Growthletter

CardTrader: A 250% Increase in Revenue from New Customers

The stories Facebook tells you are mostly nonsense that can hinder your growth, here's why…

Facebook
Marketing Partner

Facebook
Partner

Google
Business Partner

Google
Partner

Shopify
Business Partner

Shopify
Partner

This article is edition No. 7 of our Growthletter, the newsletter where we publish advanced ecommerce strategies every week

Hello,

Did you know that the stories Facebook, Google, and their ilk tell us, are mostly nonsense?

You open the Business Manager, see a ROAS of 4, and think about how well you’re doing…

But months and years pass, and your company has grown very little. Why?

Simple: you were looking at the wrong numbers.

In today’s email, I will explain why ROAS is a vanity metric and also show you a recent case study we conducted.

So buckle up, we’re starting 🚀

(but first, an introductory meme)

If you only look at ROAS, you’ll have an extremely limited view of reality.

We work with ecommerces where a ROAS of 2.5 is profitable.

With others, a ROAS of 4 barely covers costs.

Many marketers and entrepreneurs, however, stop at looking at ROAS.

But it’s just the tip of the iceberg.

Even within the same ecommerce, the same ROAS could be positive or negative.

How is that possible?

Simple: it depends on WHAT and to WHOM we are selling.

Let’s make three examples:

 

EXAMPLE 1: DIFFERENT PRODUCTS

On one category of products, you may have a margin of 25%, on another a margin of 40%.

A ROAS of 3 in the first case would make you lose money, in the other, you’d be earning.

 

EXAMPLE 2: MARKET SHARE INCREASE

If your goal is to increase the number of new customers, a ROAS that just covers costs (or a little less), is an excellent result.

Because in this case, your margin and your profit are in the future purchases of new customers.

 

EXAMPLE 3: LAUNCHING A NEW PRODUCT

If you’re launching a new product, breaking even is a defeat.

In fact, the launch of a product is mainly on the customer database, aiming to generate a flow of revenue.

Never stop at ROAS, or at a single metric.

But think with objectives.

Ask yourself:

“What’s the goal of this campaign?”

“What’s the goal of this launch?”

Once you’ve identified the goal, understand which metrics to measure it with.

Understanding that ROAS is just a vanity metric is a huge step forward for your campaigns.

In fact, 99% of advertisers evaluate whether a campaign is doing well or poorly, looking at data like ROAS and Cost per purchase.

But there’s a huge flaw in this approach: you don’t know to WHOM and WHAT you’re selling.

Let’s now see a concrete case study

We’ve been handling this new project for about 4 months now, it’s a marketplace for trading cards (Magic, Pokemon, YuGiOh!, etc.)

We carry out the entire testing phase and arrive at an advertising structure that seems optimal (both with Facebook Ads and Google Ads).

But then…

📈 1° STRATEGY: MER CALCULATION

The first fundamental measurement strategy I want to pass on to you is the MER calculation.

MER = Marketing Efficiency Ratio

Formula = Total revenue/Total marketing investment

The MER is a great indicator that lets you understand how your marketing investments are generating.

Let’s then look at the data from the period August 13th – September 13thg for this project:

You can see above that the MER for this period is 90. That is, for every €1 spent, there are €90 in revenue.

Let’s also take a look at the campaigns in the Business Manager:

Wow! You can see that the TOFU campaigns, therefore on a cold audience, have an average ROAS of around 21.

It seems fantastic, right?

Sigh.

99% of advertisers out there would spam the entire internet with this screenshot, saying how strong they are.

But such high ROAS means you’re not gaining new market shares.

The TOFU campaigns were set to reach an audience that didn’t know us (so with all the various exclusions, etc.).

But such a high ROAS meant only one thing: Facebook was going to pick up people who already knew us.

And this can be verified with the second fundamental measurement strategy I want to pass on to you today…

📈 2° STRATEGY: aMER CALCULATION

The aMER is exactly like the MER, but it only considers the revenue from new customers.

aMER = Acquisition Marketing Efficiency Ratio

Formula = Total revenue new customers/Total marketing investment

The aMER is an excellent indicator that lets us understand how our marketing efforts are expanding our market share.

And it was by looking at the aMER that we could see that Facebook was “cheating” us.

Of the €447,828 in Revenue, only €10,745 came from new customers.

From an MER of 90, we went to an aMER of 2.16.

So our advertising campaigns, even the TOFU ones, were targeting a customer base that had already purchased from the company.

How is this possible?

Simple, Facebook was cheating us…

Let me explain better 👇

 

Facebook reasons this way:

You give it an objective —> its algorithm works to bring you that objective.

So, if you ask Facebook for Purchases, it will bring you Purchases. That’s it.

The algorithm rightly thinks:

“Why should I show this ad to Mario who has never interacted with this site, when there’s Luigi who already knows it well and can buy right away?”

Elementary, right?

Therefore, despite excluding all remarketing audiences from the TOFU campaigns, the algorithm still targeted people who had already bought from us (damn IOS14).

 

What did we do then?

We asked Facebook for a different objective: Completed Registration.

In fact, only new users create an account (all others already have one).

The algorithm had to change its reasoning by force.

Let’s see the results obtained:

Looking at the campaigns in the Business Manager, the average advertiser would probably be depressed.

We indeed went from a ROAS of 90 to a ROAS of just 4.

But let’s instead see how the aMER behaved 👇

You can see that from September 14th, the day we launched the campaigns with the new objective, everything changed completely.

We started attracting many more new customers.

We went from an aMER of 2 to an aMER of 7 simply by changing Facebook’s objective.

And now, of course, we are ready to scale the account and the entire business 📈

We’ve reached the end of today’s newsletter.

Here’s what you should take away from today’s newsletter:

  • ROAS is a vanity metric. It depends on WHO and WHAT YOU SELL.
  • Start with your business objectives. Only then define the metrics to measure them.
  • You need to calculate MER and aMER to better measure your marketing efforts.
  • You need to understand how Facebook thinks to align the algorithm with your business objectives.

 

Wishing you good growth,

Thomas

we wave, you grow

Related Growthletter

The Strategy of Progressive Profiling

The Strategy of Progressive Profiling

How to improve the main asset of your ecommerce: the data you own!
The Big Lie About Abandoned Carts

The Big Lie About Abandoned Carts

The recovery of abandoned carts is one of the biggest lies we're telling ourselves.
The Ask Phase: The Missing Link in Your Funnels

The Ask Phase: The Missing Link in Your Funnels

How to optimize a funnel phase everyone forgets and no one talks about: the Ask phase.

Become our next success story

Click below and send your application to become our next success story.

iscriviti alla growthletter

Ottimizza e scala il tuo ecommerce in soli
5 minuti a settimana

Ottimizza e scala il tuo ecommerce in soli 5 minuti a settimana

Richiedi l’accesso gratuito ⬇

Scala il tuo ecommerce in soli 5 minuti a settimana

Ogni settimana strategie, tips e consigli avanzati per ottimizzare e scalare il tuo ecommerce.