Hey Roy, we have a small business we are looking to grow and are looking for some AdWords growth strategies. We'd love to get to the point where we are spending $100k or so in ad spend (and making money). We can afford a ROAS of 5.6. From what you can see of our account, what are your recommendations? Thanks for any advice you can offer up.
Hey Artie, that's actually an excellent exercise--one that I was putting in some time on recently, which you can read through here.
If we're talking about a 5.6 ROAS or 18% COS (hence the making money caveat), then that would require roughly $556,000 per month in topline revenue. To start with, you only have 2,450 products currently active in Google Shopping. While the impression share (for the past 30 days) is only about 24%, that means that even with an infinite budget, we can only realistically expect to get 2-3x the impressions from the market for those products--nowhere near the 25x increase you're talking about (going from $4k to $100k). I'd say you need to expand your catalog by at least 10x, spreading that net wide enough to capture that many eyeballs (if you'll forgive the mixed metaphor).
If you had ten times as many products, let's assume you could get 15x as much traffic, as the traffic compounds as you build brand recognition, retarget that audience, and continue to tune the site's conversion. If we also get a 25% increase in conversion rate during that time, that gets us to almost 19x the conversion count--a good chunk of the way to the 25x target.
One client I have experience with had 40k products, of which about half are parts which are drop shipped, so the meat of the catalog was probably 25k products. 85% of the company's orders are fulfilled through their own warehouses and inventory. About 100 products made up 50% of the revenue and 800 products made up 85%. If even one of those top products runs into trouble (some jerk blowing them out on Amazon, or the like), it is a big problem for the company. Over the last couple of years, they've worked to continuously explore new products, manufacturers, brands, and categories. Some products would over-mature, the price would drop out, and they'd need to replace it with something new--it was and still is a full time job for two people.
They've managed to spread out revenue to 500 skus making up 50%, and 1,800 skus making up 85%. That's still a lot less than the 25k products in their core catalog, but without those 25k, they would never have found or had the 1800 that really mattered. Also, the long-tail became healthier and healthier as they started to stock anything in that parts catalog that hit some traffic and sales threshold, which also boosted margins.
As I mention in the article, you then need to present the new products as effectively as possible. This includes product photography, but also supporting content (check out some of the videos on this site, for example), and conversion rate optimization. The great thing about CRO is that everything depends on conversion rates, so even a small change there gives you the freedom to do all kinds of things elsewhere in your funnel. For example, if you can amplify your conversion rates by a little, it actually frees you up to consider lowering prices (which has a dollar-for-dollar greater impact on sales than a larger marketing budget, for example), or other strategies. Sites live and die by conversion rates. But there are lots of tools out there that make that easier and easier to work on--but it does take a lot of time and attention. That's part of what I presented on at eTail last year, actually.
But the short answer is that the first step in that direction is to focus on sourcing and merchandising, as you need a lot more products to offer in order to have the draw for an audience that size.
Thanks for the question Artie. Drop me a line if you have any other questions. I love to talk shop.
Up and to the right,