lookalike 1% to a lookalike 5% to achieve this. However, to your surprise, you soon realize that although you are able to attract lower cost leads, your new team member has been having a hard time converting the new leads.

At first, you believe it’s solely the sales agent’s experience, as he is new to your company, and you expect his performance will improve over the coming weeks. Despite your patience, you observe that the agent continues to perform below your team’s standards, as the agent only manages to converts about 5% of the incremental lead volume.

Before deciding to let the agent go, you decide to route some of the lookalike 5% leads to your top sales associate to validate the issue. However, you are shocked when your #1 agent hovers at a 5% conversion rate, just like the new agent.

This phenomenon is a common occurrence when expanding your lookalike audience as you sacrifice performance when you broaden the percentage of the audience size.

You might not see the impact in your standard media metrics (i.e. CTR/CPC), but you will see the decrease in performance when it comes to action metrics like conversions.

This diminishing return is simply a factor of lower number of matching characteristics between your initial audience source (i.e. Email List) and the audience Facebook builds. The tradeoff is that you are able to increase your audience size, and your lookalike approach should still be of greater impact than a more basic interest & behavior strategy.

Improving Lead Conversion Rate with a Tiered Bid Approach

A tiered bid approach allows you to weight the value of each lookalike audience distinctly at your bid level. It gives you more control and can help you scale your Facebook ads while maintaining a strong pipeline of qualified leads. 

Facebook Ads Lookalike Strategy

The Facebook ads manager platform grants you the capability to control bids for your conversion campaigns with three distinct options:

  1. Cost Cap:The algorithm will get you as many leads for a specific budget
  2. Bid Cap:The algorithm with serve ads more aggressive to users it believes it can convert under your max bid, and it will not bid over your specified amount.
  3. Target Cost:The algorithm will deliver ads to users, and will attempt to avg. the bids to your desired cost. However, it can bid above that and below.

My recommendation is to use a bid cap strategy as this option will allow you to have the maximum control to drive predictable leads, without going over your costs.


Your max CPL (cost-per-lead) is the most you are willing to pay for a lead from your Facebook ads campaign. This is what you will use for your Lookalike 1% audience as they will drive the highest qualified audience and will be the easiest to convert into a paying customer 

Often times, marketing teams work with sales and finance department to understand the business economics and establish this number.However, If you are unsure of how you should arrive at your max bid, then use the following formula below.

Facebook Ads bid cap

Essentially, you want to map out what costs to attract a lead on Facebook (using historical campaign performance), and factor that by your average conversion rate. Additionally, you want to consider the economics of your business, to ensure that you can still be profitable with your max CPL.

If you have not previously ran any Facebook campaigns, then you would want to consider first testing a lookalike 1% audience strategy with an ‘automatic bid’ and gauge the CPL for that campaign before utilizing the above framework.


Now that you have established the highest dollar amount that you can pay for a lead, you are going to decrease you max CPL by about 15% with each increment in your lookalike audience size. For example, if you are paying $25 for your lookalike 1%, then you would set your max CPL at $21 for a lookalike 2%.

Facebook Ads Lookalike Strategy

You might be wondering, at this stage, what would be the purpose of expanding the audience to the broader lookalike 6-10%, if the conversion rate is the highest for the lookalike 1% segment.

The question is fair, and I would remind you that this is a strategic framework to both scale audiences & performance. Your lookalike audience size will be capped at a maximum of 2.1M users if you are advertising in the U.S. market, and the incremental lookalike audiences help you reach more qualified audiences beyond that.

Layering Broader Lookalike Audiences W/ Additional Targeting

For advertisers who are looking to scale audience into the lookalike 6-10% audience sizes, it is recommended to add additional audience parameters to further mitigate the diminishing return of the broader audience.

Lookalike Audience Strategy

A simple method to accomplish this is by adding interest and/or behavior options additional to the audience segment.

