3 Ways to Increase Return on Ad Spend

Marketing budgets can be tight and making sure that the money that is investing in digital advertising is most effectively spent is crucial. A positive return on investment is always the goal of any marketing campaign. Ideally, money invested in digital spend is resulting in more sales than spent. This is only a partial picture because of the evergreen effect of consumers across the internet. 

Sales is a very important metric when evaluating the effectiveness of a marketing campaign, but only one perspective. I agree with you, clicks don’t pay the bills but money spent capturing email addresses can be worth ten times more than a single sale if the right systems are in place. You also cannot forget that every dollar invested in a marketing campaign online is gathering data that will provide you insights to sharpen your targeting and be more effective with the following campaigns 

Before starting the next digital marketing campaign, take into consideration the following factors and how they can affect the outcome of your campaigns. These are usually overlooked because they aren’t dollar signs, but their importance longterm can be the difference between effectively scaling or closing your doors for good. 

1. Conversion Rate

If you manage to get 10,000 visitors to your store over the lifetime of a campaign, but only 1% convert in sales, that is 100 orders. Now suppose you focus on increasing your conversion rate and your efforts result in a 3% conversion rate. That same amount of traffic is resulting in 300 sales. That is a 300% difference in the number of sales that the same amount of traffic is generating. 

Many factors go into your conversion rate. Some are uncontrollable, others are directly within your locus of control. One of the main factors is simply the load speed of your page. If you can improve the load speed by even 1 second, it could save you thousands of dollars in sales. According to 2018 research by Google, 53% of mobile users leave a site that takes longer than three seconds to load. You can use Google Page Speed Insights to see how your page currently performs on desktop and mobile.

Another factor that you can control in increasing the conversion rate on your website is establishing trust with new visitors by displaying authentic reviews from your previous customers. Yotpo conducted a survey and found that 98% of consumers consider authentic customer reviews to be the most influential factor in influencing purchase decisions. This is a staggering statistic that cannot be ignored. If there are no reviews displayed, the likelihood of a visitor spending their precious money is decreased dramatically. 

Lastly, if visitors add a product to their cart and reach checkout, there is potential friction that will result in abandoning their cart and never returning again. That potentiality is a complicated checkout UX. According to the Baymard Institute, 26 percent of US online shoppers have abandoned an order because the checkout process was too long and complicated. Shopify singlehandedly provides a solution to the problem of a complicated checkout process via their dynamic checkout feature. Shopify’s dynamic checkout offers customers a checkout solution using popular payment methods, such as PayPal, GooglePay, ApplePay, and AmazonPay.

If you take care of these three factors, your conversion rate is likely to increase multiple percentage points resulting in more sales for the same number of visitors who shop your site, making your advertising spend work harder and more effectively. 

2. Average Order Value

Let’s consider if the conversion rate problem is solved. Instead of 100 conversions on 10,000 visitors, 300 conversions occur because the website was optimized, reviews are in place and checkout is frictionless, how else can we make our advertising spend result in more. Simply put, you increase the amount that each customer spends. Increasing the average order value is a sure way to make your advertising budget be more effective. There are multiple methodologies to achieve this, but they all come down to encouraging and incentivizing bigger carts. 

If you get on Amazon.com and observe how their product pages are set up, you will begin to learn how you can structure your store to get more dollars per conversion almost immediately. They have complementary products ready to bundle that include a discount, use social proof to suggest products that are “frequently bought together” and present free shipping when you reach a minimum cart balance.

These are features you can easily add to your store using CartHook – One Click Upsell, Yotpo Cross-Sell and discount thresholds using Shopify discounts. These all present the customer with choices as they are shopping to add more items to their cart, spend more money and increase the average order value across all customers. Here is another example of how altering the structure of the store can result in more effective advertising spend.

3. Customer Lifetime Value

The immediate sales that a marketing campaign generates are a meaningful, yet incomplete indicator of the success of the effectiveness of the advertising. It is important to focus on the cost per acquisition of a marketing campaign because this metric is vital when scaling a campaign. However, if the cost per acquisition is overemphasized then the entire marketing strategy is shortsighted. For example, if it cost $20 to acquire a customer and they make a purchase of $50, then the assessment would be that there was a positive return on ad spend. What few marketers and companies fail to realize is that without the right systems in place that will be the only purchase a customer makes. If the correct customer nurturing systems are in place, then the likelihood of a repurchase increase dramatically. Let us consider another scenario, where the same $20 generates a customer who spends $50 on their first purchase and every month thereafter they make a $50 purchase. That same $20 generates $50 in scenario number 1 and $600 in scenario number two, a 1200% difference. 

Now consider if there were incentives for that same customer to refer a friend to purchase. They might receive a 25% off coupon for every customer they refer to purchase. This extends the effectiveness of that initial $20 invested to acquire that customer. We have identified three systems to increase the lifetime value of your customers.  These can be implemented immediately so you can start to nurture new customers and reengaging your existing customers. Focussing on increasing the lifetime value of each customer will make every dollar invested in advertising work more effective long term. 

Final Thoughts

Marketing is both short-term and long-term. Focussing on immediate sales generated by campaigns is vital to the health of the brand. In the short term, these campaigns can be improved by simple website performance and user experience adjustments. The boost in sales from these two factors alone will make every dollar invested in ad spend return more than if they were ignored. Longterm, focussing on nurturing your existing customer base as well as creating systems that engage new customers will also stretch your advertising spend. At the end of the day, businesses solve problems and present solutions, whether that is done via products or a service, it is all the same. If your product is the solution to your customers’ problem, then turning them into loyal lifelong customers is a win-win situation.