Google Ads For Low Margin Products - Secret?!
Discussion
Does anyone run Google Ads for low-cost, low-margin products? I normally do higher cost, higher margin products and the maths work fine for me there.
But for instance, one of my product ranges are quite cheap, ranging from £16 - £80 depending on the item.
Lets say ads convert at 2% so you'd need 100 clicks to get 2 sales.
The average CPC is £0.50 so it costs £50 to get 2 sales making a CPA of £25
In an ideal world that customer will buy a larger quantity of items in one go making a higher AOV but even so with £16 products at a 20-25% ish margin you'd need to sell at least 8 items in each order to break even, let alone profit. (and that's not taking re-marketing costs into account)
Obviously increasing the AOV, margins and decreasing the CPC will all help, but there's only so much that can be done.
There are so many products that fit this low price/low margin and lots of people advertising so I'm either doing it wrong, or they're losing money.
People who buy this kit will potentially come back for more so the LTV is higher if done right, we've started re-marketing and have Klaviyo to follow up on purchases and assist with abandoned carts and we're just making some box fliers for loyalty discount to encourage repeat custom.
The other plan is bundles to make it easier to increase the AOV.
But is this simply a case of increasing the AOV, decreasing CPC an improving margins where possible or am I missing something?! Improving conversion rate will also help but that's proving quite difficult. My main focus is ROAS but it's just a long way away from where it would need to be.
But for instance, one of my product ranges are quite cheap, ranging from £16 - £80 depending on the item.
Lets say ads convert at 2% so you'd need 100 clicks to get 2 sales.
The average CPC is £0.50 so it costs £50 to get 2 sales making a CPA of £25
In an ideal world that customer will buy a larger quantity of items in one go making a higher AOV but even so with £16 products at a 20-25% ish margin you'd need to sell at least 8 items in each order to break even, let alone profit. (and that's not taking re-marketing costs into account)
Obviously increasing the AOV, margins and decreasing the CPC will all help, but there's only so much that can be done.
There are so many products that fit this low price/low margin and lots of people advertising so I'm either doing it wrong, or they're losing money.
People who buy this kit will potentially come back for more so the LTV is higher if done right, we've started re-marketing and have Klaviyo to follow up on purchases and assist with abandoned carts and we're just making some box fliers for loyalty discount to encourage repeat custom.
The other plan is bundles to make it easier to increase the AOV.
But is this simply a case of increasing the AOV, decreasing CPC an improving margins where possible or am I missing something?! Improving conversion rate will also help but that's proving quite difficult. My main focus is ROAS but it's just a long way away from where it would need to be.
Edited by MrSparks on Friday 9th August 11:03
Without knowing the product/market I'm guessing, but 2% conversion rate from Google Ads seems low. If that was 4% or 8% would the maths work out better for you?
I have a website selling products at £6.99 each, £8.30 AOV and some repeat custom is a bonus. We pay average of around 70p per click and are happy to do so because the conversion rate is 30+% and the margins are reasonable.
I have a website selling products at £6.99 each, £8.30 AOV and some repeat custom is a bonus. We pay average of around 70p per click and are happy to do so because the conversion rate is 30+% and the margins are reasonable.
wheelerc said:
I have a website selling products at £6.99 each, £8.30 AOV and some repeat custom is a bonus. We pay average of around 70p per click and are happy to do so because the conversion rate is 30+% and the margins are reasonable.
How are you working out that conversion rate? It's incredibly high!wheelerc said:
Without knowing the product/market I'm guessing, but 2% conversion rate from Google Ads seems low. If that was 4% or 8% would the maths work out better for you?
I have a website selling products at £6.99 each, £8.30 AOV and some repeat custom is a bonus. We pay average of around 70p per click and are happy to do so because the conversion rate is 30+% and the margins are reasonable.
Wow 30% is crazy!I have a website selling products at £6.99 each, £8.30 AOV and some repeat custom is a bonus. We pay average of around 70p per click and are happy to do so because the conversion rate is 30+% and the margins are reasonable.
My overall rates are ridiculously low, adwords isn’t much better.
