Hi there,
Thanks for reaching out! Happy to give you some initial thoughts on your question about finding the right audience. Tbh, it's probably the most important question in paid advertising and where most people go wrong, especialy when they're just starting out. It's not as simple as picking a few interests from a list, which is what most platforms would have you believe.
The real way to nail your targeting is to stop thinking about 'interest groups' and start thinking about your customer's most urgent, expensive problems. I'll walk you through how we approach this.
TLDR;
- Stop targeting broad demographics and interests. Instead, define your ideal customer by their 'nightmare'—the specific, urgent problem that keeps them up at night.
- The goal isn't the lowest cost per click; it's acquiring high-value customers. You need to calculate your Customer Lifetime Value (LTV) to understand what you can truly afford to spend on ads.
- Structure your campaigns methodically using a ToFu/MoFu/BoFu (Top, Middle, Bottom of Funnel) approach to guide people from awareness to purchase.
- Your 'offer' is more important than your targeting. A low-friction, high-value offer (like a free trial or a useful tool) will outperform a "Request a Demo" button every time.
- This letter includes an interactive LTV Calculator and a Funnel Strategy Flowchart to help you put these ideas into practice.
You'll need to define your ICP by their nightmare, not their demographics...
This is the first and biggest mistake I see. People create these sterile profiles like "Men, 25-40, interested in football". That tells you nothing. It's useless. You end up with generic ads that speak to no one and you burn through your budget.
You need to become an expert in your customer's specific, career-threatening nightmare. Your Ideal Customer Profile (ICP) isn't a person; it's a problem state.
Let's say you sell a project management tool. Your ICP isn't 'small business owners'. It's the agency owner who is terrified she's going to lose her biggest client because her team keeps missing deadlines and communication is a mess. That's the nightmare. Her pain is chaos, lost revenue, and reputational damage. Suddenly, your ad isn't about 'features'; it's about 'restoring order' and 'saving your most valuable client relationship'. See the difference?
Once you've isolated that nightmare, you can get much smarter with your targeting. Where does this stressed-out agency owner go for advice?
- -> She probably listens to business podcasts on her commute.
- -> She might follow industry leaders on LinkedIn or Twitter.
- -> She might be in Facebook groups for agency owners.
- -> She probably already uses other software like HubSpot, Slack, or Xero.
These become your 'interests'. You're not targeting 'business'; you're targeting the specific ecosystem of your ideal customer. I've seen so many accounts targeting massive, broad interests and wondering why it doesnt work. For instance, if you're trying to reach eCommerce store owners, targeting "Amazon" is a terrible idea. That includes millions of shoppers. But targeting interests like "Shopify", "WooCommerce", or pages of well-known eCommerce agencies? Now you're getting somewhere. You're targeting platforms and services that your ICP almost certainly uses or follows.
This initial research is the absolute foundation. If you don't do this work, you have no business spending a single pound on ads, whether it's £2 a day or £2,000.
I'd say you need to understand the numbers behind customer acquisition...
Your question hints at another common trap: focusing on a tiny budget and by extension, a super low cost per click or lead. The real question isn't "How low can my Cost Per Lead (CPL) go?" but "How high a CPL can I afford to acquire a truly great customer?"
The answer is in a metric called Lifetime Value (LTV). This is the total profit you'll make from an average customer over the entire time they do business with you. Understanding this number completely changes the game.
Here’s the simple maths:
- Average Revenue Per Account (ARPA): What do you make per customer, per month?
- Gross Margin %: What's your profit margin on that revenue?
- Monthly Churn Rate: What percentage of customers do you lose each month?
The calculation is: LTV = (ARPA * Gross Margin %) / Monthly Churn Rate
Let's run an example. Say your software costs £100/month (ARPA), your gross margin is 70%, and you lose 5% of your customers each month (churn).
