I originally wrote a blog post about my e-commerce marketing philosophy that revolves around three pillars: product, branding, and sales.
The original blog post ended up being more than 7,000 words. As a result, I decided to split it up into three separate posts.
This blog post ist about the third pillar (Sales).
The 3rd Pillar: Your Sales
Your sales are the engine of your business.
The fastest way to scale an e-commerce business from zero to seven figures a year is by creating a scalable customer acquisition process.
The scalable customer acquisition process for e-commerce is pretty simple. You need two things:
- PROVEN OFFER: You need a website where you sell your stuff. This website needs to be optimized to a point where you know exactly what percentage of your daily visitors will buy and how much they will buy on average.
- PAID TRAFFIC: You need to send enough people to your website at a cost that is lower than the profit you make from your average customer.
If the cost of sending one buyer to your website is lower than the profit you make from one buyer, you have a scalable system. You can then increase ad spend, send more people to your website, make more money, collect more email addresses and scale your business.
At this point, you are printing money while raising brand awareness.
Creating a PROVEN OFFER
A.k.a Optimizing your website
I will spare you the details of setting up a Shopify/Woocommerce/Clickfunnels website.
The truth is: it doesn’t matter which platform you use. I prefer Woocommerce because it gives me a little bit more freedom and I am very familiar with WordPress.
Instead, I want to talk more about the content of your website and the marketing behind it.
Depending on the price and complexity of your product, you will either need a sales page or a product page. Or both.
With sales page, I am talking about a long-form sales page. Think about Apple’s current iPhone 11 sales page:
With product page, I am talking about the standard product pages you see in most e-commerce stores. Typically, you have a photo of the product on the left side, a short description text, price and “buy now” button on the right side. Some product pages have more text below the fold. Here’s a classic example of a product page (compare that to Apple’s long-form sales page):
When do you need a product page and when a long-form sales page? While there is no definitive answer to that (and you should always A/B test both!), I usually recommend the following:
Long-form sales page if:
- your product either needs more explaining for the user to fully grasp the value
- your product is sold at a higher price-point (either in absolute terms or in relation to other products in your product category)
How to create a long-form sales page
Long-form sales pages scare people. Because they are long. They don’t know what to write or are not too excited about the idea of hiring an expensive copywriter.
If you have done the market research from the second pillar (Branding), writing a long-form sales page will be much easier than you think. You already have all the information you need:
- The specific target you are selling to
- Their biggest problems
- Their potential objections and reason why they would not buy from you
- The big marketing idea that will help them solve their problems
- The big promise you will be making them
With all that information, you can craft a sales page with the following framework:
- A headline that describes the product and speaks to your target customer
- Lead that includes your customer’s problem and introduces the big idea you have. The lead summarizes the core message of the entire sales page
- Body with selling points and calls-to-action
For the body, here’s what I like to do:
- Take all the objections you came up with in Pillar 2 (Branding) and write them down ordered by importance. For example:
- How can this product help me?
- How does this product work?
- What makes this product different from others?
- Will this product really help me?
- Who is this company?
- What do other people think about this product?
- How much is it?
- What size do I need?
- What colors are available?
- How much is shipping?
- How do I buy it?
- Now you turn those objections into selling points. Address each objection and turn them into selling points until the reader has no more open questions and concerns. Each selling point can have a main headline. This is where you can and should include the features and benefits of your product, as well as photos. You can tie each benefit of your product to an objection the reader might have. This is also the place to add customer testimonials, money-back-guarantee badges, scarcity, and urgency. However, I would put those elements at the end of the sales page.
Again, look at Apple’s sales page for their iPhone and how they did it. Keep in mind that their sales page is very feature-heavy since they are selling a tech-product. They also don’t need to show customer testimonials or offer a money-back-guarantee because… well, they’re Apple.
Buying the right TRAFFIC
Once your sales pages are ready and proven to convert, it is time to buy some traffic.
When driving traffic with paid ads, the goal is to at least break even on the front end.
You are breaking even on the front end if your average cost per purchase equals the average profit per customer.
Example: it costs you $24 in ad spend to get one customer who is spending $60 on his first purchase. Your profit margin is 40%. ($60 x 0.4) – $24 ad spend = $0.