Getting to 4% would be good, 8% would make the maths work better all round but I’m still a million miles away from those rates and haven’t figured out why yet.
Yes! Can sympathize
The general way I approach this, is to pick a product category or vertical depending on the client, then the client needs to understand that their aspend for the few months is going to be at junk status until enough data is in the Ads account.
At the same time, I'll be trying various transactions out on the clients website to find any UX issues, also running a few heat maps.
The best way to manage this, is to package it up in someway, so if you were Asos, you might put a serious focus period in on just baseball caps, obviously they have the resources to do way more than this, but when resources are limited narrow down and be prepared to spend money to get the right result.
The general way I approach this, is to pick a product category or vertical depending on the client, then the client needs to understand that their aspend for the few months is going to be at junk status until enough data is in the Ads account.
At the same time, I'll be trying various transactions out on the clients website to find any UX issues, also running a few heat maps.
The best way to manage this, is to package it up in someway, so if you were Asos, you might put a serious focus period in on just baseball caps, obviously they have the resources to do way more than this, but when resources are limited narrow down and be prepared to spend money to get the right result.
Look at ppc as acquiring the lifetime value of the customer with follow up and add on sales.
I never looked at overall ppc on an item by item just an overall % of sales (say 5% reinvested).
I accept it’s hard to look past “I spent £80 this week and sold 5 at £20 each” but as long as you’ve done everything to maximise potential sales from the buyer it’s a valid strategy.
I never looked at overall ppc on an item by item just an overall % of sales (say 5% reinvested).
I accept it’s hard to look past “I spent £80 this week and sold 5 at £20 each” but as long as you’ve done everything to maximise potential sales from the buyer it’s a valid strategy.
jammy-git said:
How are you working out that conversion rate? It's incredibly high!
Sorry, it was a bit higher than I'm actually getting. The best month so far this year for me was April, with an average conversation rate of 24.40% - this is taken from the Google Ads reports. 582 clicks at average CPC of £0.79, so an average cost per conversion of £3.23. Average order value was £8.40, and lifetime value for a customer will be a bit higher as there are some repeat customers, as well as referrals to friends etc so I'm fairly happy.I'm using Shopping ads, as they seems to work well for me. It's important to have great product images (my CTR increased when I switch to CGI images of the product rather than home-taken photos for example).
I think it also helps to be at the top of the results if you can. If you are #1 result you will catch a lot of the customers who just want to make a quick purchase. If you are paying half the price per-click but are in #3 spot you will be getting a lot of traffic from customers who are searching around for the best deal, maybe visiting 4 or 5 sites and therefore your conversion rate will be lower, making the cost per conversion higher.
Your positioning is not just based on how much you pay, it also includes a quality score from Google analysis of your page. So if you have a bad landing page, you could be paying twice as much as your competitors to get to that #1 spot.
I find it's best to take any visitors directly to the product page, and ensure you have all the information your customer needs to make their purchase decision on that same page. Product info/photos/price, delivery information (including estimate delivery date) etc etc.
I've also found that highly targeted non-shopping ads can work. For example, my products are all small and shipped via Royal Mail 1st Class. Royal mail can deliver to the Channel Islands for the same price as mainland UK, so I setup ads targeting channel islands highlighting free delivery to channel islands, and there is very little competition on them. Last month I got 37 visitors from the channel islands, at a CPC of £0.42 with a conversion rate of 21.62% and therefore a cost per conversion of £1.95.
The other tip I have which may be obvious, is to keep on top of your negative keywords. Regularly check what keywords people are using add any irrelevant terms to your negative keywords. You don't want to be paying to get customers onto your site who aren't looking to buy your product.
RegMolehusband said:
My son looks after the business PPC campaigns and he's just said get yourself on Reddit and search for "PPC".
r/PPC has 33K very helpful members apparently, some managing big budgets.
Seconding Reddit as a resource. Been subscribed there since I first started managing PPC for my old job, and now I'm comfortably managing spends of £100k/mo. r/PPC has 33K very helpful members apparently, some managing big budgets.
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