LTV = (£100 * 0.70) / 0.05 = £70 / 0.05 = £1,400
Each customer you sign up is worth £1,400 in profit to your business. A healthy ratio for LTV to Customer Acquisition Cost (CAC) is about 3:1. This means you can afford to spend up to £466 (£1,400 / 3) to acquire a single new customer.
Suddenly, worrying about a £2 click or even a £50 lead seems silly, doesn't it? If you know a customer is worth £1,400, you can confidently invest in higher-quality, more expensive ad placements that your competitors, who are obsessed with cheap clicks, are too scared to touch.
To make this real for you, I've built a simple calculator. Play around with your own numbers and see what your LTV is. This will give you your 'true north' for ad spend.
We'll need to look at how you structure your audience targeting...
Okay, so you've defined your ICP's nightmare and you know what a good customer is worth. Now you can build your campaigns with a proper structure. Most amatuers just throw a bunch of interests into one ad set and hope for the best. That's like fishing with a single hook in the middle of the ocean.
We structure everything based on the marketing funnel. It sounds like jargon, but it's simple: Top of Funnel (ToFu), Middle of Funnel (MoFu), and Bottom of Funnel (BoFu).
- ToFu (Cold Traffic): People who have never heard of you. Your goal is to make them aware of the problem you solve. This is where your ICP nightmare research comes in.
- MoFu (Warm Traffic): People who have shown some interest. They've visited your website, watched a video, or engaged with an ad. Your goal is to build trust and educate them.
- BoFu (Hot Traffic): People who are close to buying. They've added a product to their cart or visited the checkout page. Your goal is to close the sale.
You need seperate campaigns for each stage. Here's how I would prioritise the audiences within that structure, especially for a platform like Meta (Facebook/Instagram).
- 1. Detailed Targeting: Based on your 'ICP Nightmare' research (specific tools, publications, influencers).
- 2. Lookalike of Customers: Create audiences that 'look like' your best customers. Start with a lookalike of purchasers, then work backwards (e.g. lookalike of leads, lookalike of visitors).
- 3. Broad Targeting: Only use this once your ad account has lots of conversion data. Let the algorithm find people for you.
- 1. Website Visitors: Retarget everyone who visited your site in the last 30-90 days (but didn't buy).
- 2. Video Viewers: People who watched a good chunk of your video ads. They're interested.
- 3. Social Engagers: People who liked, commented, or shared your posts/ads.
- 1. Added to Cart: People who added a product to their cart but didn't buy (last 7-14 days). Show them an offer!
- 2. Initiated Checkout: They were *so* close. Remind them to finish.
- 3. Previous Customers: Don't forget them! Sell them more or new products.
With your $2/day budget, you can't do all this at once. You should focus entirely on one ToFu audience first. Pick the single best 'interest' group based on your nightmare research and run your ads just to them. Your goal is to get enough data (e.g., 100 website visitors from that audience) so you can start building a MoFu retargeting audience. It's a slow build, but it's the correct way to do it. You prove the model on a small scale before you add more money.
You probably should rethink your offer...
Here's the brutal truth: the best targeting in the world won't save a bad offer. In fact, your offer is probably the #1 reason why your campaigns will fail, and it's something most people don't even think about.
The "Request a Demo" button is the most arrogant, high-friction Call to Action in marketing. It presumes a busy person has nothing better to do than schedule a meeting to be sold to. It offers them zero immediate value. It's a failure point.
Your offer's only job is to deliver an "aha!" moment of undeniable value that makes the prospect sell themselves on your solution. You must solve a small, real problem for free to earn the right to solve their whole problem.
What does a good offer look like?
- For a SaaS product: A free trial (no credit card) or a freemium plan. Let them use the actual product. I remember one B2B SaaS client saw a huge jump in signups when they switched from a demo request to a free trial; we got them over 1,500 trials this way. The product itself becomes the salesperson.
- For a service business (like an agency): A free, automated tool or a high-value piece of content. This could be a website SEO audit, a data health check, or a 15-minute interactive video training. For our own consultancy, we offer a free 20-minute ad account audit. We provide real value upfront.
