How Changing Your Offer Can Overhaul Your Ad Performance transcript

[Music] I talk so much on this show about media buying about creative but the things that are driving your ad account forward and yet I have not given enough attention to something that may have a bigger effect than both of those on your ad accounts performance and that is the offer that you are giving your customers makes a huge difference to the performance of your ad sometimes like a really really really big difference to where it could be the thing that unlocks an ad account for some of my Brands it happened to me recently and that's why it's top of mind for me and so I'm the show today I'm gonna be talking to you about the offer in your ads and really in any traffic that you're driving to the site and how big of a difference that can make and how to think about what a great offer is relative to your customer and your product so hello and welcome the Andrew Ferris podcast thanks so much for joining me on this episode of the show talking about offers I think it's going to be really helpful to you let's dive in all right here's the core idea of the episode and I mentioned it in the intro but it's this it's that the offer that you are giving your customer is really really important and that is so obvious in some ways in fact if you think about what an offer is it's almost impossibly obvious right because I think of an offer is basically two things an offer is the product plus the price it's that simple the product plus the price are the two things that make up an offer now you can frame the price a lot of different ways and you can talk about the product a lot of different ways but I would consider those sort of tactics around ultimately what the offer is and and again those those can all make a really big difference too but that off offer very simply is what you are selling and how much you are selling it for that's the offer you're given to your customer and I have recently seen some accounts of mine where changing up offer not even in a way that necessarily hurt my margin or that required larger discounts per se changing up that offer could make a huge difference in the performance of a Brand's customer acquisition and that includes the meta ads account but actually includes even more than that as we've as we expanded that to sending emails and doing all kinds of things that have driven traffic to the offer page that I am running an offer page broad term that could be a landing page that could be the PDP it could be all kinds of things but as you change the offer you can see a huge performance difference so I want to talk about that a little bit and and here's the big idea I want to get and by the way how big of a difference has this made recently at least for one account of mine it like probably doubled the ad spend kind of overnight now overnight is tricky like it took us a lot of learning to get there we test a lot of different kinds of offers this brand happened to have a bunch of landing pages a bunch of offers pre-built when I got there I also think this is kind of hard to test in meta ads it can work with cost controls the way that I typically buy bid caps Etc but when you're changing the offer it can be really tricky because typically changing the offer means also changing the average order value so you have to be super attentive to how your CAC needs to change if you're buying meta ads and you're buying meta ads specifically on highest volume or lowest cost optimization right basically optimi telling meta to optimize for give me the lowest CAC possible well if I if I launch an offer page that has is going to push people to push their aov up $40 because I give them a giant bundle discount or something like that right well that's GNA meaningfully change what CAC I need now my CAC probably needs to go up you know 20 bucks or some commensurate amount with the $4 and so testing this in in an ad account can be a little bit tricky conversion data also is the slowest data that meta can gather right so if you're if the change in your performance happens down at the level of the conversion or the aov it's going to take a little bit of time for meta to figure that out and therefore uh and that's different than testing creative regularly so I still do this with bid caps with cost caps but sometimes I will try to force a little bit of spend in a way that I don't usually do with most landing page testing frankly I think the best way to test and off is going to be something with a third party tool I actually don't have a great recommendation here I know a lot of people use intell gems for Price testing had some good experien with them but not no big strong opinion here about the actual methodology for making this test so whatever method you use there's maybe something there and if you don't have a third party tool and you don't want to do that you can probably test this in meta ads just by running different ads different ad sets with different offers and just I would just separate those offers at the adset level so you collect all the same aovs basically as you run different offers uh that way you can if you're running bid Caps or cost Caps or you're just oper even if you're not if you're just optimizing for highest uh volume in general that you're going to see the CAC needs to be relative to the aov that's a really important media buying principle if you're buying lowest cost highest value excuse me highest volume then uh that matters so there's a basic idea how to do this there's a lot of different ways actually that is the reason why at first when I was working with this client I kind of missed this I didn't see it happening because meta was not pushing spend to some of my ads that were aimed at some landing pages that had some offers some bundle based offers so I was driving all this traffic to the PDP