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How To Setup Facebook Retargeting Funnel

The cost to advertise (and compete) on Facebook is on the rise. A whopping 85% of consumers conduct research before deciding to make an online purchase. And most people don’t purchase the first time they see your product. If you want to massively profit from Facebook, you need a bulletproof retargeting funnel.
By Dara Denney
This Is How Your Customers Think


If you’re only going to read one guide about Facebook retargeting…make it this one.

I’m going to teach you everything you need to know about how to design and build a powerful retargeting funnel that makes it possible to dramatically increase your profitability and scale your advertising.

Facebook ads aren’t getting any cheaper! The cost to advertise on Facebook is at an all-time high.

According to Statista, 85% of people conduct research before making an online purchase.

Your customers live online, and they already purchase from someone else.

The only way to acquire a new customer is to convince them to stop doing business with someone else. And then you still have to convince them to purchase from you!

Think about the last time you made an online purchase… ?

  • Did you research competing brands, or different products?
  • Did you price check on Amazon?
  • Did you check reviews and social proof?
  • Did you search the web for discounts?

Retargeting will make or break your business.

How To Build a High Converting Facebook Retargeting Funnel

Account Structure: TOFU, MOFU, BOFU

Before we dive into retargeting techniques, it’s important to understand how to structure your account.

We use the TOFU, MOFU, BOFU method:

  1. TOFU – Top of funnel
  2. MOFU – Middle of funnel
  3. BOFU – Bottom of funnel

We use this naming convention to structure most of our accounts here at Fetch & Funnel.

how to create a retargeting ad on facebook

TOFU (top of funnel) is for targeting cold traffic on Facebook, and we’ll define cold traffic as anyone new to your product or brand, that hasn’t seen you before.

These cold traffic campaigns are often the first touchpoint that your future customer will have with you, and it’s the best place to use Facebook’s lookalike audiences as well as interest-based audiences for targeting purposes.

Don’t forget to include CBO campaigns that contain your best performing audiences, for scaling.

Not sure how to use CBO? Check out our Guide To Facebook CBO.

Moving on to our MOFU and BOFU campaigns (middle and bottom of funnel), this is where our retargeting takes place. These sections of the funnel are primarily used for retargeting website traffic, social engagers, and any other audiences that have previously interacted with your business.

MOFU usually includes social engagers and website visitors that haven’t viewed a product (or added to cart) yet.

And finally, BOFU contains our bottom of funnel traffic, usually comprised of groups of people that exhibit buying behaviors. Examples are people that have added a product to cart, spent significant time on your website, viewed multiple pages, or taken any other actions that typically lead to conversion.

We often use a blended approach, of both conversion and dynamic product campaigns at the bottom of funnel.

How To Set Up Your Facebook Retargeting Funnel (and which audiences to target)

Okay, now that we’ve covered naming conventions and how to create a retargeting ad on Facebook funnel, let’s take a look at which audiences to target.

Naturally, you’ll have to test audiences in order to determine which will be the most successful.

For some brands, retargeting Instagram engagers will yield tremendous results. But for others, this audience won’t produce a positive ROI.

It’s best to take budget into consideration. Where is most of your TOFU money being spent? Use this data to help narrow down your retargeting efforts.

Here’s a list of Facebook audiences we like to test in MOFU:

  • Video Viewers (from your TOFU campaigns)
  • Website visitors
  • Content viewers
  • Instagram Engagers
  • Facebook Engagers

how to create a retargeting ad on facebook

Within BOFU, we usually begin with two campaigns:

  1. Conversions
  2. Dynamic Product Ads (DPA)

Facebook Dynamic Product Ad campaigns are able to deliver ads containing the exact products someone viewed, or added to their cart on your website.

DPA is Really powerful advertising, so don’t overdo it.

When someone isn’t ready to make a purchase, repeatedly showing them the same product isn’t going to magically convince them to purchase.

