Personally, I don’t know anyone who wouldn’t like to win the lottery. The idea of picking the winning numbers and having an extraordinary large amount of cash appear in your bank overnight is a pipe dream we’ve all had, at least once or twice.
Unfortunately, this is also how many of us formulate expectations for our business and, more specifically, the role that paid ads will have in meeting those expectations. Said another way, there is a common perception that simply running ads will result in huge commercial success.
The truth of the matter is that ads are a (usually) critical component in a solid overall business strategy that seeks to build a robust Customer Lifetime Value (CLTV). This post is how we helped Obega Beauty to put that component in place, and where the company needs to go from here to realize their greater vision of success.
About Obega Beauty
Obega Beauty is a classic drop shipping company. When we met them, the founders of the company had found a winning product (support bras for women), but needed help with both overall strategy and nuts-and-bolts marketing for that product
Is Drop Shipping Dead?
Dropping shipping has been around for, literally, forever. It is a tried and true eCommerce play and it’s here to stay. Success in drop shipping comes from realizing that you’re building a business, as opposed to finding a product that “works” that you can juice online for a quick profit – as with all great businesses, you have to be product and customer focused.
Where Was OB When They Met Klout?
When we brought OB on board, they were essentially breaking even. They were spending a lot of money on testing ads and ads sets. When they came on board, we used all of that test data to pick winners, create structure and make money
What’s The Reality Around Ad Testing?
We’ve round that, many people start an eCommerce business with one or two products. They then try to get tips from YouTubers about how to grow the business with ads and think it will work. Ultimately, we’ve found that the problem is that these types of videos are made for the masses and, as such, have either limited or completely flawed strategies whose value erode quickly.
Is There Danger In Being A One-product Company?
Every business has to start somewhere. But once you’ve created, or found, a product that works, the most important consideration is determining how you’re going to maximize Customer Lifetime Value. As examples:
- Will you have the option of future sales of the same product (e.g. anything consumable)?
- Are there opportunities to cross-sell other products (e.g. socks for shoes)?
- Are there ways you can bundle the product to sell more (e.g. 3 for 1 deals)?
With OB, because they are selling bras, there could be a longer term play with the right vision about growing CLTV.
Klout’s Approach To Solving The Problem
When they came on board, OB had a lot of “look alike testing” in their ad sets. They were breaking out their custom audiences too narrow and niche. We restructured their ad targeting by first building out an audience with past purchasers, then layering in people with back pain and then finally people interested in bras.
Can You Just Create A Winning Ad Set Then Set It And Forget It?
The short answer is, no. As a business owners, you can’t just focus on your ads, you also need to look at your shop. As a part of our service we also look at our client’s stores to create as frictionless process as possible. In this case, we had OB, add PayPal pay, change how add to cart works and a bunch of other tweaks.
Other ways to create a frictionless sales process include removing as many steps as possible, split testing, adding bundling options and a “buy now” (rather than “add to cart”).
The key is to remember that people who come to your site are sheep… you need ot keep guiding them to the end goal of purchasing
Client Communication Is Critical
As with all relationships, you have to continue to work at them. in the Case of OB, we found that communicating about goals was super critical. For example, when your strategy is to buy into a market to scale your business, the more that you buy in the more costly it gets (this is the law of diminishing returns). Thus, one key understanding for all companies is that there should be ebbs and flows as a company grows: spend to grow, then stop and consolidate for profit & growth of war chest.
Klout Results for Obega Beauty
We increased Month over month sales by 30%, tripled spend and improved efficiencies by 100% (increase their ROAS from 1 to better than 2).
Critical Takeaway From This Experience
There is a difference between being a “drop shipper” and a “business owner.” Typically drop shippers want more, yesterday, and are only focused on short term wins and flips. If you have the ability to be a “business owner,” and make decisions on a longer term time horizon. You can focus on CLTV and you’ll always be able to out spend and out compete anyone.
Watch The Full Episode of Impact Marketer
This case study comes from Impact Marketer episode #040