Second ecommerce video is out! This one talks about the relationship between profit and revenue for ecommerce business owners. As someone who’s about to sell a few items myself, I am just starting to see how hard this balance is.
At the end of the day, we all want more profit, but what’s the best way there?
Would love your thoughts – good or bad – about the video, questions & comments are appreciated. It’s almost 12 minutes long, so you might want to listen to it in the background. Enjoy.
Hey guys, Andrew here. I wanted to talk to you about is more revenue versus
more profit. We’re a full-service solution, and what we do for a client is
we will do everything from start to finish, from data creation to
optimizing product bids and cutting products that aren’t converting.
We play a role in how much revenue our clients can get and we also play a
role in how much money they spend. For example, I’d say 70-90% of retailers
on the comparison shopping engines, they’re not doing it right. They’re
spending too much, they’re not paying enough attention these channels, and
they’re wasting a lot of money, and they’re also missing out on lot of
sales because they’re not optimizing their bids.
When a client starts to work with us, what happens really quickly off the
bat, is that we start optimizing their campaigns, and within 1 to 3 months,
you start to see some pretty significant improvements. Say, a retailer’s
goal is they’re at a 3 to 1 return and they want to get to t a 5 to 1
return. What we’ll do, is we will start cutting the fat, cutting out the
products that are getting clicks, but not leading to any sales.
We’ll also cut products that just aren’t profitable. For example, if you
spend $20.00 in clicks on a product, but you get one sale and that product
costs $20.00, that’s not a profitable product for your campaign, so we’ll
cut it as well.
Say two to three months down the road, we’ll come back and we’ll see that
the ROI has increased from a 3:1 to a 4:1, what has happened as a result of
that is that revenue has decreased slightly. Say you’re making $50,000. Now
you’re only making $48,000. Even though you’re making less revenue, you’re
making more profit.
To me, if I was the retailer, that would be something very beneficial to
me. I would be curious to what retailers out there focus more on. What do
you focus on more? Is it profit? Is it revenue? Obviously, there needs to
be a balance of both.
What happens in that first initial one to three months with retailers, is
they expect that those types of enhancements that we’ve made to their
campaign can happen month after month.
In reality, we only have a certain range in which we can impact revenue and
improve ROI. Usually, it’s somewhere between 30% and 60%. For example, if
you’re making $10,000 in revenue, we may be able to add another $3,000 –
$6,000 in revenue per month.
Don’t quote me on that. The account management team will kill me. Gains
will vary by retailer depending on your category, the number of products
you have and how good your site is. We only may be able to improve a
campaign by 10%. We may not be able to improve a campaign. We may be able
to improve it by 120%.
Long story short, account management, the team, they don’t like me saying
projections like that. They’re not realistic and sellers like to latch onto
them, like flies on poop, because they look really good. At the end of the
day, it’s bullshit until we actually try to improve your campaigns.
The main thing I’m trying to get at is, a lot of clients they come to us
and they expect these type of gains for sequential month, month after
month. I totally understand that. If I was a business owner, I would want
to get the most out of the agencies that are handling my marketing. There
comes a point where, literally, ever lever that’s being pulled is pulled,
and there are retailers that think we can just do these miraculous changes
to their campaigns, month after month after month.
In reality, we can impact a campaign a lot, and we only take on clients
where we’re going to pay for our service and add incremental value on top
of that. We’re not miracle workers. What it comes down to, is we’ll reach
one goal for a client, in fact, in the example of the 3-to-1, and they want
to get to a 5-to-1.
Say within four months we’re at a 4-to-1 return and within five months, we
reached that goal of a 5-to1 return, but over that period of time, revenue
has decreased because we’re cutting products that aren’t profitable.
Remember that $20.00 product, it cost $20.00 to get a sale on it. That’s
not a profitable product.
We’re cutting some revenue off these campaigns to increase profit. Then the
retailer sometimes will come back and say “No, no, no, no, no, no. We need
the revenue. We need more revenue. Increase the revenue now. Why are you
decreasing revenue?” Our argument is to say “we increased your profit as
Now, if you want to increase revenue, we can be more lenient with the
products that we cut. For example with the product that costs $20.00, but
made a sale, we can keep products like that in the mix, but what happens is
that ROI is going to go down. It’s going to go from 5 to 4 to 3, if you
want to increase revenue.
