Building an Ecommerce Business, Part 5: Paid Acquisition

Knowing where to advertise can be daunting to new and experienced ecommerce entrepreneurs alike. There are many options, and it’s often unclear which will fit your business. Digital marketing agencies can provide some answers.

I am the founder of Beardbrand, an Austin, Texas-based ecommerce business that focuses on beard care and men’s grooming. This is the fifth episode in my series of conversations about building an ecommerce business. The previous installments are:

For this interview, I visited with Alex Hart, founder of Good Joo Joo, an Austin-based digital marketing agency. I asked her about paid acquisition, the process of using advertising to acquire customers.

What follows is my entire audio interview with Hart and a transcript, edited for length and clarity.

Eric Bandholz: Tell us about your company, Good Joo Joo?

Alex Hart: We’re a digital marketing agency focused on acquisition. We use all the channels, for all the fun! AdWords, Snapchat, Instagram, you name it, we advertise there. Our clients range from big retail clients to small-time hustlers with digital download products. We offer email marketing and automation services, too.

But primarily our focus is on acquiring customers for ecommerce companies. We’re a little shop. We have partnered with an education non-profit to create a mutually beneficial ecosystem between the clients donating to that organization, making money, and hopefully making the world a better place.

Bandholz: Give us an overview of the advertising options for merchants.

Hart: The thousand pound gorilla is Facebook or Instagram, depending on your audience. If your audience skews a bit older, it’s perhaps Facebook. If you’re after millennials and younger, it’s probably Instagram.

Then there’s Pinterest. That’s for visually appealing products or something that could catch peoples’ attention — such as a cooking recipe, which could result in selling cookware. Pinterest seems to be a bit narrower in terms of prospects. The same thing can be said about LinkedIn; it works well for B2B.

Google AdWords tends to be much less sexy. Companies haven’t given it the attention that it deserves recently. In the last two years or so, it took a backseat to all of Facebook’s innovations. That meant less AdWords’ competitors and those who advertised were doing very well there.

Bandholz: Does anyone market on Twitter?

Hart: Yes. Twitter does well for some people. The unique thing about Twitter is the ability for advanced hashtag targeting, the actual targeting of a user’s followers.

Bandholz: For merchants who are new to paid acquisition, what kind of strategy should they be thinking about?

Hart: I’ll assume for the sake of the conversation that most of your readers are B2C merchants, targeting consumers. For starters, you’ve got to have some images that you can turn into a carousel or a slideshow, perhaps a short video or a GIF. You need to have your landing page in order. There has to be a way for visitors to purchase. All of that has to be running smoothly.

Site speed is often overlooked as is ease of use in the checkout flow. That’s something that I talk about with potential clients. I run speed and usability tests before an engagement even starts.

Do we have confidence that a consumer we get on paid media is going to actually convert and go through all of these steps? You want to have all your tracking mechanisms in place — testing the Facebook pixel, testing the Google conversion code, and making sure that you’re getting it back in your dashboard and seeing what’s happening.

I’ve seen a lot of ecommerce brands feature product photos without people. That’s a mistake. You need people in your advertising. It’s important for consumers to make the mental connection with the product. Even if it’s a photo of furniture, you want to include people sitting on it and looking comfortable. Humanizing your product will go a long way in your creative.

Bandholz: How do merchants know when it’s time to hire a marketing firm? What should they look for?

Hart: I’ve seen only a handful of founders launch acquisition channels well. When you’re evaluating an agency, keep that mind that just because people can discuss advertising doesn’t mean they understand the finer points of it. Ask qualifying questions, such as, “Do you know how to install a Facebook pixel?” Just hear them out. Try to get a feeling for their level of comfort in answering that question.

Another good question is, “What is the difference between branding and acquisition?” Branding is focused around boosting posts. You’re doing it for awareness. You may be getting impressions, likes, and comments. But that’s not acquisition.

Bandholz: What kind of investment should merchants make in a firm?

Hart: First, don’t even consider paid acquisition until you have your first 100 customers. That’s a good benchmark. You want an agency to ask, “How many purchasers and unique visitors? What’s your overall site traffic?”

If they promise you everything under the sun, you need proof. If they’re saying like, “You hand me the creative and I do all the ad operations. I do all the analytics, and I give you beautiful reports.” That’s a good thing, too. Just make sure they are savvy at running those actual numbers.

I generally tell small businesses to start between $1,500 and $3,000 per month. That gets you two campaigns on Facebook and Instagram combined at $25 a day. The first campaign can be to set up dynamic product ads, which are for retargeting to help with your brand and cart metrics. People have already seen the product. They’ve already added it, and then they abandon. So that’s a way to recover those.

Then the second campaign can be strictly prospecting — going out and looking for new customers.

Bandholz: What is a normal return on ad spend?

Hart: Revenue from ad spend should be at least twice the cost. That’s the cost of the ads, plus the agency fee or your marketing person salary (monthly salary, not annual). It should be double after you take out all the costs; anything above that is gravy. Three to four times the investment is ideal. But double the investment is the minimum, at least from my perspective.

Bandholz: How does customer lifetime value factor into the calculation?

Hart: Average order value is more important at the beginning than lifetime value because you just don’t know yet. It depends on how many SKUs you have. And if you’re a subscription, you want to know the churn rate.

See the next installment, “Part 6: Hiring Employees.”