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
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.
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