MATH! What does It Have To Do With Online Advertising?!

MATH! What does It Have To Do With Online Advertising?!

(music plays) – Are you ready to transform
your normal e-commerce business into one that experiences
exponential growth, year after year, using online advertising. If so, this show is for you. Me and my guests will
show how you too can grow your e-commerce business to
seven or even, eight figures. So you can go on more luxurious vacations, spoil yourself and your family, say yes to more opportunities
and become financially free to never have to worry about money again. Welcome to The E-commerce
Performance Marketing Show. Hey what’s going on
guys? Josh Marsden here, host of The E-commerce
Performance Marketing Show. So in this episode, we’re gonna talk about that dreaded four-letter word. That dreaded four-letter word
that a lot of people dislike and they’ve disliked for
pretty much their entire lives. And that is, “Math”. Now,
Math is super important when it comes to running ad
campaigns and being successful when it comes to running
ad campaigns on Facebook, or Google or any other channel out there. If you don’t know your
math, then you are basically flying blind. That’s not good. As a former air traffic
controller of the US army, I know that that’s not good. Because when I was an air
traffic controller years ago, I used to direct planes on
when they could take off, when they can land, what planes to follow, to turn different degrees to avoid other flights up in the air. My job was to basically, you
know, give them visibility that didn’t have from
their own visibility and help them navigate the sky successfully. So this way the hundreds
of people on flights could get to where they want to go safely. And that’s very similar to
what we’re talking about today. We’re talking about
basically setting benchmarks, and having visibility that
you can take advantage of. This way you can run an
ad campaigns successfully, effectively, and also you can scale those. Because if you don’t have your math right, then you don’t have visibility
and you’re flying blind. And you’re basically like
an air traffic controller, non-existent, and flights
are out there up in the air, and they’re not getting to
where they need to go safely. And that, I don’t want that to happen. So that said, in this episode of E-commerce Performance Marketing Show. I’m gonna talk to you about
math and what math has to do with your ad account to be
able to run ads effectively, successfully and also at scale, okay? So the first things that
you guys need to know is you need to know what KPIs matter. So KPIs are Key Performance Indicators. Those are essentially the
benchmarks that you want to really pay attention to when
it comes to your ad account and your performance in your ad account. This has to also do with your business. Numbers in your business
dictate what numbers that you really need to pay attention to when it comes to you ad account. So here are some KPIs
that you need to know in order to be able to
be effective with ads. For one, you need to know
your Average Order Value. That basically tells
you, what’s the average transaction value out of customers, when they first become
customers in your business. Also, you need to know your
Customer Lifetime Value. That’s huge. You need
to know, over the time, over the course of your
customer life cycle, how much revenue you generate
per customer. That’s huge. Refund Rate. You need to know
what your refund rate is. When it comes to people
asking for a refund. Cost of Goods. You have to know
what your profit margin are. How much it costs for
you to deliver the goods that you’re selling in
your e-commerce business. And then finally, you
need to know your CPA. Your cost per acquisition.
Which is also cost per customer. Now cost per customer, you can calculate that with these metrics. So CPA, that’s why knowing
these numbers in your business, outside of your ads is super
important because then, you can set your benchmark
for your cost per customer when you’re running
ads on any ad platform. So you need to know these numbers. Now, I’m not gonna go
over the equations here. I don’t want to waste your time. You can turn to our good friend Google, search for Average Order Value equation or Customer Lifetime Value equation or can just click in the notes below. I’m giving you a free tool
here, in the notes below, that will help you calculate
what your ideal CPA is. So this way you have a
benchmark to be able to manage your ad account effectively
too and be able to run ads successfully from. So take advantage of
that, go the notes below, it’s called a ROAS calculator. ROAS stands for Return On Ads Spend. And with the ROAS calculator,
gift that I’m giving you, you’ll be able to plug-in
your Average Order Value, or your Customer Lifetime Value, those are two different CPAs. And I’ll explain what the
difference is here, in a sec. And also, your Refund
Rate, your Cost of Goods. You can plug all that stuff
into the ROAS calculator, and it’s gonna spit out
what your ideal CPA is, so you have that benchmark
for your ad campaigns. So, you need to know this. Okay? If you don’t know this, you
