If you are trying to scale up Facebook Advertising for your ecommerce brand and struggling to make a profit, then let me tell you how we scaled a brand from 7 figures to 8 figures Annual Run Rate.
Hi, my name is Merrick Lozano, and I am an ecommerce strategist and consultant. Today I’m going to share with you the 3 Profit Multiplier Principles you can use to scale your brand profitably to 7 or 8 figures and beyond.
But first, let’s review the 2 marketing principles that every brand needs to revisit before successfully scaling their Facebook Ads.
The more time you spend understanding your customers, the more opportunities you will have to serve them and grow your business.
For many new businesses, the founder is the ideal customer. And as long as the founder is involved in all aspects of the business the brand can build products that speak to the desires of their Ideal Customer Profile.
But as the brand grows, the marketing team’s success is limited until they spend time building and reviewing their brand’s Ideal Customer Profile(s) and Customer Journey Map.
When asked how he increases his customer lifetime value and innovates, Griffin Thall the CEO of Pura Vida mentioned this first principle on the Ecommerce Influence podcast.
"Pura Vida has a few different personas... we have the surfer girl, we have the adventure girl, the other girl who might be a little more exotic... and once you take those personas and design products that represent those types of people you'll see a much more personal shopping experience on our website"
Forbes reports Pura Vida was acquired in 2019 in a deal valued up to $130 million.
When your brand spends time understanding your ideal customer you will be able to:
Without these pillars, it's hard to “turn advertising into profit” with Facebook Ads.
Your brand will reach a point where the strategies and tactics you’ve been using will not be enough to help you reach the next level.
That’s why it’s important to lead your brand with a growth mindset learning new strategies, taking small risks and allowing a margin for failure.
Early in your Facebook Advertising journey, you’ll have opportunities to increase your reach as you build up:
But one day your media buyer will find that deploying new Facebook and Instagram Advertising tactics are no longer enough to continue scaling up.
Facebook advertising expert Molly Pittman, the former VP of Marketing at Digital Marketer, recently mentioned on the Perpetual Traffic podcast:
"... even nowadays when I am working with big brands that are maybe doing 50M a year 100M a year and they hire me for private consulting a lot of the times we are going back to the avatar stuff back to ad copy back to creative"
Use Principle #1 to reinforce the foundation for your marketing. LIke Molly, work on your customer profiles, copy and creatives so you’re ready to scale your Facebook advertising to the next level.
Let me share with you how a sunglass brand named Calis put each of these Marketing and Profit Multiplier Principles into action and grew 10x in less than a year.
The story of Calis is like that of a client I had the opportunity to work with - a different name, and industry but representative of a true story.
I was at a beach party when I saw my friend Paul, an entrepreneur who was growing a large following on Facebook for his lifestyle brand Calis.
I asked Paul what was new and he smiled and mentioned he launched a new Shopify store for Calis that summer and it was already generating five figures in ecommerce revenue.
The secret to Paul’s early ecommerce success was rooted in marketing Principle #1.
Calis email list was growing every day and Paul was already dripping content to his audience and occasionally promoting their sunglasses.
When Paul wanted to grow faster he turned to Facebook Ads because he had years of experience in Direct Response Advertising before starting Calis.
About 7 months after seeing Paul at the beach, I sat down with him for tea and found out he had 10x’d the amount of new customers from 20 a day to 200.
In less than a year since launching the Shopify store, Calis was generating 6 figures in monthly ecommerce revenue.
Then Paul used marketing Principle #2 to reach the next level in his business.
Calis was an impressive business at that point but Paul wanted to scale Calis up to 7 figures a month.
Paul was in a mastermind with other Direct to Consumer founders who were sharing their best practices so he knew this was an attainable goal. His business coach suggested he get help scaling up to the next level.
At the time I was consulting with an 8 figure ecommerce brand that was successful with direct response advertising but not Facebook Ads. So I jumped at the opportunity to help Calis and learn along the way.
I recommend starting with Profit Multiplier Principle #1. It is usually the fastest, simplest and cheapest way to increase your profit per order.
Often Ecommerce brands get stuck by only focusing on getting more customers - Profit Multiplier Principle #3. It’s natural to want more customers - you need some level of critical mass to have a self-sustaining business.
