The most valuable thing to know when getting into E-commerce.
Out of all the things I have learned since I got into E-Commerce and what I value most is this:
“Ad spend at the beginning will most likely be 10 times higher than what you earn, and that’s normal.”
A few years ago, a friend of mine got into E-commerce and asked me to help out. He wanted to spend a fraction of the item cost on ads and make a profit on every sale. It doesn’t work like that. If he spent more than what the item cost, it wasn’t good.
As time has passed, I have encounters other people who think like him. It’s ok, we have been programmed to think like that. Explaining the same thing to my mom was impossible. She still doesn’t get it. How can getting sales but losing money be ok?
The secret is in the long run.
What people fail to realize is that you don’t spend on ads to get sales, you spend on ads to get ideal customer data.
The way you have to see it is: How much does it cost to acquire 1 customer and what is his lifetime value to my business? The problem with seeing it like this is that some people only want to sell 1 item 1 time to 1 customer.
It’s about cultivating a relationship with your customer and building loyalty. You wouldn’t open up a restaurant and only serve a customer once, then banned them from the restaurant. You treat them nice and they come back. It’s the same in E-commerce.
The first month with my first E-commerce store, I spent 300 Dollars on ads and sold 1 item for about 28 dollars. Some people might think that I’m doing something wrong or that it's a bad investment.
I lowered the ad spend number and raised the income number.
By month 6, I spent 90 dollars on ads and sold 120 dollars worth of product.
Facebooks algorithm works that way. It needs data to work. That’s what Facebook sells you when you buy ad space. Data.
If you are starting in E-commerce, don't panic if your ad spend is high in the first months. If by month 6 you are still spending more than you are making, then it’s time to change your marketing strategy.