for a client I've seen lots and lots and lots of money spent on ads going to the PDP for lots of product for lots of products and brands in the past it has worked well for many clients that I've worked on and therefore I didn't worry too much about I'm not sure this make a huge difference I'm going to commit to generating new creative for this client as the main thing I'm testing at first and we'll do that and starting to see some forward movement as we did that you know built good Med buying principles all those things but when I realized at some point that these offer Pages which are still kind of running quietly alongside my other spend were producing a much higher aov at the same conversion rate that I was previously running ads to I suddenly started pushing bunch more spend there by raising my bid cap against Those ads and when that happened the whole account unlocked and so spent 2x maybe even coming close to 3x what I was spending before just by changing up that offer now that opened my eyes and reminded me of this truth and this is the thing right with media buying and and digital advertising there's just so many things to do like you test creative and you just do media buying stuff and maybe you're trying to switch over to cost Caps or bid Caps or whatever and you know I don't know there's a lot of different stuff you could do and so you can lose sight of these and it was just a a a reminder right in my face that the offer can make a really really big difference and I tend to not be somebody who is a big believer in traditional cro conversion rate optimization as something most brands should spend money on really under 10 million even $20 million in Revenue you know once you get to 15 20 million maybe you want to start spending on that it's just in my experience done very poorly lots of times the testing methodology is bad tests aren't replicable and so cro I think can be kind of a quagmire in the e-commerce industry it's just really hard to do very well I'm sure some people are doing well and making money on it but for me it's a tends to be a smaller issue on the whole and that's not really what I'm talking about here I'm I don't care that much about the organization of information on the landing page you should do all the basic stuff right be clear make sure customers have the information they need that stuff does matter to some degree but I'm not talking about going and testing that stuff so this is not really about landing page testing per se it's about offer testing and the mechanism by which you offer test can be a lot of different things but ultimately as long as you're giving people different offers you can really change people's performance by just framing up what the customer gets when they purchase and here's a an underlying principle of what you're doing if you're running meta ads if you are running meta ads you are in the business of Performance Marketing of direct response marketing and one of the key principles with direct response marketing direct response advertising is that you need to give somebody a reason to buy right now I mean think about if you're optimizing for one day click on meta ads that means you're trying to get customers who are going to go from ever having heard of your brand to clicking an ad and buying right now and like for that customer right that customer who's gonna buy right now they they like they need a reason to get their wallet out right at this very moment and that reason very often is an offer now again offer in some sense is a generalized term could be your product at full price that is an offer your product the full price is an offer okay just really straightforward like that but maybe you want somebody to have a reason to buy right now and so you start thinking about offering different things as as a way to get somebody to buy and I want to tell you from the start that one of the mistakes I have made and seen many other people make over time they have been too concerned about being brand dilutive with their offers what I mean is they see brands that are sort of monster Legacy brands that never discount and they say we got to do that and maybe that works for you there are brands that can get away with that and it can work really well within their growth plans and all those things and that's great like so this that may be the right decision but I'll tell you I have been historically too concerned about being brand eluded specifically on offers for firsttime customers uh in the past there's a lot of Brands where if I ran them now brands that I have before I would have done all kinds of different things with the offer level than I've done before and that would have included maybe some discounting probably not just a pure discount right like my least favorite offer and this is an offer most people a lot of people are running is like 10 to 20% off often 10% off on your popup right away on the site like that is an offer you give me your email address I'll give you 10% off that's kind of a standard Baseline offer a lot of brands are doing one of my least favorites I just think you can move the needle a lot more than that maybe decent email capture strategy although I'm skeptical of that too to be honest with you but I I do think though that there is something there's much typically more creative and better ways to frame this up depending on your product mix and it can make a really really big difference it can meaningfully change the average or value you're running now I actually also don't care that much about aov per se because aov in C tend to be so highly correlated right people like the idea that they get oh $100 out of a customer instead of $50 customer that's fine but if you have to if the margin is 50% on those products and you have to go from 25 to $50 in CAC you made zero dollars in both situ in both situations right