There’s a reason people don’t buy, and as marketers it is our job to figure out what this reason is, and how to solve it.

Here’s a list of Facebook audiences we like to test in BOFU:

  • 14 days viewed content and/or add to cart, but not purchased
  • 180 days viewed content and/or add to cart, but not purchased
  • Top 25%, 10% time spent on website
  • Visited the website 2x
  • Past Purchasers

For the dynamic product campaign, we tend to stick to 14-day add to cart or viewed content, depending on the business.

How to Set Up Facebook Dynamic Product Ads

In order for you to set up DPA, you’ll need to have an up-to-date catalog containing all of your products.

How to set up a Shopify Product Catalog for Facebook Ads

For Shopify, we use the app Flexify. This makes catalog creation and the update process simple.

You can download Flexify here. It’s free in the Shopify App Store.

how to create a retargeting ad on facebook

Click “Add app” to add it to your Store.

You will then see it in the Apps section of your Shopify account.

how to setup facebook retargetinghow to setup facebook retargeting

Click on the app.

how to setup facebook retargeting

We recommend checking these two boxes in Settings.

how to setup facebook retargeting

Next you’ll select which collection to use for the feed.

We recommend everyone upgrade to Premium, because it offers automatic image resizing.

Larger retailers with many SKUs will be required to have a Premium subscription.

Your product feed lives in the URL, which you’ll copy into your Business Manager.

how to setup facebook retargeting

This brings up a good point. You will need to have a Business Manager account on Facebook!

Next, let’s head over to your Facebook Ads Manager account.

Click on the menu shown below:

how to setup facebook retargeting

how to setup facebook retargeting

Navigate to Catalog Manager.

how to setup facebook retargeting

Click on Product Date Sources. Click on Add Product and Add New Product.

facebook retargeting

On the next page you’ll click “Use Data Feed”. This is where you’ll be putting the URL from the very first step.

facebook retargeting

facebook retargeting

Configure your settings:

  • Name your feed, select your currency, and choose the uploading method.
  • We select automatic file upload schedule.

On the next page you’ll add the URL from the Flexify App in Shopify.

Almost finished!

Next you’ll create a Product Set, to ensure that only in-stock items are displayed in your ads.

To do this, go to Product Sets -> Create Product Set.

facebook retargeting

From here you’ll name your Product Set and match items for ALL, select Availability is in stock.

You’re finished! This will be the catalog that you use for your retargeting campaigns.

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For more thorough instructions on setting up your Shopify product catalog using Flexify, here’s a good video.

Chapter 4: Ad Copy That Makes Customers Purchase

You might be thinking: Okay, I know how to set up my account and I know which retargeting audiences to test first. I’M READY TO SCALE!

Slow down, partner. What about your ad copy? (You didn’t think you were able to get away with just duplicating your best performing top of funnel ads, did ya?)

So what’s the secret? Do your customer research. You’ll increase your conversion rates, and your customers will purchase faster.

When testing ad copy, consider the following…

Long-Form vs. Short-Form Copywriting

Which performs best for your audience? You need to test whether long-form or short-form copy generates better results.

I’m surprised at how often people don’t test copy length! The difference is usually profound, and until you know which is better you’re leaving money on the table.

Here’s an example of a brand that spends a lot of money advertising, that infrequently tests new ad copy. It drives me bananas, they could be making so much more money!

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Writing great ad copy, along with multiple variations isn’t easy, but doing so will pay dividends.

I’ve found that when long-form copy performs best, we might see lower click-through rates…but conversion rates are tremendous.

Don’t be afraid to give it a try, I’d love to hear how it goes.


If you haven’t tested this tactic don’t waste any more time, do it now! Humans always want to believe that they have made the correct choice: cue social proof in ad copy!

There are so many ways you can test this: long testimonials, short ones, press hits, or directly from the customer… I say test them all. Everyone seeks reviews before they part ways with money, it’s final validation!

You can either wait for people to come to your website to find reviews, or you can speed things up and deliver them right into their social feeds. I recommend doing both.

