Why Most People Fail At Paid Ads…

And How To WIN!

First, a question…

Would you spend $5000 to get 1000 NEW customers that made a purchase on your Shopify store?

To clarify, would you lose $5 per order on 1000 new customer orders to ADD 1000 new customers to your store?

If you said no, keep reading because everything is about to change for you.

If you said yes, you are probably on the right track. Keep reading to find out…

You are about to discover how the BIG STORES run their PPC (Pay Per Click) ads for New Customer Acquisition.

This concept will give you a whole new thought process.

What metrics really matter when acquiring new customers?

CPC, CPM, CTR, Impressions, Clicks, Views, etc. etc?

All of these are really useless (Hate comments incoming).

The only 3 things that matter are:

1. CAC - Customer Acquisition Cost

2. The Amount of Profit or Loss on the first order.

3. The amount of LTV Profit.

Before you slam your new iPhone on the table, please hear this out. 

IF your paid ads are profitable when acquiring new customers, YOU are winning.

IF you are not profitable running paid ads when acquiring new customers, your LTV Profit must make up for your losses.

Let’s look at a couple of customer acquisition examples…

Scenario 1:

• Product costs you $10

• Consumer product price $40

• Ad spend to get sale $20

• Ad spend + Costs = $30

• Gross profit = $10 ($40-$30)

Scenario 2:

• Product costs you $10

• Consumer product price $40

• Ad spend to get sale $35

• Ad spend + Costs = $45

• Gross profit = $5 LOSS ($40-$45)

Obviously, scenario 1 is great and what everyone wants.

Unfortunately, it does not work this way very often.

If you are currently running New Customer Acquisition ads and making a profit, you should pop some champagne and celebrate.🍾🎉

Sometimes you can do this at low spend volume but when you start scaling to $5k/day and beyond, your NEW Customer Acquisition cost will increase drastically.

Chances are that you’re NOT able to acquire customers at a profit on the first order even if you’re using The Secrets of a Million Dollar Facebook Ad

The good news is, that doesn’t mean you have to turn off all paid ads. 

You just need a new mindset…

How to Buy Buyers

Or more specifically, How to Buy Customers that will stay engaged with your brand and buy more from you in the future…

For this method to work, you MUST know your AOV and LTV numbers.

Let’s use the following assumption:

1. Product Costs $10 (including shipping to customer)

2. Product Sale Price $40

3. Number of Purchases the average customer makes lifetime = 3

You sell your product for $40 and it costs you $10 = Gross Profit of $30 per sale.

Let’s say you have to spend $35 on ads to get a purchase.

That means your product cost ($10) + your ad spend ($35) = $45.

That means you spend $45 to get a $40 sale = $5 loss

That seems like it sucks, right?

Well losing money does suck, but hang in there. The good part is coming…

Remember something important: in this example, you know your data and know that your average customer buys 3 times.

They’re so happy with your brand and store, that they come back to buy again and again.

When they come back to buy again, you don’t have to spend the money on ads the second or third time.

That means, that when we look at our numbers, we don’t have to count the ad spend into our cost on the second or third purchase.

So when they buy the second time,

They spend $40

Product cost: $10 (we don’t have to consider ads on second purchase)

Gross Profit on second purchase = $30

So lets look at where we are now:

First Order: $-5

Second Order: $+30

Total= $25 Gross profit across both orders

AND watch what happens when they buy the 3rd time…

First purchase loss of $5

Second purchase profit of $30

Third purchase profit of $30

Total Profit = $55

That’s much better math, isn’t it?

We think so too…

Losing Can Equal Winning

This is why knowing your AOV (Average Order Value) and LTV (Customer Lifetime Value) is so important to the life of your business.

You must always try to increase these.

If you increase your AOV you can spend more “buying” new customers.

Whoever can spend the most on acquiring new customers wins.

Imagine being able to spend $10-$20 more than your closest competitor!

If you increase your LTV, you put more profit into YOUR POCKET.

One of the easiest ways to increase your LTV is with our “Money Printing” Automation.

To All The Haters 😎

Back to CPC, CPM, CTR, Impressions, Clicks, Views, etc. etc

Obviously you want to monitor these for best practices.

But at the end of the day,

If you know you are going to make $55 Lifetime Profit or $500 Lifetime Profit you can look at your entire paid ad strategy differently.

If your paid traffic strategy includes affiliates or influencers and you know your AOV and LTV, you may be able to afford to be more aggressive on first order commissions and outbid your competitors too.

Make increasing your AOV and LTV a key goal of Your Success Roadmap.

This will allow you to “buy” even more new customers!

Talk soon,

-Brent and Rush

P.S. if you’re struggling to get your store over $30-120k/month and your ad strategy doesn’t make sense to you, CLICK HERE to reach out to us for a free audit.