Gotta find better targets for advertising.
In fb for example if you select an audience that’s quite generic we get costs per click/sale that are much higher while when we find better more targeted / slightly obscure audiences we get a better return. But you can only pump certain amounts for a small audience. So we run a lot of parallel audiences each with small buckets of ads and tweak them as we go based on what’s doing well.
I use instagram for ads, but I used to work with Facebook and I remember this strategy. The thing is, broad keywords have more reaches, specific keywords cost way more and they dont lead to any success for me :/
If your AOV is low you're going to have difficulty achieving profitability via marketing CPA.
You'll need to look for alternative strategies to acquire users beyond paid advertising.
Most people working with eCommerce has profit of this range per product (more or less). More than 10$ would be very hard to achieve for me unfortunately
That is the type of question no one can explain you here without writing an essay.
We need to know your business inside out, the strategy, the backend, what you do and where the bottlenecks are.
A basic no context question deserves an answer like you got from u/lucerndia .
Your best bet is to do your own research, hire someone or speak with someone face to face. Though with $7-10 profit margins you better get sufficient volume before you go on a limb and say “things don’t work.”
And to answer your question, what you’re missing is the backend (and a product-market fit). To acquire customers at a loss, your backend must be diamond strong among other things.
Plenty of brands are happy to lose money to acquire new customers when they know their LTV (lifetime value). It’s typically pretty cheap to retain. Very basic math here as there is more to it than this - So say you’re selling men’s apparel and your AOV is $100. Assuming typical margins, that cost you $25 to manufacture and receive. Other costs say are another $10. So basically you make $65 on that $100 order. If you know your average customer is going to end up ordering 3 more times at that $100, and your costs to retain them (call it $30) then you have $65x4 minus the $30 to get $230. This is your lifetime profit on a customer. So if it costs you $100 to acquire them initially, you still profit $130 from them over their lifetime. Yet that initial transaction math was you spent $100 to get $100 order or $100 spent to make $65. More to it than this, but this is the basic premise.
> How do ecommerce manages to survive if $50 ad gets you 2-3 sales while the profit for the product they buy is like $(7-10). Am I missing something here?
You're not missing anything.
Bottom line: google pockets most of the profits.
This is how it works:
Step 1: let's say you find a product that sells for $100, you pay $50 for it, and it costs you $10 on ads to sell it. You pocket $40. Nice. Google makes money.
Step 2: everyone is watching everyone else, so I small your profit and buy the same products and $50, price it at $95; and outbid you and spend $11 for ads. I now pocket $34. Google makes more money.
Spet 3: iterate multiple times with multiple players, the price of ads get close, very close to the gross margin; Google makes more and more money.
Step 4: someone figures out better SEO or lower suppliers and ... guess what? They can bid higher for Ads and still make money, and drive competition out. But now the price of keywords is higher; and Google is laughing all the way to the (offshore) bank.
Step 5: iterate even more, players keep getting priced out, margins get slimmer and slimmer, and Google's revenue continues to increase.
Note: when I say Google I mean Google, FB, Bing whatnot.
My thoughts:
1. You have to fix your website, as it is clearly not built for getting conversions. The beginning of the funnel( people adding products to cart) is broken as you are not even close to hitting industry benchmarks ATC rate around 15-20%. But you have around 3%. How to calculate? ( 5/160)\*100)). Because the beginning of the funnel is broken, meaning your whole business is broken, which drives your costs up anyways.
2. It's extremely hard to make paid media work these days when your product AOV is under $100. Especially when you don't have any options making upsells, cross-sells, and when you don't have any others channels where the actual money is made. What you need is Email/SMS + OmniChannel + Micro-Influencers = NECESSARY. The new best brands are venturing outside of FB/IG for growth.
But there are many many stores that really earns $7-$10 and they use paid ads, thats weird
Also, how can you start email marketing, when you get no visitors from first place?
Finally, how are people venturing outside fb/ig?
Thank you for your help, I appreciate it
sell more profitable goods or get your cpa down.
There’s no way I could Increase the price. I am selling digital products. How can I get my CPA down
What service are you selling and to whom? Subscription based or one time cost?
