What Percentage Of Gross Sales Should We Budget For Ad Spend?

Hey, how's it going? It's Ollie here. Welcome to the Ecommerce Freedom Podcast. Before we dive in with today's episode, I've got two cool resources for you. The first one is my new E Commerce Q and A group on Facebook. So in this group, the point is, you ask questions in the Facebook group and I answer them with daily videos, okay? So you can get your questions answered really, really, really quick. It's a great resource. If you go to ecommercefreedom.com and look at the top of the page, you'll see a button for the Q and A group. Click on that, it will take you to the Facebook group. Second resource I got for you is an Amazon accelerator call. So what I'd love to do with you is talk about your goals, talk about where you are now, and talk about the stuff that could prevent you from hitting your goals right together on a strategy session, we will come up with a plan for you to replace your income with an Amazon business. If you'd like to book a call where we can do this, go to ecommercefreedom.com, look at the top of the page and click Amazon Accelerator Call. You'll be taken to a very short application page. You can fill that in on the next page. You should be able to book your call. Alright. Hope you really enjoy the episode. Hey, hey. Valkomen Jos. Schoole ville prata fera. Practicing my Swedish still kind of suck. But I can order a coffee, I can say I want to order some food, I can order taxis, I can do road names. There's a few things I can say I can kind of get by, but still definitely not fluent. Anyway, fantastic questions today as always, and we've got a lot of them. And today again, I wanted to focus on the theme. So quite a few people have been asking about marketing and advertising their products. So Lewis starts off by saying, I keep losing all my profit in ad spends. What percentage of gross sales should we budget for ad spend? So this is a great question. And when you're thinking about marketing and advertising, we do want it to make your products way more visible. We do want it to be effective, but we don't want it to eat into your margins so much that you end up losing money. So I'm going to answer your question. I'm going to give you an answer, though that probably isn't what you expect and it's probably not what you want. So right now you're asking, what percentage of gross sales should we budget? I wouldn't look at it like that. Actually, what I would look at it, this is my advertising strategy. Okay? First of all, you do absolutely everything you can to get your product onto page one, okay? So usually this means losing money initially on sales. Your ACOS is going to be ugly. You're going to be giving away products through a promotion service like AMZ Tracker or something like that. And you might even be charging way too little for your product. So all you're doing is you're just trying your hardest to get sales and also to get reviews and to get visibility. Once your product gets to page one, then you want to spend as little as possible on marketing and try and keep it there, okay? So that's what you should aim to do in order to get your product visible and get it selling. Because once it's on page one, it should be relatively self sustaining. I mean, you'll get organic search results, right? People will type in the keyword, find your product without you paying for ads, and you'll make sales, okay? And those sales will keep the product well ranked and that will keep you on page one, which will get you more sales. Then you can spend a lot less on marketing. So it's like a big push to get to page one and then you just kind of let the dust settle and you stay there. That's ideally what we want. So to answer your question, what percentage of ad spend should we allocate? What percentage of gross profit should we allocate to ad spend? Well, as little as possible is the answer. As little as possible. I think it's hard to give a realistic percentage because I think every single product is different. I think every single niche is different. And you know, if a niche is way more competitive, the keywords are going to cost more and you're gonna have to pay more to get onto page one. It's just the way it is. So I think you should think about it like this. Try and make as much profit as you possibly can. So there's always a way to find a cheaper way to source your product. There's always a cheaper way to ship your products over. If you can get some sort of external traffic as well as advertising on Amazon, then that can start to work out cheaper as well. If you have an email list and you can send traffic from the email list to your page as well as Amazon pay per click, I mean that's going to be seriously cheap marketing for you. I mean, it's basically free traffic. So do everything you can to get a larger profit percentage on your products. Then what will happen is you can spend more advertising than all of your competitors because you've cut back in all other areas. Therefore you can be more fiercely competitive and you can stay on page one. Also, try and launch products where you've got a great margin. Think about this from the very beginning. Products where you can charge a lot, go in with a slightly more luxury angle and aim to charge more than everyone else by providing more value to the marketplace. This will give you a lot more chance to make profit even after those costly advertising spends. So I don't think there's an exact answer to your question, but that's the strategy I would use to approach it to solve your problem. Hope that's helpful. Lewis. Catherine says, how do you know that your advertising is effective? So this is a great question. And the only purpose of your advertising really is to get your product visible. So like I just said to you, Louis, right in the beginning, when you're advertising a new product, it's not about trying to make a profit, it's about getting the product onto page one as quickly as you possibly can. The way you know your advertising is effective is if people are clicking on your product and they're buying it as a direct result of your advertising. It's very easy to see on the advertising page you can see the amount you've spent on ads, the amount of sales you've made, and therefore the ACOs, or the advertising cost of sales. So if you're making sales, the advertising is working. If your ACOS is low and you're spending a little bit and you're making a lot on sales, the advertising is very effective. If the acos is high, you're spending a lot on ads, you're making a little bit of sales. Advertising isn't as effective. And usually the thing that makes the difference isn't what you do with your keywords, it's more to do with your listing and the product itself. Alright, because that enables you to charge more, which inevitably makes your ACOs better. Right, because you can make more profit and relatively spend less on ads. So hope that answers your question. Katherine Dorian asks, what's better, automatic or manual advertising, which one is better? Well, this is the funny thing, it depends. I've got products where I just couldn't get the manual campaign to work that well for whatever reason. I've tried all different kinds of keywords, all different keyword types and search types that you can do. I've tried putting tons in, I've tried refining the keywords, I've tried everything under the sun. And for whatever reason, the manual campaign just doesn't work as well as the automatic. So the key thing to do when you find an advertising campaign that works generally is just to leave it alone. So I advertise on various platforms. I advertise on Amazon, advertise on Facebook, advertise on Google and YouTube. I've also advertised on Reddit and various other platforms as well. And that is one piece of advice I would say is consistent. As soon as you find a campaign that works, regardless of what you're doing, just leave it. Just let it run, let it do its thing. And it will only get better over time as the algorithm gathers more data and as it understands exactly what your objective really is. So if the automatic is working, leave it. If the manual is working, leave it. I think it's a good idea to spend less time trying to spend less on advertising. Spend more time trying to launch products that allow you to spend more on advertising. Per sale, there's a quote which is very, very, very powerful when it comes to marketing strategy and it's who can spend the most to acquire a customer wins. Who can spend most to acquire a customer wins. So what does that really mean? Well, if you can spend £2 per click to get your product to sell in your niche and all your competitors can only spend £1 50 to get their product to sell per click, then you can buy way more advertising than everybody else. You can get your products way more visible, you can get way more sales and you will outlast all of your competitors. So the key is to focus on cutting back as many expenses as you possibly can, launching products that you can sell for more money by adding more value to the marketplace, therefore having more wiggle room so you can spend more on advertising. This is the aim, alright? This is what we want to do. And then again, follow the same strategy that I mentioned earlier to Lewis. Get your product to page one and then it should stay there. You can just top it up occasionally with promotions and advertising. Awesome. So hope this helped guys. Hope it gave you a little bit of an insight into how to use advertising and how to work your marketing strategy so you can dominate your niche. And if you've got any follow up questions or anything you wanted to add, comment below on this video. And if you're watching this video outside of Ollie's E Commerce Q and A Facebook group, then click the link either AB below this video to join the group. And as you enter you'll be asked to leave a question. Once you've asked a question, I'LL approve your request to join the group, and I may just answer it on one of these daily videos. Alright, thank you so much for your amazing questions, and I'll catch you all very soon.