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What we've learned about paid advertising

We approach paid marketing as an investment operation. Our goal is to achieve attractive returns on the capital that we invest to promote our products. We share below some of the lessons that we have learned, which we’ve tried to summarize in a few principles and practical rules.

Overall principles:

  • Concentrate time and money in the few things that matter

  • Measure performance per SKU

  • Make focused infrequent changes

Practical rules:

1) Concentrate the budget on the 10-20 keywords that produce more than 50% of sales.

This means that you should focus your advertising spend on the keywords that are most likely to convert into sales. You can identify these keywords by looking at your historical sales data. For example, if you sell shoes, you might find that the keywords "running shoes" and "basketball shoes" account for 50% of your sales. In this case, you would want to focus your advertising spend on these two keywords.

There are a few reasons why this is a good strategy. First, it allows you to get the most out of your advertising budget. If you spread your budget too thin, you won't be able to generate as much traffic or sales. Second, it helps you understand what is happening. Paying for hundreds or thousands of keywords is distracting not just financially but with regards to limited time and attention.

2) Don't invest much money in long tail keywords until your brand has reached maturity.

Long tail keywords are those that have low search volume but potentially high relevance to a particular product or brand. They can be very profitable if you can rank well for them. However, they are not the best use of your advertising budget if you are just starting out or if you haven’t already optimized the investment in the core keywords mentioned earlier.

We believe that a brand can be very successful in paid advertising without using long tail keywords. However the opposite is not true, it’s unlikely that you’ll be effective at paid advertising if you don’t perform well in your core keywords.

3) Focus on TACOS per SKU as the main performance metric, this takes into account the organic performance of each SKU in conjunction with your paid marketing efforts.

TACOS stands for Total Advertising Cost of Sales. It is a metric that helps you to measure the profitability of your advertising campaigns. To calculate TACOS, you divide your total advertising costs by your total sales for each individual SKU.

This is a good metric to use because it takes into account both your paid and organic sales. TACOS gives you a more complete picture of the profitability of your campaigns and importantly, the profitability of each individual SKU.

The first step is to get the TACOS at the level that you want it for each SKU. Then you can adjust (increase) PPC spend based on your growth targets.

4) Don't use campaigns with mixed match types (broad, phrase, exact) since it makes it very hard to allocate resources and measure performance.

When you create a campaign, you need to choose a match type. The match type determines how closely your ad will match the search terms that people use. Broad match is the most general match type, and it will show your ad for a wide range of search terms. Phrase match is less general than broad match, and it will show your ad for search terms that include the phrase that you are bidding on. Exact match is the most specific match type, and it will only show your ad for search terms that are exactly the same as the phrase that you are bidding on.

It is best to use a single match type for each campaign so that you can easily track your results. If you use mixed match types, it will be difficult to tell which match type is performing well and which one is not.

5) Build a basic campaign structure of one auto, one broad and one to four exact matching for each important SKU. This will give you a good starting point for your campaigns. You can always add more campaigns or change the match types later as you get more data.

When you are first starting out, it is helpful to have a basic campaign structure to follow. This will help you to stay organized and to make sure that you are covering all of the bases. A good starting point is to have one auto, one broad, and one to four exact match campaigns for each important SKU.

Auto campaigns are a good way to get started with advertising. They are easy to set up and they will automatically bid on keywords that are relevant to your product. Broad match campaigns are a good way to reach a wider audience. They will bid on a variety of keywords, including some that may not be directly related to your product. Exact match campaigns are a good way to target specific keywords that work well for your particular products.

Once you have a basic campaign structure in place, you can start to add more campaigns or change the match types as needed. You can also add negative keywords to your campaigns to prevent your ads from showing for irrelevant searches.

6) Once the initial period of setting up the campaigns is done (20-30 days) don't make changes too frequently, twice a month is fine except during seasonal high points (ie Christmas).

It takes time to see results from your advertising campaigns. Don't make too many changes in the first few weeks or you won't be able to tell what is working and what isn't. Once you have a few weeks and months of data, you can start to make more changes on a regular basis.

Here are some tips for making changes to your campaigns:

  • Start with small changes. Don't make sweeping changes to your campaigns all at once. Start with small changes, such as adjusting your bids or your keyword targeting.

  • Test your changes. Once you make a change, wait a few weeks to see how it affects your results. If the change is not working, you can always revert back to your original settings.

  • Be patient. It takes time to see the full impact of your changes. Don't expect to see results overnight. Be patient and give your campaigns time to work.


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