don’t need to be running ads. You’re wasting your money,
you’re wasting your time. You need to know these numbers in order to run ads effectively. Next thing you need to know is, once you have your ideal CPA
from the ROAS calculator or you just did your own
math because you went to our good friend Google
and you got the equations for all these important KPIs. Now you just need to plan
accordingly when it comes to your ad spend month after month. You have to keep a few
things in mind here, especially when you’re
scaling your ad spend, and you’re a bootstrap
business that doesn’t have bucket-loads of cash everywhere,
then you need to make sure that you really pay
attention to these numbers and you manage your ad account carefully and your business
carefully when it comes to running ads and spending money on ads. So, let’s just say that
your ad spend budget is at 10 000 per month, okay? And you’re acquiring about
a hundred customers or so, you’re looking at a CPA
of 100$ per customer. So you also know that you’ll get 5000$, so you know, 50 bucks per customer, right when they become a
customer with your business. So right here, you already
have a negative 5 000, right? So you need to make it up in
your Customer Lifetime Value. That’s why in the first episode of The E-commerce Performance Marketing Show, I talked about how important
it is to be able to run your ad campaigns
in your business with Customer Lifetime Value
in mind, because it’s such an important metric
because it gives you your true return on your ad spend. And a lot of e-commerce
business owners and marketers, especially inexperienced
ones, they don’t really pay attention to that
as much as they should. They don’t even know it. I
can’t tell you how many times, that I’ve talked to business
owners or marketers that don’t even know what their
Customer Lifetime Value is. And you’re missing such a key
metric that’s gonna help you be able to afford more customers
at a higher CPA because you’re looking at the true
return on your ad spend, not the immediate return on your ad spend. Which is what Average Order Value is. So you have a windfall
here, so this is why knowing Average Order Value and
Customer Lifetime Value is so important and knowing time frames. So in this diagram here
that I’ve drawn out for you, I’m showing you that you might
earn 5 000$ right away from the average order value for a
hundred customers that you’re buying with your 10 000 ad spend. But in 90 days, your
customer lifetime value is gonna be 10 000. You know that for a fact, that
your customer lifetime value goes up to a hundred dollard
per customer within 90 days, because your follow up is so good, because your funnels are really good. Things like that, right? That’s why back end is so important, again I cover that in episode one. And so, when you know your
average order value and your customer lifetime
value, you can now predict, okay, I know that I’m
gonna go negative 5 000 for 90 days from my 10 000 ad spend. I gotta be okay with
that as business owner. You have to be okay with
that as business owner. So that’s why, knowing your
average order value and your customer lifetime
value is so important. And it doesn’t really matter
which level of ads spend is, or what your average order value is or your customer lifetime value. Either way, you need to
know these number because if you’re a bootstrap business
and you’re budgeting your own ads and every dollar counts,
which I know how that feels, you have to know these
numbers. Doesn’t matter. Now, when you go up and you’re
spending a lot of money on ads, 10 000, 20 000, 100 000
per month, it’s even more important to really know your
cashflow in your business. And to do that, to know that,
you have to pay attention to your average order value and
your customer lifetime value. And you have to map it
out like this when you’re planning out ad spend
budget, month to month. Now that we’re done with that, let me go over some other KPIs here. So, once you have had your CPA
calculated because you used our ROAS calculator
below, which is 100% free, or you just calculate this yourself using equations that Google gives you. Once you know that, now
you know what your CPA is that you’re targeting
with your ad campaigns. Now, in order to be able to
see how well your ad campaigns are performing when it
comes to acquiring customers at specific rates, you have to have your conversions 100% set up. Now, having your conversions
set up, whether it’s with Facebook or Google, let
me explain what that is. If you don’t know what that is. So Facebook, Google and
other ad channels out there, they give you conversion codes. They also give you pixels that
you set up on your websites like your Shopify store or on your funnel. You also set up custom conversions
in a few different ways. You can set up by the URL,
so you can tell basically- let me just use Facebook as for example, you can tell Facebook that
if someone gets to the thank you page after an order is placed, if they get to that specific
URL then a purchase is made. And you could also set
the purchase’s value of that purchase as well. You could do it through a URL or even do it through a piece of code. Very simple piece of code.