The top three ways to make sure that incremental gains to revenue and
profit can be made each month is on the retailer. Pricing is such a
dominant player in comparison shopping engines, that if you’re not price
competitive, comparison shopping engines are probably not a good place for
you to be in the first place. If you are going to compete on an engine that
competes by price, one of the major differentiators on whether you’re going
to see gains from month to month, is how you’re pricing strategy is going
to be. There are some companies out there that re-pricing software. You can
check them out in the video description below.
Your pricing strategy can only affect the products you have. Say you have
the best pricing strategy, period, against all your competitors, you’re
lower than all of them, but you only offer 500 products. You’re still going
to hit a ceiling based on the traffic pools that those comparison shopping
engines have access to. They’re getting traffic in very similar ways to you
are, through Google, through affiliates, through paid search.
To make incremental gains in terms of profit and revenue each month, you
not only have to have a great pricing strategy, you also have to have to
have a great product strategy. You have to secure the right products at the
right time at the right price. If you can do that, you’re going to grow
your revenue incrementally.
The third thing is the site. There are too many retailers that focus on
their marketing campaigns as opposed to building the foundation of their
site, which is, above all else, the most important asset that you have.
Sometimes it’s hard to say “it’s my site, and industry standards in terms
of conversions, and is it not. How can I improve conversions? What is my
typical consumer buy cycle? Is it a day, is it an immediate purchase? Is it
going to take multiple days? Do I need to structure my site more for those
shoppers that have to discuss this purchase with their spouse?” Maybe that
means that it needs more content or more pictures, or whatever.
Conversion rates have a huge impact, and increasing them over time has a
huge impact on whether or not you’re going to get incremental sales and
profit from comparison shopping engines.
When you think about the agency you choose and the marketers you choose to
manage your campaigns, you always want to find the right agency – someone
who’s going to be straight with you, someone who’s going to be transparent,
up front, and who’s going to give you great customer service and, most
importantly, put their money where their mouth is and show you that value
for what you’re paying them.
CPC Strategy is one of those companies, and I know there are a ton of other
agencies out there that are the same way. But understand that a lot of
marketing falls back on you. We can’t affect the levers in terms of traffic
and what products they go to. So, we’ll want to push more traffic to your
high-converting products. That’s what we do multiple times a week for our
clients. We also want to turn off levers on products that get clicks but
Your site, your products and the prices of your products, it’s extremely
important to whether you’re going to see incremental gains year after year
in ecommerce. If you’re not seeing 10% growth or better, year after year,
you’re not in pace with the ecommerce industry, and you need to be looking
at more fundamental things like “an I offering the right products? Am I
even in the right business? Can I make changes that will successfully turn
this around so that I am seeing the growth that the rest of the industry is
Thanks for watching.
A couple of quick shout-outs:
The first to John Lawson. He’s a retailer himself and he has an
awesome e-commerce group on Facebook. Details are below in the description.
Also, another shout-out goes to David Weichel. If you’re looking to
increase conversions on your site, a lot of that comes from understanding
your user behavior. To do that, you need to dive into Google Analytics.
David Weichel is a Goole Analytics expert from implementation to
understanding Google Analytics.
David Weichel, he’s a magician. That’s all I can say about him. He will help
you understand and find the metrics that you really need to track to grow
your business. If you’re looking for some Google Analytics consulting or
help with installation or troubleshooting, give the guy an email,
Last but not least, if you need help with your comparison shopping
campaigns, check us out at cpcstratblogsite.kinsta.com. We usually start making sense
for retailers who are looking for serious, fully outsourced solution for
their comparison shopping campaigns, and that usually begins around the
$3,000 spend range.
If you’re interested, hit up cpcstratblogsite.kinsta.com. There’s a contact form on
every page. Shoot us your info and we’ll reach out to you directly and
we’ll have a conversation.
Thanks again for watching, and until next time. Okay. Bye.