Part 3 – Ad Strategy
Once we made the decision to scale hard it was critical that we knew what “success” looks like. The only way that is possible is by knowing your numbers. We knew that with CurlMix®’s cost of goods sold (COGS), shipping, and overhead that getting to 200% ROAS was a solid number for us.
At our agency, we only want to partner with brands that can actually make money if they are hitting 200% at scale. What that number means is the business has their ish together. If a company is paying too much for products, spending too much on overhead that isn’t adding to their bottom line, and doesn’t have their backend marketing in place to increase the customer LTV...then “only” getting a 200% likely won’t be good enough.
With CurlMix® they had a solid foundation in place and they understand the concept of the lifetime value of a customer (LTV)...which in my experience maybe only 10-15% of e-commerce business owners truly understand and even fewer embrace.
Let’s do a little math to see if I can properly explain the importance of LTV. Let’s imagine that you have an AOV of $50. You have a repeat customer rate of 20% since your product is consumable. If 80% of the people buy once, 10% of the people buy twice, 5% of the people buy three times, 2.5% of the people buy 4 times, and 2.5% of the people buy 5 times - then the lifetime value of your customer is $150! So if someone said “hey if you give me $30 to have this customer that over the next year will pay you $150” - would you take that deal?
You are probably thinking “of course I would take the deal!”. However - what happens is that when your cost per acquisition (CPA) rises from $20 to $30 when scaling - a lot of business owners tend to get conservative and actually rather keep the $20 CPA at a low spend as opposed to the $30 CPA at a higher spend - even though in the long run paying $30 to acquire a customer worth $150 is beneficial to your business.
Another thing to keep in mind when setting your target goals in Facebook is the fact that running paid traffic has a tendency to “lift all tides”. So what is being reported in Facebook is likely going to be considerably less than what is showing up in your Shopify store - even when Facebook Ads are your only paid traffic source.
CurlMix® now has an AOV of about $62...which means we are perfectly happy with “just” a 200% on Day 1 because we know that our actual LTV is much higher than that.
You can’t spend $100K+ a month profitably and consistently without a solid foundation. What I am going to share now is one that we have had good success with. There are lots of different ways to skin a cat - so by no means am I saying this is the only way.
One of the things that any advanced Facebook Advertisers recognize is the fact that marketing to people at different “temperatures” in a sales funnel is critical. What that means is that how you speak to a potential customer who has never heard of or engaged with your brand is completely different than how you should speak to someone who has visited your website, initiated a checkout, or made a purchase.
The foundation that we use looks like this…
So let’s breakdown what the heck these different temperatures mean:
COLD: The purpose here is to generate awareness and to test audiences and creatives as cheaply as possible. This works because the CPM (cost per 1000 impressions) will always be cheaper with campaigns such as Page Post Engagement (PPE) or Video View (VV). It is important to understand the primary goal here isn’t ROAS… the goal is to determine which audiences and ads show the potential to hit our top of funnel (TOF) KPI such as cost per click, click through rate, cost per engagement, etc. What also happens is that the ads will start to accumulate some engagement which can then help them start faster once they are promoted to the COOL campaign. If a brand has solid written content then traffic could also be sent there. It is critical that exclusions are properly leveraged here… anyone seeing these ads should be engaging with the brand for the first time.
Campaign Objective: PPE, Video Views
Audiences: Interests, Behaviors, Demographics, Lookalikes
Excludes: Purchasers - Last 180, Engagers - Last 180, Website Visitors - Last 180, Video Viewers - Last 180
Optimization: Default Here is a look at our primary COLD campaign for the month of January.
What we did here was create a Campaign Budget Optimization (CBO) campaign and put 6 ad sets inside. Those ad sets were lookalikes on lifetime value (LTV) of a customer list 5%-10%. We then placed our ads within those ad sets. Our goal here is to drive engagement. You can see that we paid less than half of penny per engagement - which is a good cost if the ad is a video (anything less than .005 and you have a strong ad).
The campaign did ultimately create 22 purchases which allowed us to recoup 43% of the spend. Our target ROAS for our COLD temperature is just 25%... so we actually exceeded that goal. However - the most important thing here isn’t ROAS... the important thing is driving cheap engagements on your ads that are connected to your ads that are going out to warmer traffic.
