eCommerce brands have experienced challenges finding the same profitability and scalability with their paid advertising programs: consumer privacy changes and limitations about access to consumer activity (ie the rollout of iOS 14.5 that limits the ability to track customers) have made it harder and more expensive to target and acquire customers.
To combat this uncertainty, having a framework to fall back on is critical to navigate the changes and find paths towards profitable ad programs.
Will Perry is the CEO of Reason Agency, where he focuses on advertising optimization for ecommerce brands.
In this podcast interview, Will shares his structured approach to creating successful campaigns:
What is the main challenge with creating profitable ad campaigns?
Whether it’s the ads not working or if it’s the limitations of the actual marketers running the ads, pretty much everybody has a pain point when it comes to ads. Creating successful ads can be the scaling lever that can be the true difference maker in the growth of their business.
There are so many things that you can do, with small efforts, to see big gains in your advertising results. This could be your creative, your copy, your offer, the landing page, the funnel.
Why not run ads for under $100 AOV?
It is hard for ecommerce brands that have products under $100. It is much easier for products or services that are highly profitable, like B2B services, SEO agencies, creative agencies, marketing agencies, stuff like that.
Those guys can afford to spend a couple hundred bucks to acquire a lead because they can sell a $500 ti $1000 package on the back end of it.
High ticket or mid-ticket ecommerce can run ads profitable, but if the Average Order Value is under $100, then the pathway to profitability almost does not exist. Competition, rising CPM and ad costs, privacy changes, all make it harder.
The actual industry standard with regard to benchmarks for CPC, click thu rate, conversion rate just don’t really work in the favor or DTC brands.
Selling a product online, especially a one time product that’s less than 75 bucks, like the math is actually will run at a loss.
How do things change for subscription recurring purchases?
Let’s say for whatever reason I sent you a new phone case every month…. and I was like, “Hey, sign up for phone case of the month.com and you get 20% off.”
And then I send you a new case every month. And then I’m banking on the fact that that customer is going to spend, let’s just say the phone case is 30 bucks a month.
They’re gonna spend $90 to $180 with me over three to six.
So I can afford to pay 50 bucks to acquire that customer. I’m $20 in the hole month 1, but I’m profitable month 2, 3, 4, 5, and six, right?
So, so those are the, those are the models that I wanna see people using with their paid social ads!
Facebook, TikTok, especially because it’s more cold traffic.
Once you drive that cold traffic, you’ll see all the lift on the Google side. And on the Bing search side. So that’s kind of like that part.
Why not run ads for under $75?
There’s one thing that I always say: marketing exposes product or process. And what I mean by that is ads are going to expose the business model.
You’re asking a business model question, which is a great question.
One time purchase products of $50 are hard to create profitable ad campaigns.
It really comes down to expectations from the business, which means they’re not thinking long term with their product development life cycle.
The longevity of that business basically doesn’t exist without a customer ascension model of some kind–having a more expensive product to sell after the $50 product.
So the, it, it really refers to a business model adjustment, which is why, like when we look at the five offers built for paid traffic, those offers are the ones that are most, the most profitable.
When you’re trying to acquire customers, then you can move into other strategies that we call monetization, like other strategies in the monetization phase in order to then get additional profit through the customer. This is ultimately where you go from like $1Million to $5 Million and you know you’re increasing profitability as you scale.
How do you like to set up your ads and landing page experience?
I’m really a big fan of running paid traffic to long form sales pages.
Typically you have more control over the user experience.
I call it a closed loop funnel. So that way, like if you’re driving traffic to your website, Shopify, for example, there’s so many places that somebody can click on, right?
Which means the bounce rate, just means opportunities for lost traffic.
Whereas when you are running an ad, and that ad has one specific offer with one specific message on one specific product, and then they go to a landing page.
They’re either going to buy that product or that offer, or they’re not.
They’re not going to shop, they’re not going to read your About Us section or click your Contact Us page.