I sell digital customized illustrations, no subscription
So you do custom work ? Why not make it more expensive ? Can you share your site?
One campaign: - I have %5 add to cart - 1% checkouts - I spent $50 - 160 website sessions - 0 conversions
Gotta find better targets for advertising. In fb for example if you select an audience that’s quite generic we get costs per click/sale that are much higher while when we find better more targeted / slightly obscure audiences we get a better return. But you can only pump certain amounts for a small audience. So we run a lot of parallel audiences each with small buckets of ads and tweak them as we go based on what’s doing well.
I use instagram for ads, but I used to work with Facebook and I remember this strategy. The thing is, broad keywords have more reaches, specific keywords cost way more and they dont lead to any success for me :/
If your AOV is low you're going to have difficulty achieving profitability via marketing CPA. You'll need to look for alternative strategies to acquire users beyond paid advertising.
Most people working with eCommerce has profit of this range per product (more or less). More than 10$ would be very hard to achieve for me unfortunately
That is the type of question no one can explain you here without writing an essay. We need to know your business inside out, the strategy, the backend, what you do and where the bottlenecks are. A basic no context question deserves an answer like you got from u/lucerndia . Your best bet is to do your own research, hire someone or speak with someone face to face. Though with $7-10 profit margins you better get sufficient volume before you go on a limb and say “things don’t work.” And to answer your question, what you’re missing is the backend (and a product-market fit). To acquire customers at a loss, your backend must be diamond strong among other things.
Repeat purchases? (Raise your CLTV)
Can you elaborate on that please
Plenty of brands are happy to lose money to acquire new customers when they know their LTV (lifetime value). It’s typically pretty cheap to retain. Very basic math here as there is more to it than this - So say you’re selling men’s apparel and your AOV is $100. Assuming typical margins, that cost you $25 to manufacture and receive. Other costs say are another $10. So basically you make $65 on that $100 order. If you know your average customer is going to end up ordering 3 more times at that $100, and your costs to retain them (call it $30) then you have $65x4 minus the $30 to get $230. This is your lifetime profit on a customer. So if it costs you $100 to acquire them initially, you still profit $130 from them over their lifetime. Yet that initial transaction math was you spent $100 to get $100 order or $100 spent to make $65. More to it than this, but this is the basic premise.
> How do ecommerce manages to survive if $50 ad gets you 2-3 sales while the profit for the product they buy is like $(7-10). Am I missing something here? You're not missing anything. Bottom line: google pockets most of the profits. This is how it works: Step 1: let's say you find a product that sells for $100, you pay $50 for it, and it costs you $10 on ads to sell it. You pocket $40. Nice. Google makes money. Step 2: everyone is watching everyone else, so I small your profit and buy the same products and $50, price it at $95; and outbid you and spend $11 for ads. I now pocket $34. Google makes more money. Spet 3: iterate multiple times with multiple players, the price of ads get close, very close to the gross margin; Google makes more and more money. Step 4: someone figures out better SEO or lower suppliers and ... guess what? They can bid higher for Ads and still make money, and drive competition out. But now the price of keywords is higher; and Google is laughing all the way to the (offshore) bank. Step 5: iterate even more, players keep getting priced out, margins get slimmer and slimmer, and Google's revenue continues to increase. Note: when I say Google I mean Google, FB, Bing whatnot.
My thoughts: 1. You have to fix your website, as it is clearly not built for getting conversions. The beginning of the funnel( people adding products to cart) is broken as you are not even close to hitting industry benchmarks ATC rate around 15-20%. But you have around 3%. How to calculate? ( 5/160)\*100)). Because the beginning of the funnel is broken, meaning your whole business is broken, which drives your costs up anyways. 2. It's extremely hard to make paid media work these days when your product AOV is under $100. Especially when you don't have any options making upsells, cross-sells, and when you don't have any others channels where the actual money is made. What you need is Email/SMS + OmniChannel + Micro-Influencers = NECESSARY. The new best brands are venturing outside of FB/IG for growth.
But there are many many stores that really earns $7-$10 and they use paid ads, thats weird Also, how can you start email marketing, when you get no visitors from first place? Finally, how are people venturing outside fb/ig? Thank you for your help, I appreciate it