Competition amongst eCommerce companies is more fierce than ever. From the giant retailers to the drop shipping mini-sites, everyone is competing for consumer dollars.
What’s often overlooked is that major ad platforms such as Facebook and Google are auction based; meaning your competitors aren’t only from your market segment. Rather, your competitors are any and all advertisers buying impressions online.
The positive outcome of the above reality is that small companies can compete on a per-impression basis with giant companies. Established companies can flood the world with more ads due to high budgets, but they won’t capture every relevant impression.
The catch? Bids.
Each ad platform utilizes their own version of a “final auction bid” that enters the auction (as opposed to the specific bid you entered while building your campaign). This means on a per-impression basis, the impression with the highest bid ($) won’t necessarily win. The ad with the highest “final auction bid” will win. This “final auction bid” is a combination of advertisers’ bid, and expected conversion rates, landing page quality scores, and more.
What can emerging businesses do to compete with established ones?
- Remarketing ads (to new and existing customers) are inherently more relevant to the user seeing the ads, and increases the expected conversion rates and other relevancy and engagement scores. Ad platforms will raise your “final auction bid” without raising your financial bid.
- Run lift tests to ensure you’re generating incremental sales revenue from these campaigns.
2. Improve the landing page experience and funnel conversion rates
- The ‘click to purchase’ conversion rate is the main driver behind CAC/CPA/CPO.
- Read my LinkedIn post here.
- sum(total_purchases)/sum(total_clicks) = C:P CVR.
- Bounce rate will be considered in that formula, as not all clickers land on the destination page.
3. Be bid constrained, not budget constrained
- As long as your ads are performing well, increase budgets to the max possible. The platform will deliver as many impressions as possible to capture the budget, and you’ll get great performance at your tolerable bid.
- If you have limited budgets, manually turn off campaigns when they’ve reached the maximum spend. You can turn on automated rules/notifications for when the ad reach a certain spend.
4. Ruthlessly prioritize the products you advertise
Conversion rate is the only metric that can offset higher bids. Higher CVR is the strongest signal to the ad platform that your ad is relevant, well targeted and good for the user. If you’re running ads for products that have a low CVR, cut them. You’re reducing the overall quality metrics that the platform will assign to your assets, and those products will drag overall performance down.Q