At some point in every ecommerce business's life cycle, the question "Should we be spending money on online advertising?" arises. It can be a scary question because costs can escalate quickly in almost every paid digital marketing campaign. Sticking with organic social media marketing, sending email campaigns, and other low-risk forms of ecommerce marketing feels less stressful. But if you want to scale, at some point, you must engage in one (or many) forms of ecommerce advertising.
But before your fight or flight response goes into overdrive, let's reduce your stress levels. This article aims to educate you on the ins and outs of advertising for ecommerce businesses. We will discuss the best practices, how to mitigate the risk of losing massive amounts of money, and how to begin with low per-click/impression costs.
At the end of this article, you will understand the steps to effectively (and profitably) engage with customers who fit your target audience. So let's get started by understanding who you should be advertising to so that when potential customers see your ad, they are not only likely to click, they are likely to buy.
Understanding the Target Audience
Ecommerce companies do not spend near enough time or money understanding their target customers. Often, they end at a “general” understanding based on communications through phone, email, chat, and possibly some basic sales information.
Leave it general understanding, and you will have dangerously high customer acquisition costs, making it not worth the advertising investment.
Another benefit to understanding the specifics of your target audience is that when you drive the right people to your business, you are more likely to develop customer loyalty.
For effective advertising, leave the one-off, never see you again marketing tactics to scammy companies. Instead, understand your target audience before advertising with a genuine and compelling offer.
To do this, you will need to understand their needs and interests, which means you may need to pay for access to previous research, conduct market research, and split test ad campaigns.
Budgeting for Ecommerce Ads
Setting an advertising budget is more than understanding how much you can spend monthly. It understands how much you can spend to acquire a customer and their lifetime value. Suppose you are setting your budget based on "what you can afford" with the mentality of at least getting some brand awareness. In that case, you will likely cancel your paid advertising campaign before machine learning starts and campaign optimization takes place.
You will have quit before the point of profitability.
Programmatic advertising is easy to turn on but also easy to turn off. Many ecommerce advertising campaigns are like the stock market, where the company owner makes an emotional decision, pulling out of their campaign at the wrong time.
Working with an ecommerce advertising agency rather than going alone is a smart idea. Performing the ad placement yourself means you are only accountable to yourself. When you have an agency (reputable, of course!) In addition to setting up a more successful advertising strategy, there will be the advisor who says, wait, let me show you the progress you've made and where we are going from here. An outside perspective should be enough to prevent you from prematurely pausing or deleting the campaign.
Choosing the Right Ad Platform
When you understand your target customer, your budget, your cost to acquire a customer, and their lifetime value, you can determine which advertising platform is right for your business. But there's one more factor we need to consider: how you organically achieve success in the first place.
For some, this will be through blog content, where search engine optimization naturally occurs. Others may have a solid social media following where mirroring their audience is the next step.
If you see success with SEO, double down on these efforts by investing in a Google Ad, Google Shopping, or even setting up a Microsoft Ads campaign. Your keyword research and current rankings will prove invaluable when you set up your ads.
If you are crushing it on social, you must double down on your current success by leveraging your existing channel's success. Here's a tip: begin by narrowing down to a geographic region when you go social. Social media ads have reports and analytics, but it is not nearly as clear as Google or YouTube ads, where you understand the specific search term a potential customer used to reach your site.
Narrowing down to a target region based on target audience understanding reduces risk and increases your conversion rate. For example, desert communities outperform coastal communities in my experience with weightlifting products. Targeting Bakersfield instead of Santa Barbara is the right choice, even though the coastal community's median household income is significantly higher.
Popular Ad Platforms For Ecommerce Ads
The term "popular" ad platforms probably bring to mind about 3-4 different places to advertise. In reality, "popular" goes well beyond the top three, and innovative ecommerce businesses recognize this. Here is a long but partial list of potential places to advertise your business. Some of these might be immediate opportunities if you've already performed market research to determine your target audience.
Google Ads (formerly known as Google AdWords)
Facebook Ads (including Instagram Ads)
Microsoft Advertising (formerly known as Bing Ads)
YouTube Video Ads
Display Ads on various websites
Native Ads on high-traffic websites
Sponsored content on targeted websites
Each platform has its pricing plan with various cost-per-click or cost-per-impression. Understanding the details of the platform is critical to the campaign's success, so do not take it lightly.
Crafting Compelling Ad Copy
Once you have a comprehensive strategy, it's time to craft your ad copy. Whether a visually dominant campaign or a simple text ad, every form of advertising demands high-level copywriting. And it should be the beginning of your ad campaign.
