How Ecommerce Businesses Can Beat Rising Advertising Costs

The best way to get through a hurricane safely is to be prepared before it hits. In the case of ecommerce startups, that means facing rising advertising costs, inventory delays and expensive capital. suggests Jamie Dimon, CEO of JP Morgan & Co “Building a Strong Balance Sheet“A person able to weather these economic and industry shocks is absolutely essential to weather the storm.

However, a sane person would argue that building a solid “offer model” that is able to cope with ad spend, purchasing behavior and cash flow are other requirements that ecommerce owners, founders and marketers need to include as part of their strategy. .

Related: 3 Ecommerce Trends You Need to Know in 2023

basic

Offer model A framework that outlines your product or service’s value proposition (i.e., the benefits you deliver), features (i.e., what’s special about your product), pricing ( (i.e., price and discount) and guarantees (i.e., returns and warranties). This is how brands approach their communications on their website and advertising creative to capture the interest of their target audience.

The offer model should capture customers’ attention with a Unique value propositionEducate the customer about the product and its variations, urge them to buy with a money-back guarantee and an incentive to address any last-minute concerns.

How are you

What to include in your offer model is up to your customers. That requires some research. Dig by you Customer reviews, your competitors and customer reviews of your competitor. You’d be surprised how many customers will simply tell you why they decided to buy the product and offer model parts that they liked the most.

Having an offer model is “unique” which you need to prove, show and/or certify. If you’re not providing a unique solution to a problem, then “who else?” Inevitably something is going to pop in the minds of consumers. With the power of Google, I can pull all your competitors in seconds.

A competitor comparison chart can be an effective way to demonstrate your unique value proposition and limit “shopping around” behaviors. Ask yourself:

• What makes my product better than any other competitive solution on the market?

• Why would a customer buy from me instead of each of my competitors?

• What advantages, features and/or components are my competitors missing?

Create value and show it

There is a difference between how you value your products or services and how your customers perceive that value. A $50 product for a business owner is just worth the cost of making the product and getting it to your door. For the customer, there is value in using the product to solve a problem or achieve a desired result. This difference in value is something that can be leveraged to your advantage to make more Value for your customers.

For example, offering a “free gift” to a customer who buys from you — say they bought a bottle of shampoo and you’re giving them a free sample pack of your conditioner. It may cost you ~$2-$3 to create and deliver this free gift to a customer. However, the customer’s perceived value of this gift is often much higher than this, which is more in line with the market value of the gift they are receiving. Instead of offering a customer a 20% discount, which lowers the cost of your order, consider giving them a free gift to take advantage of this value difference.

You can also use Free gift cards To maintain the same effect. Offering a $25 gift card with your first purchase is a $25 value to the customer — even though you know they will spend money at your store to buy your products. The customer will either use the card themselves or give it to a friend – either way, you’ve got yourself a new sale.

Showing the value of any free shipping, free warranty or free delivery insurance is another way to show value. You are paying for this, but not the customer. Informing the customer of the ~$15 shipping they are getting for free can help the customer better justify the purchase price.

Related: 4 Ways to Build a Value Creation Core for Your Business

Facing high advertising costs

There are also ways to leverage the offer model to increase the average value you receive from your customers. There is a difference between a customer who buys the cheapest product in your store and a customer who spends hundreds on a regular cadence. There are levers you can pull to influence how much customers spend at your store.

Taking a Bundling strategy, with tiered discounts and free gifts on larger bundle options, is an option that many more “CPG” brands take on. This strategy makes no sense if you sell durable goods or have a service-based offering. However, bundling allows you to deliver more value to the customer in the form of a larger discount – for example, give them a 25% discount if they buy 3 instead of just 1. This puts more money in your pocket sooner, which is very important. Maintaining cash flow as advertising costs increase.

Many Ecommerce marketers Anyone who avoids discounting at all costs will find this strategy useful – because you’re not discounting your brand, but simply providing an incentive to buy multiples of the product.

If you have multiple product SKUs, leverage pre-purchase upsells for the product or service the customer buys with post-purchase upsells focusing on unrelated products to gauge customer interest. You can also set up an email sequence to educate new customers about your other product offerings and target them to come back and buy more.

Know your numbers

Volatility is inevitable, and we’ve had a lot of it — since iOS 14.5, constant supply chain issues, A looming recession – Ecommerce businesses have been through it all. Knowing your campaign-critical metrics will save your castle from falling. Your key metrics will vary depending on your category. For most ecommerce businesses, these typically include your cost per acquisition (CPA), conversion rate (CVR), average order value (AOV) and contribution margin (CM).

If your AOV declines due to falling disposable income during a recession, your CM declines due to rising costs or inventory issues, your CPA rises or your CVR declines due to falling. buying behavior, you should be able to learn from your past offer model tests. Whether it’s creating more value with gifting, bundling and upselling to increase the value of your orders, or selling more products to existing customers to increase your margins, having data on what’s performing for your brand will be invaluable in balancing these key metrics. humming

Plan for the worst

When the sh*t hits the fan, you need to be ready. In the world of ecommerce, this can often result in unprofitable ad campaigns, technical issues, and running out of inventory. The previous strategies discussed will help with the first. Another solution is to hire a contract developer you can trust with a quality assurance system.

The third is a bit trickier and will depend on what makes the most sense for your situation. If the customer can expect to receive their product within one month of purchase, incl messaging Talking about shipping delays directly to your store can actually work to your advantage if you present the situation as a “fast sell” due to “high demand.” Allowing customers to pre-order is an alternative, however your ecommerce conversion rate will likely suffer as many will choose to pick up a competitor rather than wait.

However, the most important focus should be preserving your customers’ experience when the “worst” comes. The loss of an unhappy customer can often outweigh the loss of lost revenue, especially when you Customer lifetime value. It’s your responsibility to deliver on your brand’s mission — you can’t do that without inventory. You must ensure that customers are aware of how long it will take to receive their product, that they understand why their order will be delayed and that they are informed until they receive the product.

By going through this thought process you will be able to create a system ready for when these inevitable problems come your way.

Related: How eCommerce Companies Can Thrive During a Recession

Fortify your stronghold

You are only as good as your past test. You need to continually invest in learning more about what resonates with your customers. There are countless offer model combinations you can come across. Chances are unlikely that you will get it in the first attempt.

This involves constant testing and optimization – taking what is already working and coming up with ideas for what could potentially perform better. you can A/B test Think about what’s working to get some hard data to help make your decisions. This also involves continuous research. You should constantly be looking to learn more about your customers’ motivations, pain points, and areas of friction they experience — using data points from your customer reviews and competitors.

Finding offer model combinations that result in higher conversion rates will be a win to celebrate in the short term, however, the bigger value is learning what your potential customers are most likely to buy. This learning will make you more open in this The face of adversity. When your target metrics begin to fluctuate due to macro forces, you can double down on the offer model combination that has historically performed for you.