Ultimately, the goal is to answer the question, “Can I sell this product at break even or profitably so that I can get into my remarketing so that the email and the retention team can then take over?”
That’s where the profitability is really gonna be made. The goal of acquisition should be to acquire customers as efficiently and effectively as possible, so that remarketing, email/SMS and retention can take over.
And that’s why I’m not a big fan of one time purchase on low price point products, because it’s really just like trying to find a way to make money fast.
One thing that Alex Hormozi says is “Do direct response to make sales today. Build a brand to make money five years from now.”
And that’s the difference between like selling a one time purchase product of $50, somebody who’s just trying to make money online versus someone who’s trying to build a brand who wants to make a million dollars a year in, in net profit, right?
What do you look to improve on with your ad campaigns?
So the biggest lever is your messaging within your ad campaigns.
I’m talking your hooks and your headlines.
And the reason for that with these consumer privacy changes like iOS14.5, it made targeting more difficult, but also removed detailed interests as a way to target consumers.
And so what we teach is a method and a methodology that we call Message Driven Target.
So I teach marketers and ad buyers how to run their ads like tv.
So it’s, it’s your kind of, think of it like call out style copy, right.
For example, “Attention all agency owners, like get my agency formula, spreadsheet, forecast.”
I just made that up, but the point is to use callouts in order to speak directly to someone, but if you’re using that language within a broad setup on the ad platform, you’re not dependent upon the targeting and the algorithm in order to attract that person back through your funnel.
And so with this message driven targeting approach, we put all of the emphasis directly on the ad copy, and then that ad copy is what fuels the creative to develop.
And so long story short is I teach marketers specifically how to master the messaging that is actually driving the conversion for their ad campaign, so that when they go make a bunch of changes to the ad campaign, the headline, the ad copy, the, the video, the image, the audience, the placements that it runs, etc, they know exactly what is actually driving the sale or the conversion from their campaign.
Instead of changing two, three, or four or five different things at one time, we get them to take a very disciplined approach that we call implementing Ad Variable Isolation so that we fundamentally understand with each decision that we make, did this make an improvement or did this not make an improvement?
And going even deeper into the messaging like I teach well, is the hook and headline that is working?
Is it a promise hook or is it a promise headline?
And not only is it a promise hook or a promise headline, but are you speaking to high-level of intent traffic, aka solution aware or most aware individuals, which will convert higher than true cold traffic, which are people who are completely unaware.
The other thing too is that people don’t understand that the ad copy that they’re writing is actually speaking to the wrong person and the wrong level of awareness.
And when you get rid of all these targeting things that we all used to just have as these cushy little layers and clouds that we could just lean on, it’s why so many people are struggling with their ads right now.
Because they just don’t know how to write messaging that drives intent.
How are you evaluating what their intent to purchase is, and how does that change your copy and offer?
For the marketers who have been struggling to figure out their data analysis since iOS, you can still use Google Analytics reports with intent to add product to cart, which is called add the cart detail rate.
And so you can still find that intent from the ad to the landing page.
And then that intent from the landing page to then checking out, you know, which the KPI that I love to see is anywhere in the 10 to 15% range at a minimum is what I want to see for traffic that hits a landing page.
And then you can still analyze your conversion rates through last click attribution from direct click into sale and all those sort of things. So you can, you can analyze the intent that way.
The other way that you can analyze the intent is on the front end through your ads directly. We teach a four phased system of actually testing and validating your messaging and your ad creative into a scaling phase.
And so in phase one, we, we teach message testing through what we call Scroll Frame Optimization.
So we actually, we teach marketers and ad buyers how to optimize winning ads so they can go deeper into the winning ad concept versus just create another because editing’s easier than creating.
And so we teach them how to optimize the messaging through the winning ad through what we call the big five creative tests.
So those are gonna be your text overlay headline on your video: It’s gonna be the first three seconds of your video.
It’s gonna be the avatar in your video, So male versus female. You can literally optimize the creative that way. So we teach SOPs for all of these things.