In other words: your cost per purchase must be lower than $24 for you to make money on the front end.
Example of one of my client’s Facebook ads economics
He is currently spending $120 per day on Facebook ads.
The average cost of acquiring one customer with Facebook ads is $10 for him.
Hence, he is averaging 12 sales per day.
The average order value of his store is $60.
His profit margin is roughly 40%. That means:
12 sales a day = $720 revenue = $288 profit per day (before cost for ads) = 6x ROAS from Ads
After ad costs, he is making a daily profit of $168.
While he is profiting more than $5,000 a month from his ads, he is also growing his customer base by roughly 350 new customers per month. His brand is seen by more than 300,000 people per month. And, he has plenty of room to scale his ad spend (that’s what we are going to do this year).
That’s it. Those are my client’s Facebook ad economics. Easy math.
What isn’t factored in yet are the returning customers, the organic traffic to his website that converts (e.g. email subscribers, social media followers, word-of-mouth customers) and other traffic sources.
This is the reason why you should measure the total ROAS of your ads.
The Total ROAS of your ads
Most people only measure the direct ROAS of their ads.
Example: It costs you $10 to acquire one customer who spends $60 on his first purchase. That’s a ROAS of 6x that will show up in your Facebook ad manager.
What you should also measure is the Total ROAS of your business.
Coming back to the example above, that average customer might buy again from you a few weeks later. Let’s say on average, your returning customers spend another $20 (not everyone will buy again). On top of that, they are telling their friends about your awesome products and they spend another $10 on your products on average (without ever seeing any of your ads). Now all of a sudden, you spent $10 to acquire an average customer who is worth a total of $90 to you ($60 initial purchase + $20 average returning purchase + $10 word-of-mouth purchases).
Your total ROAS is now 9x. A huge difference compared to the original ROAS of 6x.
How do you measure the Total ROAS?
It’s pretty easy. Every single day, you should write down the total amount of money you spent on advertising (on all platforms combined, incl. paying influencers) and the total revenue you generated on that day.
The Total ROAS is simply the total daily revenue divided by total daily ad spend.
The Total ROAS includes any sales that are not directly tied to your ads. This can be word-of-mouth sales, returning customers, sales from your email campaigns, or simply sales that were not tracked by the Facebook pixel for whatever reason.
You should always compare the Total ROAS with your Direct ROAS. If you have a lot of organic traffic and sales on your website (e.g. because your brand is very well-known), there will be a big gap between your Total ROAS and your Direct ROAS. In this case, Direct ROAS is a better indicator of the efficiency of your ads. If you are barely making any organic sales, the Total ROAS is the better indicator to look at.
Remember: if you sell good products to happy customers, every single customer you acquire through Facebook ads is worth much more than the money he initially spends in your store.
Choosing the right traffic source
You might have noticed that I used Facebook ads in a lot of my examples. However, running ads on Facebook is not a must.
What I recommend is the following:
- find one main traffic source that converts cold audience at an acceptable ROAS. Spend 80% of your money on this traffic source.
- use other platforms to retarget your website visitors and spend the remaining 20% of your budget there.
Your main traffic source
Which platform you run ads on depends entirely on your product and target audience. Some products work great on Facebook, others work better on Instagram or Google.
Facebook: if you have enough data to create lookalike audiences from, Facebook is an absolute powerhouse. The Facebook ads manager also allows you to run ads on Instagram. Instagram tends to be better for younger target groups or products with outstanding visuals. Depending on what kind of products you sell, the targeting on Facebook can be a bit tricky, especially if you don’t have enough customer data to create lookalike audiences.
Google Adwords: if you are struggling with the right targeting on Facebook, you should give Google Adwords a try. On Google Adwords, you can bid on the exact search terms people search for on Google. That usually means very high buying intent and very accurate targeting (but also higher cost per click).
Retargeting: try Taboola, Outbrain, Google Display, and Facebook’s Audience network. The goal is to achieve omnipresence and follow your website visitors wherever they go on the internet.
Measure what matters
One of the most important principles of Direct-Response Marketing is to measure everything at any time.
When you are paying for ads, make sure to measure the most important metrics. Only then you will be able to draw reliable conclusions and see if your ads are profitable or not.
