In mid-April 2021, we started working with a client in the sports and fitness niche. Who sold a product for $19.99 with a $12 profit margin. The funny part is we spent around $10 in ads to acquire a customer. Leaving us with less than $1.20 after all the costs.
Here is how we scaled this product to over $30k in less than 2 months and managed to stay profitable.
The product was priced at $16.99 to start. We launched 20 adsets in the testing phase with a $5 daily budget each. Here is how we structured our initial testing phase.
- 20 Adsets
- Each Adset targeting only one audience set.
- 10 of them were targeting cold interests.
5 Adsets with 1% Lookalike of Video Views 95%, Facebook Page/Post Engagers, IG Page/Post Engagers, All Website Visitors and People who Visited a Particular Product Page.
Since the business is new, we didn’t have much pixel data to play with ATC/IC/PUR LLAs.
After 3 days, we killed the unprofitable adsets and launched new adsets similar to the profitable ones. For this business, we killed the Adsets based on these metrics.
- Cost Per Link Click > $2.5
- Spent more than $10 without any ADD to Cart
- Spent more than $15 without a Purchase
I know what you’re thinking. You’re selling a $16.99 product; how can you let an adset run until it spends $15 without a purchase? If you have run Facebook ads before, you can’t call it a winner or loser until it spends at least 3 times our target cost per purchase. But at this stage, we make our decisions based on other metrics and give the one which seems promising a little more time to prove itself.
After a week of launching
We tested around 35 adsets and 4 ad creatives. Found 14 adsets that are profitable and 2 creatives working well for this product.
At this time, we also played with our profit margin. After the first 20 sales, we increased the product price to $19.99. Once the sales were stable, we again increased the price to $24.99. At this point, the sales began to drop a bit. So we set the price back to $19.99.
Exactly after 7 days of launching.
- we found 8 profitable adsets
- 2 Winning ad creatives
- And our sweet spot for product pricing.
The important thing to note is that we never did any optimization at the adset level until now. We just killed the adsets which aren’t performing.
We sorted the winning adsets by ROAS and added them to a CBO with a $50 budget.
Waiting for another 3 days and killing the unprofitable ones. We found out our target cost per ATC is $7, and the target cost per purchase is around $10. This left us with $1.20 in profit per sale.
The product is doing good. The sales are coming in. Our only problem was the profit. Working hard to make $1.20 per sale made no sense. A bad day in the office will ruin everything with that profit margin.
We decided to increase the average order value with upsells and bundle sell.
This is exactly how we set up our funnel
On the order page, we added a bundle offer to sell more than one product to the customer. When the customer purchased more than one. We gave them a discount.
1 out of 3 customers ended up buying more than one. This increased our average profit per sale to around 6 dollars after the discount. Since the average product price of this business is less than $20, we couldn’t make a fortune with this first bundle offer.
We showed them another product on the product page. This is a completely different product from our original product but made for the same audience. We offered a good discount to people who purchased both the product.
The new product didn’t go well with the main product. But 1 or 2 out of 20 people added it to their order which we are happy with. The upsell product had an excellent profit margin which gave us more room to scale.
This was set up after the customer completed the sale. On the Thank-You page, we gave them a huge one-time discount for both the product. I am talking About a 40% to 60% discount. Even 1 out of 10 people add this, We Win.
To our surprise. on average, 3 out of 10 people also purchased the special offer on the thank you page.
After all this, we were left with around $13 average profit per sale. Remember when we started, we were dealing with a $1.20 profit.
As time went by. Our cost per purchase increased from $11 to $14. But thanks to the sales funnel we created. We are still very profitable at the end of the day.
Suppose we were to scale with that $1.20 profit margin. At this time of scaling, we should be down by -$4.50 per sale.
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All these eCommerce gurus and store owners make hundreds and thousands of dollars every month. If you think they make all their money selling one product. You’re mistaken.
It’s tough to stay profitable selling only one product when we scale. In the past, it was possible.
At this time, with Facebook ads. You always have to have your upsells and cross-sells in place before scaling.
and few more important things you need to do when scaling:
- Set up abundant cart recovery emails.
- Always allocate budget for retargeting campaigns with Ads.
- Setup abundant cart recovery SMS
- Add Product Bundle Offers
- Always try to sell more than one to your customers.
That’s a wrap. If you have any questions for us from this case study, please let us know in the comments section below.
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Happy Selling 🙂