Stop Tracking ROAS! The Real Metrics to Scale E-Commerce Brands 🚀 | Felix on 10x Marketer Podcast

Hi, Felix. Welcome to the 10x Marketer podcast. Let's start with your introduction and I have a lot of questions for you, man. Hey, thanks for having me.

Yeah, so I'm Felix. I'm a chief marketing officer for several brands. And I specialize on Google Ads and does as well on meta and email for a full funnel approach. and yeah i focus on scaling brands not on having a big in-platform flashy dashboard awesome that's a good intro and i would really love to hear your thoughts on the full funnel approach let's start with the first question so you have been telling that almost 99 percent of e-commerce founders have the same issue that every time they increase the budget they have a drop in the return on ad spend have you been able to find the root cause of this paradox and what are the chances that you can easily identify when did you encounter it at the first time yeah that's absolutely right so i would say most of the e-com founders that come to me face this issue at some point and that's why they end up reaching out and after auditing hundreds of accounts and working on different verticals i found out that it boils down to two simple things which are a robust foundation and looking at the right metrics so when i refer to a robust foundation this means that an account cannot grow if the foundation is weak so if you're trying to build on top of that it will crumble that's why we need the basics in the account set up properly and this i think miles magner and bob put this very well you need your conversion tracking your targeting your offer you need your landing pages your account structure the creative and the budget and the bids to work together in a joint effort to get the best outcome possible if just one of these pieces fails then it's hard to scale and that's why you may see that when you try to scale your budget your ROAS drops another thing as I said are the metrics people focus on the wrong metrics a lot of advertisers focus on the wrong metrics and that's why they struggle to scale the brand so yeah if you're looking too much at ROAS and relying too much on ROAS this may handicap your performance and this is because ROAS looks great in theory that's how much you put in or how much you get out but it relies on the platform attribution so it's not perfect and attribution is very messy there are a lot of factors in between such as cookies that are being blocked with ad blockers as well and then we have initiating session in different devices and different users and then google has to stitch those sessions together so it's very hard to get this right even with the ai modeling that google has nowadays so focusing on the right metrics it will enable brands to scale so you talked about wrong metrics that brands are tracking uh let's list down what are the wrong metrics versus what are the right metrics they should actually be tracking awesome yeah so i wouldn't say that's right and wrong metrics i think everything has its place but i think in the e-commerce space specifically there's a another reliance on roas i think roas would fall under the bucket of um overhyped metric or something that everyone uses and that i wouldn't recommend for all the cases it is useful to see performance for campaigns however if you are after growth and scaling you should be focusing on things like your cac your customer acquisition costs and definitely you should be focusing on your mer or your media efficiency ratio which looks at your overall spend across channels and what's your bottom line in the business how much have how much are your gross profits after that so that's very useful because it gets rid of the attribution problem that we were mentioning before that roas is subject to so yeah those those metrics are key and then to really scale a brand you need to focus on the econ vitals that i call them and these are your average order value your sessions and your conversion rate those are the three metrics that if you maximize you will see real gains awesome so that's a good list of metrics and uh you don't have to look just on the written on ad spend you have to go beyond and talk about the customer acquisition cost now where does lifetime value fit into this game oh yeah that's another key one really good one actually because when you're looking at your customer acquisition costs you have to consider as well your lifetime value So for example for a supplement brand they will not always make a profit on the first sale So the customer acquisition costs might be higher than the profit However lifetime value is where the profit lies for some brands because it a repeated purchase And overall, the lifetime of this client, you have made a profit considering your acquisition costs.