Here’s what you want to measure:
- CPM (Cost-per-mil): how much do you pay per 1,000 people seeing your ad. On Facebook, the CPM is usually between $15 – $25, depending on how competitive your target market is.
- CPC (Cost per Link Click): how much does it cost you to get a person onto your website? CPC = Total ad spend divided by the number of clicks.
- CTR (Click-Through-Rate): what percentage of people who see your ad actually click on the link to go to your website? CTR = number of clicks divided by the number of impressions
- CPA (Cost-per-action): or in the case of E-commerce – Cost-Per-Purchase. How much ad money do you need to spend to acquire one customer? CPA = Total ad spend divided by the number of orders.
- AOV (Average Order Value): how much does the average customer spend per order? AOV = total revenue divided by the number of orders
- ROAS (Return On Ad Spend): for every dollar you spend on ads, how many dollars in revenue do you get back immediately? ROAS = revenue generated directly from ads divided by ad-spend.
- TROAS (Total Return On Ad Spend): for every dollar you spend on ads, how many dollars in revenue do you get back in the long-term? TROAS= total revenue divided by total ad-spend across all platforms.
Optimize as much as you can
In the beginning, all you want to do is find out if paid ads can be profitable for your business.
You don’t need any fancy funnels, complex retargeting or the perfectly crafted ads (unless your products are really expensive).
In fact, I believe that 80% of your success with e-commerce ads boils down to two things:
- Your Targeting
- Your Offer
Show the perfect offer to the wrong audience and they will not be interested.
Show the wrong offer to the perfect audience and they will not be interested.
Show the perfect offer to the perfect audience and they will buy.
If you get the targeting right and your offer is good (that includes the product and sales pages!), your ads should be profitable. Hence, you should spend most of your time figuring out how to get in front of the right people and how to persuade those people once they land on your website.
Once you know that your ads can be profitable, it is time to optimize them and squeeze out as much ROAS as possible.
There are four things you can optimize to make more money with your customer acquisition process:
1 – Increase the Conversion Rate.
Get a higher percentage of website visitors to buy from you. You can use tools like Hotjar to find out what users are doing on your website and then A/B test your design and landing page copy.
2 – Increase the Average Order Value.
Get people to spend more money when they are shopping on your site. You can do that through up-sells, cross-sells, and incentives (coupon codes, free shipping if they order at least $50, etc.)
3 – Increase Customer Lifetime Value.
Get more people to buy from you more often. The best way to do that is to communicate with your customers via email and social media. Set up an automated email sequence for every buyer so that they are reminded of your brand. Send out promo emails every now and then. Retargeting ads can also help to increase the customer lifetime value and remind your existing customers of your brand and products.
4 – Optimize your ads.
This includes setting up more sophisticated retargeting campaigns, testing different ad creatives and ad copies, testing different audiences, setting up entire funnels, and running ads on other platforms. Once your ads are optimized, you can scale them by increasing the daily ad spend. This usually leads to a lower ROAS but higher daily profits.
The spillover effect on Product and Branding
High ROI ads are the best way to spread the word and increase brand awareness. If your ads are profitable, you are essentially getting paid to get your brand in front of millions of people.
Ads are also the perfect way to communicate your brand message and values to your audience. Every ad is a message to your market. Once you have scaled your ads to a certain point, millions of people will read your messages and associate your brand with certain values. There is no faster way for small businesses to build a brand identity than paid ads.
Profitable ads will increase your revenues and give you the money you need to further improve your products and branding. We already talked about the importance of a good product, but here it is again:
Amazing products = higher CLTV = more word-of-mouth marketing = increased customer loyalty = you can spend more money on ads per acquired customer.
The goals of the 3rd pillar
To summarize, you want to create:
- An irresistible offer
- That is presented persuasively on your website
- Either in the form of a long-form sales page or product page
- that converts a certain percentage of your daily visitors
Then, you can create ad campaigns that:
- send the right people to your website who
- buy from you, so that your ads
- have a positive ROAS and as a side effect you
- grow your email list
This will lead to:
- more sales
- increased brand awareness
- more cash to improve products and branding
- more people on your email list
- long-term sustainable growth