- For an eCommerce store: It's not just about a 10% discount. It could be a free guide on "How to Choose the Right [Your Product]", a quiz that helps them find the perfect item, or entry into a prize draw. One campaign we worked on in that space generated over £100k at 618% ROAS from prize draw campaigns.
Your offer needs to be a perfect match for the audience's pain. If their nightmare is uncertainty, your offer should provide clarity. If their nightmare is inefficiency, your offer should provide a shortcut. A weak offer will just burn your budget, no matter how small.
And finaly, a word on your messaging...
Once you have your ICP's nightmare, your LTV numbers, your audience structure, and a killer offer, the ad copy almost writes itself. You just need to connect the dots. Don't talk about yourself or your product's features. Talk about their pain.
We often use two simple formulas:
1. Problem-Agitate-Solve (PAS):
-> Problem: State their nightmare directly. "Are your cash flow projections just a shot in the dark?"
-> Agitate: Pour salt on the wound. "Are you one bad month away from a payroll crisis while your competitors are confidently raising their next round?"
-> Solve: Introduce your offer as the solution. "Get expert financial strategy for a fraction of a full-time hire. We build dashboards that turn uncertainty into predictable growth."
2. Before-After-Bridge (BAB):
-> Before: Describe their current, painful reality. "Your cloud bill just arrived. It’s 30% higher than last month, and your engineers have no idea why."
-> After: Paint a picture of the dream outcome. "Imagine opening your cloud bill and smiling. You see where every dollar is going and waste is automatically eliminated."
-> Bridge: Position your product as the bridge to get them there. "Our platform is the bridge that gets you there. Start a free trial and find your first £1,000 in savings today."
This type of messaging acts as a filter. The wrong people will ignore it, but the right people—the ones actually living that nightmare—will feel like you're reading their minds. They are the ones who will click, and they are the ones who will convert.
This is the main advice I have for you:
I know this is a lot to take in, especialy when you're just starting. But getting this foundation right is the difference between building a scalable advertising machine and just setting money on fire. I've broken down the key actions into a table for you below.
| Area of Focus | Recommendation | Why It Matters | Your First Step |
|---|---|---|---|
| 1. Customer Definition | Stop using broad demographics. Define your Ideal Customer Profile (ICP) by their most urgent, expensive 'nightmare'. | This unlocks hyper-relevant ad copy and targeting that speaks directly to your best potential customers, making your ads feel personal, not generic. | Write down one sentence describing your customer's biggest professional or personal frustration that your product solves. |
| 2. Financials | Calculate your Customer Lifetime Value (LTV). Stop obsessing over cheap clicks. | Knowing your LTV tells you how much you can truly afford to spend to acquire a customer, freeing you to target higher-quality (and more expensive) audiences. | Use the LTV calculator in this letter with your best estimates for revenue, margin, and churn. |
| 3. Audience Strategy | Structure your campaigns by the funnel (ToFu, MoFu, BoFu). Start by testing one highly-specific ToFu audience. | This methodical approach prevents wasted spend and allows you to systematically turn strangers into customers. | Create one campaign targeting the single best interest you identified from your 'nightmare' research. |
| 4. The Offer | Replace low-value calls to action (like "Contact Us") with a high-value, low-friction offer (free tool, trial, valuable guide). | An irresistible offer does the heavy lifting. It pre-qualifies prospects and makes them *want* to engage, dramatically increasing conversion rates. | Brainstorm one thing you can give away for free that solves a small part of your customer's nightmare. |
Getting this right requires a shift in thinking, and it's not always easy to implement on your own. You go from just 'running ads' to building a proper customer acquisition system. If you'd like to go over how these principles could apply specifically to your business, we offer a free, no-obligation initial consultation where we can review your current setup and give you some more tailored advice.
Hope this helps!
Regards,
Team @ Lukas Holschuh