While we live in an AI-driven world with technologies like ChatGPT that ecommerce brands can use to create any number of ads, a copywriter is still essential to the success of your campaign. There are nuances for every social and Google search ad that requires an expert's articulation that the bots cannot (yet) duplicate.
The key to successful ad copy is the same as every other campaign component: creating multiple messages and split-testing them for performance.
(example of compelling copy)
Creating Eye-catching Ad Visuals
To start, let's address the common mistakes ecommerce companies make. High-converting ad visuals don't always require shock and awe. Having the right visual goes back to our target customer understanding. Do they like flashy or minimalist? Are they attracted to pastels or bright colors?
It is important to remember whether it is a product image we find in Google shopping ads, a video ad on YouTube, or a static Facebook ad.
While it's repetitive, we must remind you to design and split test to determine what works best.
Targeting and Retargeting
Creating your ad campaign is only the start. While it might get them to your product or landing page, effective ecommerce advertising requires much more than capturing the click. What happens on the page is even more important than getting them there in the first place.
When creating your campaign, you must take the following steps:
Headline: The headline will either bring them into the story or back out of the website.
Page copy: Here is where you tap into the head and the heart making them product believers.
Call-to-action: Each click deepens the relationship, whether to a nurture campaign or immediate purchase.
Ad retargeting: You can show your brand to those who previously visited the site for a minimal cost. It's worth it!
Email marketing: Here is your opportunity to speak to them again and again and again.
SMS marketing: The most promising way to see your follow-up message.
Put as much effort into your targeting (on-page) and retargeting campaign as you do the ad itself. Again, you must design and test several concepts against one another.
Ad Targeting Options
When creating your digital ad campaigns, each platform presents a set of options for segmenting the audience into smaller, more targeted groups. Even when having an agency build out your ad campaigns, it's paramount to understand the options available. You also need to understand what decisions they make to understand the reports so you can implement learnings back into your company.
Here are the most common ad campaign options.
Demographics: Age, gender, income, education, occupation, marital status, parental status, and location.
Psychographics: Values, beliefs, attitudes, personality, interests, lifestyle, and behavior.
Interests: Specific hobbies, activities, and interests related to your products or services.
Search intent: Target people actively searching for products or services related to your business.
Lookalike audience: Target people with similar characteristics and behavior to your existing customers.
Custom audience: Target people based on their email address, phone number, or other contact information that you have collected.
Behavioral targeting: Target people based on their online behavior, such as previous purchases, search history, or social media activity.
Contextual targeting: Target people based on the context of the content they consume, such as keywords or topics related to your products or services.
Even without the ability to use third-party data, you still have plenty of ways to leverage 1st part data to improve the outcome of your advertising campaign.
A/B Split Testing Ads
While it is called A/B testing, think of it more as A/B/C/D testing because you often put more than two variations against each other.
To perform split testing, create separate campaigns and divide your budget evenly. Yes, this takes more work, but it’s worth the effort. Once you have a winner, you test the next element.
Note: Split testing is an ongoing process, not a one-time event.
Even with a successful campaign, you should allocate a small portion of the budget to testing new concepts. A/B testing provides surprising winners and keeps your pulse on how to communicate to your target audience.
Here's each element that you need to test in your ad campaign:
Ad copy: Test different headlines, ad text, and calls to action to see which version resonates best with your target audience.
Images: Test different images and graphics to see which are more attention-grabbing and effective at conveying your message.
Landing pages: Test different landing page designs, layouts, and calls to action to determine which version results in the most conversions.
Audiences: Test different targeting options, such as demographics, interests, and behaviors, to see which audience is most receptive to your ads.
Investing time and resources in A/B testing is the only way to optimize your advertising campaign for maximum effectiveness and ROI.
Ad Compliance and Policies
Here comes this article's not-so-fun yet necessary section. Ad platform compliance and adherence to government policies are essential considerations for every ecommerce company.
Investing in your campaign only to pull it down from the platform can be a painful experience. Then, you spend even more money to get back onto the platform to not lose out on your investment. Ensure you follow the platform's guidelines regarding what you can sell, show, and say when advertising.
Ask any marketer who has suffered the consequences of violating the policies set by the FTC, and they will tell you what an absolute mistake it was. Not only are the fines and fees expensive, but you will lose consumer trust when lousy press starts to surface.