so for some brands it makes sense for some brands they need to make a profit on the first sale so it really depends but yeah lifetime value is a key metric to look at awesome and you talked about something called media efficiency ratio or mer as you want to call it what it really means for a brand and how do you calculate the mer what are the metrics that goes into the calculation and why is it so critical to track it yeah great question so media efficiency ratio it's really useful because it looks at your spend across channels so how much you invested on google how much you invested on meta email sms all your channels and then it looks at how much you made so this way you can have a true vision of your returns and this is good because it gets rid as a set of the attribution problem which we face nowadays which is the customer journey is not linear anymore so when someone sees an ad they probably see an ad on facebook they get to know this brand then they move on and they search you on google then they get retargeted and maybe they sign up and then they end up buying from an email that they received so all these platforms will claim the sale because facebook will tell you oh look i have the cookie from this user and they made the purchase within 90 days so this this is thanks to me but google will say the same thing oh this user clicked on my ad and they purchased so what ends up happening is that the same purchase may be claimed by different channels and that's a problem with attribution another problem with attribution as i said are the ad blockers the cookies having different devices it's hard for google to stitch these sessions together if you know you find a brand via a youtube ad on your phone and then you purchase via another computer that's locked in on a different google account so that's why mer is so useful that's that's where mer comes to play because it focuses on your investment and how you how much you got and it doesn't bother about the attribution and then from there you can do incrementality tests you can look at okay this month if we see that google is doing well let's spend 20 more and do an incrementality test after the test if performance looks good and you look at the mer and it went up so you're you're getting more back for your dollar essentially you're getting more um profit from the dollars the marketing dollars that you are spending then you know that google is a channel that you can focus on and that's why mer is such a good metric understood so the one issue that i found with most brand or the attribution model overall is that it is never able to get you the right picture even with ai modeling you're saying that it's not 100 accurate now as a brand when you are spending across platform mer gives you a like macro picture which itself might not be perfect for investment decisions overall you know that whether you're making profit on your overall investment or not that's a good way to understand your marketing but when you have to decide at the platform level where to go what where to invest what how do you decide that and what kind of how can you get the attribution right to a level where you're able to make a correct decision when it comes to investment yeah yeah yeah great question so obviously different channels will have will take different jobs in the customer journey so for example met has a really good ad acquisition by nature because of how based on creative it is and that way you can tap into new customers that they don't know you so you're generating demands people don't ask to see your ad but based on their interest they get served an ad from you and then google on the other hand is really good at capturing this demand so if you are specifically typing in something of interest then the ad will pop up and then you can capture the sale and then at the end at the bottom of the funnel you have email that is really good at nurturing nurturing this user and really good at retention so if they've bought from you in the past they may search you and they buy from google but they may see your emails and they may repeat purchases and they they may they can make more purchases So to reply to your question, you have to look at your metrics, whether that's on Shopify, Triplewell, whatever software or backend system you are using to measure your single source of truth, essentially, and look at what's your acquisition MER, what's your number of sessions, and then how many new customers you have how many returning customers you have And if you seeing that acquisition is slowing down or new customers are slowing down then you know you have to double down on your meta or your Google prospecting campaigns That might be DemandGen or YouTube.

On the other hand, if you see retention is slowing down, then you know that you need to work on your email, on your remarketing across platforms. So that's a very good way to single out where to invest your marketing dollars. awesome that's a valid explanation but still it leaves out something very very critical that is these platforms have started doing enhanced tracking and meta is almost asking for every information that your users submits on your website especially for the shopify domain or e-commerce specifically they almost ask you the entire information like they want to did everything about the user now did start with a privacy debate which i don't want to get into because this is not the topic of our discussion today but is enhanced tracking somehow able to help in attribution or increase your conversions what is your experience with enhanced tracking so far or is it just mecca's way of collecting data from website users yeah that's great question so in short yes it is very helpful for dedoubling in the case of meta with the conversion api and then on google with enhanced conversions and offline conversions i think it's it's crucial because I believe that in this game, whoever's got the best data setup wins because it's feeding back to the algorithm, the information that it needs to thrive.

So in my experience, it's a must nowadays. If you want to succeed, if you want to scale a brand, if you want to advertise, you need to embrace automation. you need to embrace these venue updates and you definitely need to follow these best practices such as conversion api for meta enhanced conversions for google this is i would say maybe half of your strategy or more because if you are hindering growth by not equipping the algorithm with the best data you will struggle to grow which is what we were covering at the beginning right if you try to increase your budget and then your ROAS goes down it may be because you are not using your right tools okay so let's talk about the tools now you talked about MER do you need any third-party tool or it can be like you can build your own dashboard to calculate your MER and maybe take the right decisions yeah I love this question and yeah shout out to ricardo freitas for showing me this but basically i think there's a myth in the industry and people think that tracking the right metrics is very expensive because you have to hire third-party software like triple way north beam and so on but the reality is that you have at your disposal very good widgets in Shopify WordPress that can pull the data that you need into Google Sheets for example and then you are able to automate your reporting and you are even able to measure things like MER your contribution margins which are also very very important the how much is each platform bringing to the table so yeah i would highly suggest advertisers to have a look at widgets and apps for shopify wordpress and so on because it can be really useful and save you a lot of money okay now there's another campaign that is making a wave in the industry and many people are able to like maybe they're advocating that they have been able to get great results some people come and say that this is total disaster my experience has also been mixed with different brands and i'm talking about performance specs i hope you got the signal now what is the what is your experience with performance specs so far is it a really good campaign or does it hide everything behind metas ai and you don't really know what is happening behind the scene yeah absolutely so yeah performance max is an interesting one it's been around for a while now we've just recently got access to a full breakdown of where your money is going essentially and the contribution of each channel because as you know team x shows ads across youtube gmail search display and many other placements and before we were blindsided by google and we had to use scripts like mike wrote the scripts and so on and i think those scripts are still relevant but google is trying to give us a bit more of clarity into these insights even we can see now whether an asset group is receiving certain impressions or clicks and before it was just we we just were told if the i that creative or asset was good, poor, very good.

Okay, so that was definitely not enough. And now we've got access to all these things.