so I don't care that much about aov per say because CAC at least on the customer acquisition side tends to be commensurate with aov that said what I do care about is margin and LTV it's contribution margin in so many words and including contri tion margin over time so contribution margin can change and here's here's an important thing very often it's the case well almost all the time actually in D Toc that a higher aov has some built-in increase in margin because of the role that shipping plays and fixed costs like that play in the uh movement of a product from you to the customer and so what I mean is if I ship two things and they're the exact same size to the customer so item one and item two let's use my example from before item one is $50 to the customer item two is $100 but they're they're literally the same size the same weight the customer the same distance for my warehouse item two knowing nothing else about the product assuming and let's yeah let's say they also are the same exact percentage margin on cogs okay raw just like pure cogs okay let's call them uh let's call them both 30% margin okay the percentage margin is the same on both so the variable costs are the exact same however and let's even say the the C the same however item two by nature of costing more money to the customer actually has better margins landed to the customer because shipping costs the same amount for both and therefore takes up less so if I have to pay $5 to ship item one which is probably about right for a lot of them that's 10% of the margin that goes into shipping even if I charge for shipping right item two that I that I charge $100 for if I or if I pay that same $5 shipping now it's only 5% of the margin and that means that that I may have an opportunity on item two to actually give the customer some of that 5% back I can try and pocket it myself or I can pay it in CAC and be willing to go higher on CAC or I can actually give some of that money in margin the other cost in there and this is a smaller one is fulfillment costs usually most 3pls most warehouses are going to charge you a flat processing fee on every order that you sent out the door right and it's going to be let call $2 depends different different 3pl charge different ways but call $2 okay again that is what 4% of the $50 order and it's only 22% of the $100 order those two points of margin matter they matter and that means you get some margin back so larger orders can produce higher margin and therefore there can be incentive to getting a customer to buy a to place a larger order plus if you're bundling and if LTV is a significant part of your business don't forget that larger orders often mean that you've gotten another product into a customer's hand and that may have a meaningful effect on their LTV it really might it might have a meaningful effect on their LTV because now you've gotten the second product M and that can be a really big Difference Maker so so increasing aov including at the cost of potentially a discount can be a really really good idea and I think more brands should think about that and then you go track their LTV relative to each margin or relative to each offer and there's some things to watch out for Downstream but that basic concept can be a good reason to try to get people to place a larger order even if the percentage margin is about the same right so what I want to spend the rest of this episode doing is talking about different offers because they are perceived so differently by customers and by giving customers a a reason to get their wallet out and buy right now your ads can perform drastically better and therefore you can scale more effectively all right so let's talk about some different approaches and what kinds of brands should we think in what kind of ways let's start generally with my probably favorite way to start for most brands if I can and that's the simple good better best offer okay you've seen this on a million software Pages if you don't know what I'm talking talking about it's when you present the customer with three options and the goals to get them to take the middle one and you do that by giving no discount or a small discount on one product you give them a discount on you know mid midsize bundle and then a better discount on a large bundle and the goal is to generally to push them to the middle okay so classic would be 0% off 10% off 20% off sometimes you might go 10 20 30 depending on your margins and your product and all those kinds of things you might think about this as as a gift with purchase type thing and this probably is worth framing here here if there's at least three kinds of offers that are really standard one of them would be a straight discount another one would be a tiered discount like you add more stuff you get you get a larger discount uh this that's similar to like a BOGO actually would would function that way to some degree buy one get one free it's a little different but there you go another offer might be a gift with purchase okay and all of those broad things can work in all of these Frameworks right you could do a BOGO version of a good better best offer so you could say buy one of my products we'll call it widget we'll call it One widget okay buy one widget you get nothing with purchase buy two widgets you get uh the third one 50% off buy three wied you get the fourth one free okay so you could frame you could frame it that way that would be one way to to do a good better best offer Etc and or you could do gift with purchase that way right by One widget it's no gift with purchase by two widgets it's a small gift with purchase by three widgets it's going to be a better gift with purchase or whatever or maybe maybe there's even a combo right it's like a discount and a gift with purchase Etc so that can be I think one of the one of the most helpful things