Measuring the Success of Ecommerce Ads
"If you can't measure it, you can't manage it" - Peter Drucker
Measuring the success of your ecommerce ad campaign is more than just knowing your ad cost and total revenues. You need to understand the nitty-gritty of your advertising efforts to optimize and often justify the campaign.
Here are some ads to consider.
Click-through rate (CTR): This metric measures the percentage of users who click on your ad after seeing it. A higher CTR indicates that your ad is relevant to the target audience and that they are interested in learning more about your products.
Conversion rate: The conversion rate measures the percentage of users who take the desired action, such as purchasing after clicking on your ad. This metric gives you an idea of how well your ad drives sales.
Cost-per-click (CPC): The CPC metric measures the amount you pay for each click on your ad. A lower CPC means that you are getting more clicks for your budget.
Return on ad spend (ROAS): The ROAS metric measures the revenue generated from your ad campaign compared to the amount spent. A higher ROAS indicates a more profitable ad campaign.
Customer lifetime value (CLTV): This metric measures the total revenue a customer generates over their lifetime. By tracking CLTV, you can determine how much you should spend on advertising to acquire a new customer.
By monitoring and analyzing these metrics, you can determine the effectiveness of your ecommerce ad campaign and make data-driven decisions to optimize your advertising strategy.
The Future of Ecommerce Ads
Ecommerce ads are evolving at an alarming rate. If the future causes you concern, remember that the framework for building your advertising campaigns will remain the same. Focusing on the fundamentals and creating a repeatable process makes it easier to roll out new campaigns on new platforms.
Trends in Ecommerce
As ecommerce companies look to the future, they must focus on personalization and identify ways to hyper-target the right audience. With personalization comes the need to incorporate influencers into their campaigns. Why? Because influencers have a sneaky way of forming friendships with their audience even though it's a one-way conversation.
AI will also drive the need for what feels like an augmented reality experience. Although this sounds like a costly pursuit, we already see affordable software that makes a social ad have 3d effects.
Another significant trend is omnichannel ecommerce which means adding another metric to your list. Ecommerce advertising, where you send people directly to your website, will spill over onto other platforms. Measuring this is more complicated, but you must monitor how your DTC ad campaign impacts your Amazon store sales.
AI and machine learning are also changing how audiences engage with digital technology. For example, voice search is becoming increasingly popular, and advertising opportunities are available on platforms where voice search exists. For example, "Alexa, please put on my favorite fitness podcast." you then hear the response, "Sure, but first, did you know that other people listen to this podcast while on their R1000 Elite Performance Treadmill?
Yes, that kind of personalization is coming.
Keeping A Pulse On The Future
The future can seem scary and often overwhelming. But it can also seem exciting and full of opportunity. How you look at it is up to you. With innovation being at the forefront of ecommerce performance, we highly recommend that you dedicate a portion of your marketing budget, resources, and meeting time in the future. Suppose you are committing 5% of your budget to ecommerce advertising. Can 10% of that go to futuristic advertising opportunities?
Ecommerce Advertising Agency
If you are an online store looking for a digital marketing agency that understands the ins and outs of ecommerce advertising, we can help. The Nine has extensive experience in paid marketing, including search, website, and social media advertising, and work with some of the largest ecommerce brands on the internet. Schedule a time to talk with one of our ecommerce experts.
Frequently Asked Questions
What is Ecommerce Advertising?
Ecommerce advertising uses paid advertising channels to promote and sell products or services online. This includes a variety of advertising formats, such as search engine ads, social media ads, display ads, native ads, influencer marketing, and more. Ecommerce advertising can be an effective way for businesses to reach their target audience and drive traffic and sales to their online store.
How Much Do Ecommerce Brands Spend On Advertising?
The amount that ecommerce brands spend on advertising depends on various factors, including the business size, the products or services offered, and the advertising channels where spending occurs. According to a study by eMarketer, US ecommerce businesses are expected to spend $53.2 billion on digital advertising in 2021. However, this figure can range from a few hundred dollars monthly for small companies to millions yearly for larger enterprises.
How Much Should My Ecommerce Business Spend On Advertising?
Determining how much your ecommerce business should spend on advertising can be complex and will depend on your business goals and circumstances. A common approach is to allocate a percentage of your overall revenue to advertising, with the exact rate varying depending on the size and stage of your business. According to a survey by Shopify, most ecommerce businesses spend 10-20% of their revenue on advertising. However, it's important to note that this figure can vary greatly, and it's essential to regularly review and adjust your advertising budget based on your business goals and performance.