Not Knowing How Profitable Your Paid Ads Are WILL Cost You – Big Time (Pt. 4)

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Not Knowing How Profitable Your Paid Ads Are WILL Cost You – Big Time (Pt. 4)

This is the 4th blog in a series that focuses on 5 Costly Mistakes That Are Preventing Your Store From Scaling. You can catch the rest of the series here:

Ecommerce KPI Metrics: 6 You NEED To Track (Pt. 1)

Why Theme-Centered Campaigns Are A Vital Ecommerce Marketing Strategy (Pt. 2)

How To Grow Your Email List In 3 Super-Simple Steps (Pt. 3)

Want To See Your Ecom Store Thrive? You MUST Be A/B Testing (Pt. 5) 

You know your marketing strategy needs to include paid ads.

To predictably grow your sales, you must be regularly bringing in cold blood to your business with paid advertising.

Whether that’s Facebook ads, Google Ads, or something else, paid traffic allows you to scale – and not just a little bit, but MASSIVELY.

But there’s a problem and it’s costing you.

You're investing in paid ads, and the sales are happening, but the real profit you're expecting is just not there – no matter what Facebook's or Google Ads' dashboards are telling you.

As a matter of fact, the "return on ad spend" that these platforms are showing can often be inflated. As a result, you crank up your ad spend based on the inflated (false) results and lose your tail end to the ad-spend money pit.

money pit

We saw this happen during a Google Ad account audit for one of our clients.

Here’s what we learned.

The Problem With Your Paid Ads

Before we did anything else for this client, we completed an audit and found that their Google Ads were showing 675 conversions.

Sounds great, right? 

BUT, they had actually only received about 500. And that discrepancy represented nearly $20k in inflated sales. 

As if that’s not bad enough, they increased their budget (based on the incorrect numbers) into profit-less campaigns.

This can happen easily when conversions aren’t set up properly or even if somebody refreshes their browser on the thank you page.

The issue can go the other way, too. Sometimes, your campaigns show fewer conversions than there actually are and so you DECREASE your spending, even though the ads are profitable.

The 3-Step Fix

How To Make Sure Your Ads Are Profitable

  1. Know how much you can spend.
  2. Make sure tracking codes and conversions are set up properly.
  3. Use the right tools.

If you follow a few simple steps, however, you’ll be able to calculate the true profitability of your ads and unlock the power of scale without burning to the ground.

To fix this, you need to do three things.

1. Know How Much You Can Spend

You must know the absolute MAX you can pay in ad spend for a single product to break even. Because if you don’t know this, you won’t know if you’re really profitable.

When calculating how much you can spend, factor in shipping, credit card processing fees, software subscriptions, average refund rates, taxes, and similar variables to find the TRUE cost of goods sold.

2. Dot Your Is And Cross Your Ts

AKA Make sure your tracking codes and conversions are properly set up inside Facebook and Google Ads. (You’ll avoid the costly mistake our client made.)

3. Use The Right Tools

Use several analytical tools to cross-reference the sales Facebook or Google Ads are showing you. 

If you’re on Shopify, run a financial report and Google Analytics report to make sure the numbers Facebook Ads and Google Ads are displaying are correct.

Facebook might show you 100 sales, but the actual sales from Facebook traffic, based on Shopify and Google Analytics reporting, might actually be 80. Or vice versa.

The Result

Although running numbers like this each month will add a bit to your reporting time, it will empower you to make wise financial decisions when it comes to ad spend. 

The result? Huge scale and profitability.

Final Thoughts

You need paid advertising if you want your online store to thrive. 

But you have to know how profitable your ads really are before that can happen.

Follow the three tips we’ve laid out for you and avoid making a mistake that will cost you, big time.

And if you’d like some help figuring out how profitable your paid ads are, we’re always here to lend a hand. Schedule a call today and let’s talk about getting the results you want from your paid advertising.

Schedule a Call

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