That’s what I recommend. I recommend using conversion
codes from Facebook or Google, or whatever ad channel you’re
leveraging your business. You also use Google Tag
Manager to be able to manage your scripts, your pixels,
your conversions codes, effectively and successfully
from one place as opposed to going to a bunch of pages
and trying to remember which pages you stuck all
your codes on. It’s not fun. I recommend definitely
using Google Tag Manager. Once you have your
conversions set up by using conversion codes, ideally, or
at minimum using the URL of the destination where your
customers end up after they purchase or after
they take the action that you’re trying to
measure in your business. Because maybe you’re measuring leads, maybe you’re measuring appointments. I’m really kind of going over
here measuring purchases, because most e-commerce business owners, that’s what matters most. You wanna really make sure
that you have a good return on your ad spend from purchases. But, everything I’m teaching
here also applies towards appointments or leads or
any other objective that you’re trying to really
focus in your business. For example, if you’re a
high-ticket e-commerce store that doesn’t really sell on a website, you really try to get phone
numbers and appointments, well then your sale process
happens in the back end with your sales team. So therefore, you just need to know, what’s my ideal cost per
appointment or cost per lead. And you can do that, just
by reverse engineering your sales conversions and also
your cost for all the leads that you’re generating in your business. You can figure all that
out. There’s a few tool that are recommended for that and actually, I’ll put that in the
description here as well. This way you can take advantage of it. One thing that we’ve
used for a long time is this custom Google Sheet that we call the Optimization Tracking Sheet. You can kinda customize
it for your business. Especially in that example,
if you’re converting people on the phone to become a
customer with your business and you’re not doing through your website. You probably wanna be able
to reverse engineer from the point of sale, which is over
the phone with your sales rep, all the way to your ad spend and the click that you’re paying for. You can find all that out, and
find out all your benchmarks by using the Optimization Tracking Sheet and customizing it. Another thing you could do
too, and this is something that we’ve been doing over
the past six months now, is we’ve been using a
software called GERU, G-E-R-U. Awesome software, highly recommended. It allows you basically
to map out your funnel or your websites, upsells,
downsells, your ads, how much you’re spending on
ads, your cost per goods. Also, how much you’re selling,
your offer score as well. It just spits out right away
what you’re return is gonna be based off the numbers that
you plug in and this way you can really identify early on, do I need to charge
more? Can I charge less? What’s my ideal CPC with ads? You can identify all
that stuff through GERU, very very quickly and very easily. Also, I wanna give a
shoutout to Wicked Reports. So Wicked Reports, that’s
a software that we use as a standard with all of our
clients at CVO Acceleration. Now Wicked Reports, it’s
basically an attribution software, for measuring true ROI from ad channels. And it works very, very well
with Facebook ads, Google ads. Basically, we have this software set up. You know the true ROI instead
of Facebook telling you that they’ve made you X amount. Facebook is always gonna
give themselves more credit so this way you’re a
happier advertiser and you keep advertising with them. But the thing is that the
way that their pixel works, and the way that they report
how many purchases that you’re getting from your ad
account isn’t true ROI because Facebook isn’t integrated with
where your checkouts happen. Like Shopify. That’s why
Wicked Reports is valuable, because Wicked Reports pulls
in, say Facebook ads data and then pulls in Shopify checkout data and then matches that data precisely. And then tells you, what your true ROI is per campaign, per audience or per ad. So Wicked Reports is awesome,
especially if you’re spending a lot of money, I highly recommend it. If you’re spending 5 000,
10 000 plus a month on ads, it’s a no-brainer for 200 bucks a month. We can help you out with that too. Reach out to us and we’ll
be more than happy to help you out with Wicked Reports. We’re actually a trusted
partner of Wicked Reports. Now, if you’re not using Wicked Reports don’t worry about it. What you can do is you could
set up a custom ads report. And you wanna set up
all these specific KPIs, I know it’s a long list here but these KPIs are all very, very important. You can setup a custom
report on Facebook or Google, the ads reporting tool on either platform, to be able to see all these different metrics in your business. And again, the important one
that you’re really trying to pay attention to is, you want
to pay attention to is ROAS, which is Return On Ad
Spend. That’s your ROI. You also wanna focus on
these three scores here, if you’re running Facebook these are the three quality scores. You’ve got, Quality Ranking, Engagement
Rate and Conversion Rates. And also your cost per results,
that’s important as well. If you have, everything tracking precisely and you set up your pixel correctly, you’ve set up your
conversion codes correctly on your e-commerce store,
whether you’re using Shopify, whether you’re using
Woocommerce or Bigcommerce, whatever the case may be, then
Facebook is gonna tell you how much you’re spending
to acquire a customer, which then you can compare
that to your ideal cost per customer that you came up
with from the ROAS calculator. The link below that I’m
giving you access to. These are the specific
Key Performance Indicators you really want to pay attention
to when you’re running ads. And again, it doesn’t matter
what ad platform you’re on. You wanna know Delivery,
are your ads delivering? You wanna know your Results.
Ideally in sales but again, going back to the example I just gave you, if maybe you have a
sales team that’s doing the point of sale over the phone and it’s not happening on
the website then maybe you’re running a different
objective here and that’s fine. Whether it’s Results or
that Custom Objective, that needs to be a KPI
in your custom ad report. Also you need to know
your Cost per Results or your Cost per Custom Objective. You have to know your Amount Spent. Again these are specific to
Facebook but you wanna know, Quality Ranking, Engagement
Rate and Conversion Rate. To kind of go over this real quick with Facebook ’cause most people are running Facebook ads
these days in e-commerce. Quality Ranking has to do
with the quality of your ad versus other ads you’re competing
with, to show your ad to the same target audience
that you’re targeting. Engagement rate has to do with your ad, is it getting engagement?
Is it getting Likes? Is it getting Comments?
