growthletter #07 

CardTrader:
+250% Income from New Customers

The stories that Facebook tells you are mostly b*llsh*t that can hold back your growth, in this case study we show you why. 

Facebook
Marketing Partner

Facebook
Partner

Google
Business Partner

Google
Partner

Shopify
Business Partner

Shopify
Partner

The article you are reading is the 7th edition of our Growthletter, the newsletter where we publish advanced e-commerce themed strategies every week.

Hello,

Did you know that the stories that Facebook, Google and company tell us are mostly sh*t?

Open the Business Manager, see ROAS 4 and think about how well you are doing…

But while months and years go by, your company has grown very little. How come?

Simple: you were looking at the wrong numbers.

In today’s email, I’ll explain why ROAS is a vanity metric, and I’ll also show you a case study we did recently.

So fasten your seat belts and we’re off🚀

(but first an introductory meme)

If you only look at the ROAS you will have an extremely limited view of reality.

We work with e-commerce where with a ROAS of 2.5 we are in profit.

With others, however, a ROAS of 4 just covers the costs.

This doesn’t stop many marketers and entrepreneurs stop and look at ROAS.

and that’s just the tip of the iceberg.

Even in the same e-commerce, ROAS itself could be positive or negative.

How is this possible?

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

Let’s look at three examples:

EXAMPLE 1: DIFFERENT PRODUCTS

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

A ROAS 3 in the first case would make you lose money, in another you would be making money.

EXAMPLE 2: MARKET SHARE INCREASE

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

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

EXAMPLE 3: LAUNCHING A NEW PRODUCT

However, if you are launching a new product,  Breaking even is a defeat.

In fact, the launch of a product takes place above all on the customer database, and has the purpose of generating a revenue stream.

You don’t need to stop at the ROAS, or single metric.

But think about goals.

You need to ask yourself:

“What is the goal of this campaign?”

“What is the goal of this launch?”

Once you have identified the goal, you will understand with what metrics to measure it.

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

In fact, 99% of advertisers assess whether a campaign is doing well or badly by looking at data such as ROAS and cost per purchase.

But there is a huge flaw in this approach: you don’t know WHO and WHAT you are selling to.

Let us now look at a concrete case study

It’s been about 4 months since we took charge of this new project, it’s a marketplace of playing cards (Magic, Pokemon, YuGiOh!, etc.)

We carry out the whole testing phase and we arrive at an advert structure that seems to be optimal (both with Facebook Ads and with Google Ads).

If it weren’t that…

📈1st STRATEGY: CALCULATION OF THE MER

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

The MER is nothing more than a global ROAS that aggregates all advertising investment.

MER = Marketing Efficiency Ratio

Formula = Total revenue/Total marketing investment

The MER is an excellent indicator that allows you to understand how much your marketing investments are generating.

So let’s go and see the data for the period 13th August – 13th September of this project:

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

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

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

Sounds great right?

Yeah, not bad!

99% of the advertisers out there would spam the entire internet with this screenshot saying how strong it is.

But with ROAS that high means you’re not getting any new market shares.

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

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

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

📈2nd STRATEGY: CALCULATION OF THE aMER

The aMER is exactly like the MER, but it only takes into account new customer revenue.

aMER = Acquisition Marketing Efficiency Ratio

Formula = Total new customer revenue/Total marketing investment

The aMER is an excellent indicator that allows us to understand how much our marketing efforts are making us expand our market shares.

And it was precisely by looking at the aMER that we were able to see that Facebook “was screwing us over”.

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

From the MER of 90 we have moved to an aMER of 2.16.

So our advertising campaigns, even the TOFU ones, were going to hit a target of customers who had already bought from the company.

How is this possible?

Simple, Facebook was screwing us…

Let me explain better

Facebook thinks like this:

You give it a goal —> its algorithm works to bring you that goal.

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

The algorithm rightly makes this thought:

“Why should I show this advertisement to John who has never interacted with this site, when there is Jane who already knows it well and can buy immediately?”

Elementary isn’t it?

Therefore, even though we excluded all remarketing audiences from the TOFU campaigns, the algorithm still targeted people who had already bought from us (damn IOS14).

So what did we do?

We went to ask Facebook for a different goal: a Completed Registration.

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

The algorithm inevitably had to change its reasoning.

Let’s see the results we obtained:

Looking at campaigns on the Business Manager the average advertiser would probably get depressed.

In fact, we had gone from a ROAS of 90 to a ROAS of just 4.

But let’s go see how the aMER behaved instead.👇

You can see that since September 14th, the day we launched the campaigns with the new goal, everything has completely changed.

We started attracting a lot more new customers.

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

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

And that brings us to the end.

Here’s what you need to take home from today’s newsletter:

  • ROAS is a vanity metric. Depends on WHO and WHAT YOU ARE SELLING.
  • Start with your business goals. Only then define the metrics to measure them.
  • You need to calculate MER and aMER to better measure your marketing efforts.
  • You need to know how Facebook thinks to align the algorithm with your business goals.

 

Keep growing,

Thomas

we wave, you grow

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