Here are a few of my commonly used behavior qualifiers:

  • Financial: Household Income via Zip Code targeting 
  • Tech Savvy: Early adopters of technology
  • Demo: Household with kids

The one caveat here, is that if you are seeing strong results in your broader lookalike audiences and want to scale further, then you should test running without the parameters as well to gauge additional learnings.

Building Your Tiered Lookalike Audience Campaign

Once you have your bids determined, it’s time to build your Facebook conversions campaign and start scaling your leads with performance.

Step #1 is to build your lookalike audiences in the audience’s tab of ads manager, and select the ranges that you will use. My recommendation is to start with smaller increments and then consider going larger. 

Facebook Ads Lookalike Leads Strategy

Step #2 Build a New Conversion Campaign

Once your audiences populate, you can build your conversion campaign and select the desired optimization event for your campaigns.

Facebook Ads Conversion

Step #3 Build Your Ad-sets & Adjust Your Bids

The next step is to build out your audience targeting at the ad-set level and select the corresponding bid for each audience as outlined in the ‘lookalike tiered bid’ chart.

  • Lookalike 1% gets the highest CPL bid
  • Lookalike 6-10% gets the lowest CPL bid

Once this is complete, you want to follow the rest of the setup process as usual. Building your ads and setting the campaigns to go live!

Optimize/Learn & Improve CPL Further

After you campaign gets approved and goes live, you will want to wait for at least 3-4 days of ad delivery before you begin to optimize. 

Facebook Ads Lookalike Audiences

There are several ways to optimize your ads once the campaign is live, but keep in mind that making changes to the bid levels once the campaign has been activated will reset the learning phase of the algorithm, and will negatively impact the delivery of your ads for the remainder of the flight.

My recommendation is to focus your initial optimizations around budgets, audiences, and creatives. So for example, if you see that the lookalike 3% audience segment is performing really well, then you could consider increasing the budget to attract more leads.

As with all campaigns, it is crucial for you to review the performance of the audiences and glean insights from the performance. This will ensure that you can maximize the ROI of your campaigns, and truly see strong results as you scale your lead volume. 

Depending on the scope of your investment, and the nature of your business, you should think about optimizing with a greater frequency or lesser frequency.

Expanding After Your First Campaign

Post-campaign, you have another opportunity to expand on the framework of the audience tiered bid, as you can go another layer deeper by optimizing your bids by placement as well. This will help you to continue to drive down the CPL while improving the quality of the leads your sales team is receiving.

Facebook Ads Lookalike Strategy

Here is one example as to how you can achieve this at the placement level for the Lookalike 1% audience segment, which should in theory be your highest max CPL and your best performer.

Lookalike Audience 1% Example:

  • Facebook News Feed Desktop: $35
  • Facebook News Feed Mobile: $25
  • Instagram News Feed: $28
  • Instagram Stories: $21

Your goal will be to review campaign performance and align you bids by what it actually driving the desired results. If you are unsure of which placements performed best, then simply leverage Facebook’s Offline Sales conversion tool,which allows you to upload a list of purchasers that can match against your campaign to reveal which leads actually turned into sales.

Facebook Ads Offline Conversion Tutorial

You first have to create a new offline event set, which is where Facebook will deposit & track your offline conversion information. Once that is setup, you can upload a CSV with your sales so that Facebook can start matching your sales.

Facebook Ads Offline Data Set

As a best practice, you should upload a list of purchasers weekly, with a minimum frequency of a monthly upload as ads manager will not be able to match sales past the 28-day mark.

Facebook Ads Offline Conversions

Lastly, your CSV upload file should contain the following fields:

  • First Name
  • Last Name
  • Email
  • Event (I.e. Lead)
  • Time Stamp (which should include both date & time)

Once that is uploaded you can map the data in Facebook and then wait for your audience to be matched. You will see your audience match rate on the screen, and then you are free to return to ads manager to begin reviewing your performance at an audience & placement level, so that you can further improve your Facebook ads ROI. 


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