Is it getting Shares? Things like that. And how
is it comparing to other ads that are targeted in the same audience. And then finally, Conversion
Rate, that actually is a measurement outside
of your ad campaigns. That’s where you’re sending traffic to. Your conversion rate on your store, or your conversion rate
on your sales page. How is it? Facebook knows that when it has the pixels set up and
conversion codes all set up on your e-commerce
website or on your funnel. And so, they know what
your conversion rate is and they actually use that
as a scoring mechanism to give you a cheaper CPM or CPC, which then equates to a cheaper CPA if you’re taking advantage
of Conversion Rate and you’re having a real
awesome conversion rate on your store or on your funnel where you’re driving traffic to. And then CPM, which is Cost
per one thousand impressions. This is number of impressions. This is Reach. Reach is
a little more important than Impressions because
Reach is more accurate. It’s capturing how many people
exactly where as Impressions counts repeats, repeat use of
the ad with the same audience. Unique Clicks, you’ll notice
that I use unique quite a bit. Unique, again, gets it down to per person instead of counting repeats.
We don’t want to do that. We want to see per person, the data. Unique Clicks. Unique Link Clicks. Unique Click to Rate, All.
Unique Click to Rate, Link. Unique CPC, Cost per Click, All. Unique CPC, Link. And then, Website Purchases. Cost per Website Purchases. And there you go right
there, that’s your CPA. That’s the one you need to
compare against CPA over here. And then also, Website
Purchase Conversion Value. So that’s the total
revenue that the ad channel that you’re running ads
on is reporting back, whether it’s Facebook again or Google. And then finally, Website
Purchase ROAS, Return On Ad Spend. Basically, it’s gonna take the Website Purchase Conversion Value and it’s gonna compare it
against your amounts spent and that’s gonna give you, your ROAS. And again, whether you’re using Facebook or whether you’re using Google, they are going to count a little bit more than they really should. It’s not 100% accurate but
it’s really close to it. So if you do it that way, that’s fine. Or if you use a tool like Wicked Reports, which we highly recommend, which we use as a standard in our agency. You’re gonna get true ROI
reporting that’s 100% accurate, which is a better measurement. Especially when you’re
spending 10 000 plus on ads, it makes a lot of sense. So you need to know these numbers, and that’s the biggest action
that I want to give you with this episode of E-commerce
Performance Marketing Show. You cannot run ads if you don’t know the numbers in your business. You’re flying blind if that’s
the case. And you shouldn’t be spending money on ads, if that’s the case. You’re wasting your money
and you’re wasting your time. If you need to identify
these KPIs in your business, do it right now before you
run anymore ads in the future. If you’re already running and
you know your KPIs, great. You probably saw some value
from knowing how to plan your cashflow accordingly or what
metrics matter the most or maybe you just picked up the
tip that Wicked Report is a great tool when it comes to
measuring true ROI attribution and it’s extremely important
to measure that when you’re spending a lot of money
on ads, if that’s you. With that said, take action.
Really take advantage of everything that I’m
showing you in this episode of E-commerce Performance Marketing Show. Tackle Math. I know that a
lot of people don’t like math out there and you might not
like math but you know what, if you’re gonna run ads, if you’re gonna invest in
your business with ads, you have to do the math.
You have to do the work. I’m gonna make it easy for you though. Go to the description below,
download that ROAS calculator and download the Optimization
Tracking Sheet as well, take advantage of it. Use it just like it’s supposed to be used. I’m actually gonna give
you some videos as well. That’s gonna show you exactly
how to use both of those tools and this way you can run ads
effectively and successfully and you can scale your ads
because you have clear visibility of the KPIs that matter in your business. Hey how’s it going
guys? Josh Marsden here, host of The E-commerce
Performance Marketing Show. So on February 18th and the 19th, I’m going to be showing 30
business owners how they can scale their ad performance
by using ARM5 Formula. Now this formula has
yielded successed such as a 1 524% ROI, using Facebook
ads over six months. It’s done a 330 000$ sales
period for Black Friday 2019. It’s even seen a 93 000$ sales
day for one of our clients. It’s an awesome strategy and
process that I’m going to be revealing exclusively to
30 business owners here, in sunny Scottsdale
Arizona where I’m located. So if you’d like to be
a part of this event, then go ahead and click on
the link below or swipe up. Find out more before it’s
too late because again, this is limited to 30 business owners. I’m looking for action takers
that are hungry for success, that are willing to put the work in and wanna learn our ARM5 Formulas, so this way they can use
online advertising effectively, successfully and also at scale. So, click below or swipe
up, find out more about ARM5 Formula Intensive
happening February 18th and the 19th, here in
sunny Scottsdale Arizona. (music plays) Thank you for tuning into The E-commerce Performance Marketing Show. If you enjoyed this episode,
be sure to subscribe, like and comment with a time
stamp of your favorite part, and share with a friend. Until our next episode, here’s to you and the success of your
e-commerce business.

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