The amount of budget that we aim for the COLD temperature when spending $100K+ a month is between 5-10% of the overall budget. This is scary for a lot of people because there is a chance you can see 0 purchases on this campaign - but believe me, it will help make your other ads more profitable. COOL: The purpose here is to start pushing people into your warm/hot audiences while also making a decent return in the process. The Return on Ad Spend (ROAS) is the most important metric... but metrics such as Cost Per Add to Cart and Cost Per Initiated Checkout are also very important. The ads that are being used should have already passed our initial screening by graduating from the COLD campaign. We want to ensure that people further down the funnel aren’t seeing these ads - so excluding people that added to the cart, initiated checkout or already purchased is critical.
Campaign Objective: Conversion
Audiences: Interests, Behaviors, Lookalikes, Video Views 50% and below, FB Engagers, IG Engagers, Website Visitors Over 14
Excludes: Purchasers - Last 180, Add to Cart - Last 30, Initiate Checkout - Last 30, Website Visitors Last 14, View Content Last 14, Video Views 50% and above
The COOL temperature is where a large percentage of your budget will be going because it is prospecting. We aim to spend 40-50% of the budget on this temperature.
We calculated based on the target ROAS and the amount that we were spending per temperature that we needed to hit at least a 150% ROAS at this phase.
We ended up hitting our goal by producing a ROAS of 176%...but we did overshoot our target spend number which was 50% of the total budget.
What that means is that we probably could have had an overall higher ROAS for the account if we limited spend on the COOL temperature, but acquiring customers at the prospecting phase at just around your target CPA ($30 per purchase) is not the end of the world.
Since this campaign has the most spend...it will also need the most attention. During the month, we ran ads to 10 different campaigns. Within those campaigns, we typically aim to include 10 of our best audiences. For CurlMix®, we have a few interest-based audiences that treat us well and the remainders are lookalikes based off of things such as: Purchasers LTV, Purchasers, Engagers, Video Viewers, Initiate Checkouts, People Viewing Products Multiple Times, etc. So the mix is typically 60%-70% lookalikes and 30-40% interest based. In terms of campaign specifics - we use a mixture of CBO optimizations and ad set level optimization. Our workhorse was a CBO campaign that had a daily budget as high as $1,600/day and a ROAS of 180%.
Managing high spend is definitely easier when you have big budgets - so our default is to aim big. At the ad set level we typically are working with budgets between $50-$150 per ad set. The crazy thing is that based on what Facebook tells you, it actually needs to properly optimize ( 50 conversions a week) our daily ad set budgets for this account should be about $215 per day.
We have a full dedicated section talking about creative strategy but just know at this temperature you will have a lot of different types of ads in place!
WARM : The purpose here is to start cashing in. The ROAS is pretty much the only metric that we truly care about. These are people that have been “touched” multiple times - so we would expect our conversion rate for this segment to be higher than it is for the COOL segment. For the ad copy…we want to make sure that we are being strong with our call-to-actions and we want to have a pulse on what objections may have stopped these people from moving further down the funnels…so we can work on overcoming them. The size of the audiences are going to start to get smaller….so make sure you have a lot of different creatives.
Campaign Objective: Conversion
Audiences: Website Visitors 14 days and under, View Content 14 days and under, Top Website Visitors Last 180, Video Views 50% and over, Viewed Products 10+
Excludes: Purchasers - Last 180, Add to Cart - Last 30, Initiate Checkout - Last 30
Now things should be starting to pick up. Our target spend for WARM traffic is about 20% of the overall budget. We knew that our target ROAS number was 250% for these campaigns.
Unfortunately, we did fall a bit short of that number.
The great thing about this system is that if one temperature is off a bit then one of the others can pick it up - which is what happened for us. It is important to establish these target ROAS goals because you can then start to easily figure out which ads need your attention. When we saw that our WARM ads weren’t doing what we needed them to do - we started to put more attention on those ads to get the number up as best as we could.
You do see that the CPA is about 23% cheaper than what it is for the COOL campaigns which is what we would expect.
For the campaigns here we use a mix of CBO, Ad Set Budgets, and DPA ads. Our workhorse campaign here was actually an Image campaign!
You thought image ads were dead, didn’t ya? Honestly - this was a big surprise to us as well. We fell in love with video ads and forgot that images can be just as effective - if done properly. The key here is that we were willing to TEST. Never make assumptions off of feelings - find out what the data says.
This is the first phase which we start to introduce discounts. We don’t do it on every single ad but we do sprinkle them in to see how they perform. If offering a discount gets us the sale at this phase - then we are totally cool with that.