Introductory Offers

An introductory offer is an enticing promotion that can only be used one time. This is commonly used to attract first-time customers, but it can also be a one-time offer extended to your existing customers.

When thinking about an introductory offer in your retargeting, it’s also a good idea to think about traffic temperature. For colder audiences that might have visited your website once, you might find that offering free shipping or a 15% discount is effective. And it usually is, but it’s not original and consumers are trained to expect it.

If you want to stand out and catch eyeballs, you’ll need to think differently. I recommend finding a way to engage your cold audiences with great content, or put together an amazing offer packaged with an unrivaled industry guarantee.

Whichever you decide to use, be sure to test an introductory offer and pair it with dynamic product ads, so that your audience is able to see the offer along with the product they might be interested in.

Evergreen Offers

A bit different than the introductory offer, evergreen offers are sweet little perks that you offer to all customers. These are things like:

  • Free shipping on all orders above $50
  • Money-back guarantee
  • Free returns
  • Free samples or gift with every purchase
  • Social justice perks
  • Company-wide values

Let the customer know you’re watching…

Let’s face it, if you’re not adding some kind of personalization to your ads, then you are really missing out. One way to do this is to add dynamic product ads to your strategy. You can also go the extra mile by tailoring your copy to where your potential customers are in the funnel.

Facebook CBO For Retargeting

If you’re very familiar with the Facebook Ads Manager, then you’ve probably heard about Campaign Budget Optimization. Or you’ve at least seen it when starting to create your campaigns.

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For those that need a quick recap: CBO sets your budget at the campaign level, not the ad set level, which allows Facebook to distribute the budget where it thinks it will likely get the best results. If you want to dive deeper into this tactic, I wrote a complete guide to Facebook CBO best practices along with how to correctly use campaign budget optimization.

So, what’s the deal? Should you use it on your retargeting funnels?

In short, yes.

We’ve actually found that CBO tends to have the most consistent results when used in a retargeting campaign, because it helps guard against audience saturation.

Preventing audience saturation is really important, so let me explain how this works.

Let’s say you had a retargeting campaign that contains two ad sets:

  1. Social Engagers (ad set)
  2. People that visited your homepage (ad set)

These two audiences are going to overlap. Some of the people that engaged via social media will have also visited your homepage. Pretty obvious, right?

If you don’t use CBO:

  • Facebook will look at these two audiences separately, in isolation.
  • The result is that you’ll end up reaching the same people more than once (overlap).

If you do use CBO:

  • Facebook combines these audiences, thus eliminating overlap.
  • Facebook then optimizes based on which people are most likely to produce the desired objective.

Another benefit to using CBO (in this case), is that your budgets are no longer constricted to an ad set, allowing for greater overall consistency with retargeting performance. This is because the pixel is encouraged to “find results” instead of “find results that align with a particular type of spend”.

Test Facebook CBO within your Dynamic Product Ads first.

We consistently see this as the better way to optimize, across a wide variety of accounts. Especially for bottom of funnel (BOFU) campaigns. Additionally, roll it out across middle of funnel (MOFU) campaigns that could be experiencing overlap, such as social engagers and general website visitors.


I’ve heard rumors from industry leaders, as well as other media buyers that Facebook Ads Manager will primarily be used for retargeting in the future.

Costs and competition continue to rise. According to Hanapin Marketing, media spend on Facebook has increased by 15% (YoY) in 2019. Even more shocking, total media spend on Instagram has grown by 35% (YoY) over the same time period.

Advertising to cold traffic on Facebook is expensive, and I’d argue that generating a positive ROI at the top of the funnel is a major challenge for most brands.

This is why setting up a bulletproof retargeting funnel is imperative to your success.

Doing so will produce two major results:

  1. You will Increase conversions (sales) and ROI…without spending more money.
  2. You will be able to effectively scale your campaigns, faster, while maintaining profitability.

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