for the brand that has relatively few options and you know what the customer is going to want to buy or you can suggest it basically a brand where a customer does not need to browse good better best works great and I strongly recommend you do it it can be a major it's basically a bundle Builder offer it can be a major way that you drive customers to add products to their cart they get a good deal you get more products in go hands you get more margin and you can push the aov forward and that can work well another thing that happens with good better best that's great is that conversion rate and average order value are inversely related to one another right so as a broad principle the more something costs the lower the conversion rate somebody reached out to me at one point who was selling motorcycles online and I can just assure you the conversion rate on motorcycles is going to be a lot lower you know however many you know in the in the five figures however many thousands of dollars motorcycles cost right is going to be a lot lower that conversion rate is going to be a lot lower than when I was selling Klo rings for $30 or $20 or whatever cost at the time okay so those two things are going to work like this which means as your aov comes down your conversion rate goes up just like that so the thing is though they are not linear what I mean is they don't actually function exactly like this where one moves at the exact same rate what I think happens is that conversion rate doesn't come down as fast as aov goes and and so if you push your aov up your conversion rate will come down but it won't come down so let's start let's start my hands here okay if you're watching this right aov goes a bunch conversion rate comes down but maybe not as much and if that's the case then that means your click just got more valuable and it can be a really economically effective way to drive additional value on every click that you drive to the site and that's exactly what I've seen happen on one of the clients of mine that triggered this episode okay so that can be a really really valuable thing what's more you can test this down to the ad level by the way and I should have said that earlier you can test all this down to the ad level you can put at the end of your uh at the end of your ad here's the reason to buy now here's the offer Etc and you can see if that can make okay so good better best I really like good better best offers I like an information Rich landing page that frames that up with a good better best offer at the end really simple the design you've seen a million times on e-commerce landing page get the information there give people what they need to know to buy and then frame your offer that way think about what it is that makes sense and for you and your brand again the idea here is the customer doesn't have to browse they've already got some information from your ad they've already got some some information from your email whatever is driving them there from the affiliate that's driving them there from the Google ad that's driving them there and now what they can do is they can go and see they can go and they're looking for the product that you recommended to them but now you're also going to suggest to them other products or maybe you even say that at the OD level like I said and for that customer it's a nice tight funnel it gives them a reason to buy right now and you go from there that can be really really effective that was the offer type that worked that triggered this episode I am watching businesses spend too much money on their Opex on their sgna their fixed costs are too high and there is no reason for it when there are they great people and more Staffing help you not only with your already lean team but up add team members to that still lean team from the Philippines who are incredible e-commerce professionals and you can add them at a price that is lower for you than hiring that same Talent domestically in the US but a great price for in the Philippines that is a win win and so you can get incredible e-commerce professionals attract great talent from the Philippines who know e-commerce inside and out across every part of the business I'm talking about supply chain operations like inventory demand planning marketing everything you can think of customer service everything you can think of I've had incredible experience with my friends at more Staffing they've been my sponsor on this show for a long time because I keep hearing back from people who have heard from me about more Staffing working with them to hire up Talent from the Philippines for their businesses and has worked out great it is an obvious thing to me at this point in e-commerce that you should be considering adding Talent from the Philippines to your business if you are looking to add Talent at all it is just a win-win as I said earlier go to more now.co tell them that I sent you I work with them myself personally the majority of my team at this point is in the Philippines and that's because they're great and so go to more.com Co tell them I sent you get incredible talent in the Philippines they will help you do a ton of the work present you with great candidates you will interview them just like any other interview process they will speak good English it'll be great for your team go to more now.co work with great talent in e-commerce from the Philippines okay number two the save as you build offer okay and again this is what I think of as the offer for Brands where browsing is part of it and the key category here is probably apparel but really anything anything like that where somebody would want to go and put together a collection for themselves where it's really doesn't work very well for me to like try and get exactly the product I want to get into your hand right with apparel like somebody needs to