HOT: This should be where the bacon is fried. The conversion rate and ROAS should be significantly higher than both the COOL and WARM audiences. Dynamic Product Ad (DPA) campaigns will do a lot of the heavy lifting but we can also use traditional retargeting campaigns as well. The ad copy should always leverage scarcity, urgency, and discounts wherever possible. Audience sizes here are typically very small…so having a bank of creatives is important. There should be a strategy around how these ads are structured…for example for people that Initiated a Checkout but didn’t buy in the last 48 hours show them an ad that induces scarcity and urgency but doesn’t give a discount, between days 3-5 have an ad that looks to overcome objection 1 and offers a discount, on days 6-10 have an ad that looks like overcome objection 1 and objection 2 and has a bigger discount…etc.
Campaign Objective: Conversion
Audiences: Add to Cart , Added Payment Information, Initiate Checkout
Excludes: Purchasers - Last 180
The amount of budget that should be allocated to this phase is around 15-20% of the overall budget. Since you are spending a good amount of coin you should be able to feed these buckets enough to spend that budget consistently. For CurlMix® we knew we needed to hit a target ROAS of 350% for our HOT traffic. Here is how we did…
So it did what we needed it to do...and picked up some slack from the warm campaign! Looking back at it - we drastically underspent at this temperature. We only spent 5.5% of the budget here instead of 15% that we aimed for. Now there are many reasons that could happen but in this case I think that we just needed to incorporate another campaign. We relied pretty much solely on our Dynamic Product Ads (DPA) campaign to do the heavy lifting (that is the one with the ROAS of 425%).
Our go to second fiddle in the HOT temperature is typically a Messenger retargeting campaign using Manychat. This actually most times outperforms our DPA campaign - but Facebook switched things up on us. Before we were able to run a campaign that said “comment CURLS if you want us to slide in your DM with a coupon code”. Then we would get them on our Manychat list (very valuable) and then we would have the bot send over the code. It worked great - that is until it didn’t. Facebook started to frown upon running ads that ask someone to make a specific comment - which limited the success of this campaign.
We will now supplement our HOT campaigns with more video and images campaigns - just like we do for WARM. We always offer some kind of discount here. If you have a consumable product that has a high probability of being ordered again and you believe in your brand and you know you provide a good buying experience - then you should be willing to at minimum give a 20% off discount to acquire a new customer. Think about it if your Customer LTV is $150...is giving $10 off a $50 order worth it in the long run? Brands that are stingy with discounts to attract first-time customers don’t understand or embrace the LTV of a customer. If you don’t have a consumable product and people really don’t need to buy again - then I wouldn’t make the discount as high. In order to get these kinds of numbers in the HOT campaigns - you must be willing to sweeten the deal via a discount.
FIRE: The purpose of this segment is to try to increase the LTV of your customers as quickly as possible. These are people that have just recently bought…so the ad copy should acknowledge that and then aim to make them feel acknowledged and appreciated. This is a good time to get aggressive with discounts (hey you bought X and we know that you would also love Y - here is a new customer discount that is only good for the next 72 hours). The audiences will be small but you don’t need a ton of different ads here…you just need a few very good ones.
Campaign Objective: Catalog Sales, Conversion
Audiences: Purchases Last 30
Lots of people leave this out of their foundation - not us. We aim to spend about 5% of the budget on this temperature. For our target ROAS we were looking for 300%.
We just hit our mark...which is always cool.
We rely primarily on Cross-Sells for this temperature. In order to do this you need to select “Catalog Sales” as your objective (which means you need to have a product catalog).
From there here is how it works. You can create a product set that features your shampoos.
You then tell Facebook that you want to show an ad for shampoos if they purchased a conditioner within the last 30 days but didn’t buy a shampoo.
That’s all there is to it. For the ad copy it is typically really short and sweet - “hey I bet you are loving your CurlMix® conditioner - your curls would pop even more if you added the shampoo to your regiment!”. Done
WINBACK : The purpose of this segment is to encourage repeat purchases from our existing list. Upsells and cross-sells can work here…also knowing when people typically run out of a consumable product can be important information. If there are email campaigns being ran…win back campaigns can be created to help boost their efforts.
Campaign Objective: Catalog Sales, Conversion
Audiences: Purchases Last 180
Excludes: Exclude Last 30
This is the last temperature. We aim to spend about 5% of the budget here. Our target ROAS is also 300%.
We hit pay dirt with this one at a healthy 458%. Our spend was much lower than what we would hope though.
At this temperature, you have a lot of different campaign types at your disposal. The main focus is doing whatever you can to get someone to come back and buy again. If they haven’t bought in 30 days...offering a discount isn’t a bad idea. If you are running special promos throughout the month you want to incorporate them into your winback campaigns - which will have a have probability of being profitable for you.
Told you spending $100K profitably is going to take some work!