But keep in mind that Facebook Advertising is a marketplace and as you try to scale up the following becomes true.
Your Ability To Acquire Customers Profitably Through Facebook Ads Is Impacted More By What You Do Off Facebook Than What You Do On Facebook.
Let me show you how you can 10x your profits by stacking the Three Profit Multiplier Principles.
By getting more profit out of every order you unlock more cash flow you can use to pursue more growth for your business like:
Calis growth plan had hit a wall - the media team was often losing money when they increased their ad budget to try and reach more new customers.
So Paul set the mission to double the Average Order Value to increase profits. With testing of price increases, we were able to increase the average order value from $25 to $50.
That may sound ambitious but let me reassure you that it’s possible to achieve especially if you've never worked on this part of your business before.
There are many ways to increase your profit per order - the quick win is often simply increasing your prices.
I’ve done this before many times across multiple businesses, in multiple industries.
It really can be that simple and effective.
You can utilize this principle even if you already have a high AOV and feel you reached a price ceiling because the goal is to focus on increasing profit on every order and we have many more ways to do that. Want fries and soda with your burger?
6X Profit Achieved - $6,000 Daily Profit
Since Calis was spending $10 to acquire new customers on Facebook and $10 for costs of goods sold - profits soared from $1000 a day to $6000 a day with just 200 customers a day.
Having customers purchase more than once can be very profitable especially when you own your customer and can freely market to them without having to pay customer acquisition costs all over again.
There are many ways to increase your customer lifetime value - one of the simplest ways is to offer them more of the same product at a discount.
Calis beautiful ads were working great - prospects were soaking up the San Diego lifestyle in the ad creatives making Calis sunglasses desirable.
However, Calis customers were only buying one pair of sunglasses. If Calis could get customers to buy more than one pair of sunglasses a year it would be a quick way to multiply profits.
Getting 25% of Calis 200 customers per day to buy once more is equal to 50 additional orders per day.
Calis could email customers through Klaviyo with a limited time offer coupon.
When these customers make a repeat purchase the Average Order Value is only $30 but the profit is still $20 per order since Calis doesn't have to pay Facebook and only has to pay $10 for the cost of goods sold.
Those 50 orders are worth an additional $1,000 in profit a day.
7X Profit Achieved - $7,000 Daily Profit
Imagine you are Paul the founder of Calis and your brand just went from profiting $1,000 a day to profiting $7,000 a day. You’d probably be thinking of all the ways you can use that extra profit and cash flow to hire help, improve the quality of your products, pay off those credit cards, and finally pay yourself a living wage.
But we are not done.
Our goal is 10x Profits, so let’s put the third profit principle into action.
Increasing the number of new customers per day can add significant profits especially if you’ve already gone through the first two Profit Multiplier Principles because you’ll be able to outspend your competition and get access to Facebook’s higher quality audiences that convert better.
We mentioned earlier that the Calis media buying team was having trouble scaling past 200 customers a day profitably. At 200 customers a day our CPA was $10.
Calis was able to scale up to 400 Customers a day because our new profits allowed us to absorb the increased CPA of $20 because we had much more profit to work with.
Calis is now profiting $10,000 a day.
We had 400 Customers Per Day, with a $20 profit per order so that was $8,000 in profit per day.
And we were getting the equivalent of 100 Additional Orders Per Day (25% repeat orders on 400 new customers per day). That was an additional $2000 in profit per day.
It’s amazing how much profit growth you can achieve in a short amount of time by leveraging these marketing principles.
Even if you’ve already utilized them before you’ll be able to identify new opportunities to grow your profit by cycling through these marketing principles again.
For example, if you cycle through these principles a second time you might:
I was fortunate that my partner had us working on a few of these principles early on in our SAAS business because we were able to grow our profits with a few simple changes.
I've also had the opportunity to work with 7 and 8 figure brands utilizing these principles to drive growth.
By utilizing the 2 marketing Principles and 3 Profit Multiplier Principles you can transform your business into a profit machine even as Facebook advertising costs rise.
If you want to grow your brand to the next level and increase your profits, send me a message so we can talk.
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P.P.S. Let me know if you would like more examples of how to increase your Average Order Value and Customer Lifetime Value as a Shopify merchant and amazon seller.