be able to go look around a little now you can do some stuff to guide them towards certain products right a good filtering system how you merchandise the website makes a real big difference with apparel But ultimately they're going to make the choices that they want to make and you want to make that easy for them and so what do you you do you uh build something on the site that is the classic sort of progress bar where it's like okay look if you get past $50 you get free shipping if you get past 75 you get 10% off you get P 100 you get 20% off whatever and give them clear reason and then reinforce that everywhere you go in the site now this can also be really really effective for the exact same reasons and by the way now you're adding things to a to a box and so it is going to be more expensive to ship every time you add something but it is not linearly more expensive once again same concept and so there's often very good reason for you as a brand to get more items into a customer's card because it's going to be a margin additive for you in that respect even as you give a discount you can also play in this situation in any LTV brand situation with a tool like fondue I've never used this personally but I've heard some really good stories about how something like that gives cash back instead of pure discount that can be really margin additive as well it makes a lot of sense to me I haven't seen if customers respond to cash back quite with the same way they respond to other stuff but but that could make a really big difference as well so that's another way of thinking about this now apparel is not the only category here and I'm actually working with a brand right now that I'm seeing build a really careful thoughtful guide you by the hand experience to help put together your cart this is a brand that has a whole bunch of different stuff that you're going to put into each order like each order requires a lot of selecting of products but there's a incredibly broad skew set that you can select from so the the client now is is working with a developer to build out sort of a a guide you by the hand experience where we're going to walk you through each part and as we walk you through each part of the that you need to build with a lot of customization as we do that now what we're going to do is we're going to show you as you add to your to your cart that you are also getting a better discount along the way as you keep adding and so maybe why not add one more thing Etc because there's just a huge range of choices you could make and so that's sort of a combo sort of thing and that gets me to one of my favorite mechanisms for presenting an offer that can really frame up how to get the right product into people's hands because it's not just price it's also product so presenting the right product to to customers one of the core things you can do to do that effectively is quiz I've talked about this before that I did a whole episode about using a quiz because I think it could be so effective but you can use a quiz to get people into something like a guide you by theand experience for building a whole cart or maybe more likely you can use a quiz to get people to a good better best offer in that case you're just aligning the recommendation of the three different items in that offer to the customers to the customer's choice and you're just helping them sort through the website to go get the choice and that's basically the argument I made in the episode I did before very often a quiz functions like a salesperson in a retail environment who comes over and says can I help you find what you're looking for and now you're going to guide that person by the hand and say yes here's what it is and by the way once I'm helping them find what they're looking for I'm also showing them oh and by the way here's the reason you should buy right now the thing you're looking for is actually on sale as long as you add this other thing to here's the reason you should go to right now and it won't be on sale for forever Etc right that can be really really powerful as well is to combine a quiz with either of those approaches now some of these may get a developer involved and it may get a little bit tricky but it can be such a big difference maker that I think it's worth doing all right next okay from there is a big subscription discount and this is the last offer I want to talk about today but it's something I've also seen be really really effective which is get rid of the choices for customers if you want to get somebody into a subscription that's good for them subscription customers are just drastically more valuable than non-subscription customers and that in one sense is topology and what I mean is there's a major collection bias problem here the kind of person who subscribes is the kind of person who wants your product enough to order it automatically right to have it show up to their house and charge your card without thinking about it they're probably already pretty invested in general at least the way you build subscriptions now but I am watching Brands who have a good case for subscription where the refill or um restock Cadence is predictable and regular and it's not too expensive and all those things where subscription really can work great for both the customer and the brand I subscribe to a bunch of stuff on Amazon I love it my paper towels just show up in my house I've figured out how often I need paper towels will show up and they show up and it's great so does my toilet paper so do my daily electrolyte supplement like all a bunch of stuff that I can use like that and I love it it's a great experience for me because there's one less thing to think about coffe coffee is that thing I subscribed to it's fantastic and so for you if you can opt customer into that from the start in a way that's actually helpful for them if they like your product and canceling time or whatever it can be really really good and reduce the friction of them reordering even if they like the the product sometimes people just forget they got a lot going on and so I think the offer here is massively discount that first subscription and and that's because in my experience massively discounted subscriptions or at least very high perceived value because in my experience so much of the time as long as it's not like free plus shipping like the most extreme discount that people will do in my experience those customers are still really really valuable to businesses when they are subscription customers so you can afford to give away a lot a lot on the first purchase if people will subscribe and they won't turn again be careful about this measure it don't go spending at a giant loss all the time because you just think LTV will probably work if you're GNA go down this route of being a subscription business at all you've got to measure LTV and by the way some Brands shouldn't be subscription Brands like just like don't try to force people into subscription if it doesn't make sense for your for your company that you know when I was running FC Goods I was gonna try to get somebody to subscribe to a wallet the ridge guys are probably not getting people to subscribe to a wallet or a ring or a pen or whatever right but like if your product makes sense for that if it's cpg in some way like then try this and build the whole Lander around here is how good of an offer you get when you subscribe today it is really awesome it works great and I have seen this be incredibly incredibly effective the whole Lander goes there there's one offer there's no good better best and it's just it's just here's the offer you get when you subscribe very often a gift with purchase works great for this you have to figure out a swap on the back end so they don't get the gift with purchase every time from there but if you can give a high perceived value gift on the first purchase and then it opts them into a subscription as well man that can be a very very powerful thing so if you have subscription products and you have not given real time to a subscription focused Lander that opens up that leads at that offer and a funnel built around getting people there you really should try it's just an asymmetric bet there's massive upside on subscription customers because they off three four 500% LTV in a year I've seen higher than that it's for subscription customers but if it's a 30-day subscription they can be incredibly valuable and a one year is a arbitrary cut off date by the way those customers often will last into a year two and year three just sticking on your product so it can just be really really valuable so consider a very strong offer there and if you have subscription products products that make sense for subscription but you haven't sought to really develop a subscription funnel for those customers it gives them a really good offer man you should really try I think it's it's really worth it because the value that customer is so outsized all right that's all of the ones I could think of but there's probably a whole bunch more like I said BOGO I'm not even talking about I'm not even talking about not even really giving big time to gift with purchase even though I think that is really effective that's one of the things I've seen work really really well is that good better best where that the gift with purchase is the better and the best uh is in there combined discount plus plus gift with purchase those can work really well you get the idea though find where it works for you on from a margin perspective do the math and then go give an offer and start testing it because it really can take ads that are already working or close to working and get them to go a lot further for you all right that's it for today's show so many good episodes coming up so soon don't miss them I have a lot of really good stuff including my beard brand opening the books I've been pumping that up for so long I'm so close to having that ready to go it's in the very last stage of edit and prep to get going uh there's a whole bunch there i' I've done a whole bunch of work to get that ready to go and I've got more guests coming up Cody pler is coming back don't miss out on that my most popular episode ever was with Cody plofker we talked media buying I said Cody come back give the people what they want and so he's going to come back so subscribe right now wherever you're watching listening Etc and I do appreciate it so much if you love this episode if it's helpful to you best thing you can do is share it with a friend if that's a way you'd like to say thank you to me helps spread the show and helps get useful content I hope to other people in the trenches running DC brand so that would be a huge help to me and also of course ratings and reviews people always talk about on podcasts also really do help so thank you for that as well if you would like to respond to this I would love to hear from you you can email me at Android ajg.com you can go to my website ajg.com you can reach me on Twitter I'm probably fastest there at Andrew J Ferris so go do that as well more Staffing go work with more St Staffing what am I even thinking the greatest sponsor in the history of the world go work with more Staffing staff up your team keep your team lean but hire great people at the same time it's a win-win for everybody incredible Talent from the Philippines in your e-commerce business they should join you and you should use more Staffing to go recruit and train and on board and Coach them along the way more now.co tell I sent you there more now.co to work for more Staffing I use them personally you should do all right that's it I will see you next [Music] time a with my eyes CL and [Music] iong