Author: Social Nucleus

Many brands fall into the trap of relying on repeat purchases from existing customers to keep revenue steady. While customer loyalty is valuable, leaning on it as the main driver of growth is a risky approach. Brands that aren’t first-order profitable—that is, brands that don’t earn enough from a customer’s first purchase to cover their acquisition costs—operate like a “shrinking sponge.” As customers inevitably churn, the brand struggles to keep up with rising acquisition costs and diminishing returns.

To build a resilient, growth-focused brand, first-order profitability should be a core focus. By optimising for new customer profitability, relentlessly improving margins, and leveraging higher spend opportunities, your brand can unlock a sustainable growth engine and avoid the shrinking sponge effect.

 

1. The Risks of Relying on Existing Customers: Why Brands Become a “Shrinking Sponge”

Brands that fail to achieve first-order profitability tend to rely on existing customers to maintain revenue. Over time, this creates a “shrinking sponge” effect, where customer churn makes it harder to sustain consistent results year after year. Customers may not stay forever, and each year, more effort is required to replace churned customers with new ones, often at higher acquisition costs.

The Problem of Churn: Even with strong retention strategies, customer churn is inevitable. Brands that rely too heavily on repeat purchases risk creating a fragile revenue model that struggles to adapt to rising customer acquisition costs and diminishing loyalty over time.

The Impact on Long-Term Growth: Without first-order profitability, your revenue model becomes increasingly unstable, leading to higher dependence on paid acquisition, unpredictable revenue streams, and the risk of declining profitability. In contrast, brands that are profitable on the first order have a resilient foundation that isn’t solely reliant on repeat purchases.

 

2. NCPA: New Customer Profitability Always

New Customer Profitability Always (NCPA) is the principle of ensuring every new customer is acquired at a cost that is covered by the profit from their first purchase. NCPA means you’re generating positive cash flow from day one, without relying on retention to recover costs. This approach empowers brands to scale sustainably, without running the risk of becoming overly dependent on repeat purchases.

Why NCPA Is Crucial:

• Scalability: First-order profitability allows you to confidently acquire new customers, knowing each addition contributes to profit, not just future cost.
• Resilience: Brands with NCPA are less vulnerable to fluctuations in customer loyalty or retention, as each new sale adds value immediately.
• Flexibility for Growth: When each new customer generates positive cash flow, you have greater flexibility to reinvest in growth, marketing, and product development without relying on future purchases to break even.

What You Can Do: Regularly analyse your customer acquisition cost (CAC) against your average order value (AOV). If CAC is higher than AOV, work on strategies to increase immediate profitability, such as bundling products, upselling, or refining your ad targeting.

 

3. Margins Are Your Leverage: Optimise Them Relentlessly

High gross margins are a powerful competitive advantage in eCommerce. With strong margins, brands can absorb rising customer acquisition costs while remaining profitable. As ad costs continue to rise, brands with high margins will have the flexibility to stay competitive and pursue growth, while those with thin margins will struggle.

Why High Margins Matter:

• Ability to Absorb Higher Acquisition Costs: Strong margins provide a buffer that allows brands to sustain higher CAC while still achieving first-order profitability.
• Confidence in Ad Spend: Brands with high margins can invest more confidently in paid media, knowing that they have the margin flexibility to handle variations in acquisition costs.
• Financial Flexibility: High margins create a financial cushion that supports innovation, testing, and scaling, allowing brands to pursue opportunities without compromising profitability.

What You Can Do: Regularly review your cost of goods sold (COGS) and look for ways to improve efficiencies in production, sourcing, or pricing. Every improvement in margin strengthens your ability to scale, maintain profitability, and compete.

 

4. Higher Margins Unlock Higher Spend Tiers on Meta

One of the most significant advantages of high margins is the ability to scale quickly on paid media platforms like Meta (Facebook and Instagram). With high margins, brands can afford to play in higher tiers of ad spend, allowing them to reach larger audiences and accelerate growth.

Why This Matters on Meta:

• Reach Larger Audiences Faster: Higher spend tiers on Meta enable you to expand your reach, targeting more potential customers and increasing brand awareness.
• Accelerate Growth Quickly: With the capacity to absorb higher acquisition costs, brands with strong margins can confidently increase ad spend, driving faster customer acquisition and revenue growth.
• Stay Competitive in Bidding: On Meta, bidding plays a major role in ad delivery. Brands with higher margins can afford more aggressive bidding strategies, ensuring their ads reach target audiences despite rising competition.

Example: A fashion brand with a 70% gross margin can confidently increase its daily ad spend on Meta, knowing that each customer acquisition cost is sustainable within its high margin structure. This enables the brand to grow its customer base faster than competitors with lower margins.

What You Can Do: Focus on maintaining or improving your gross margins. The higher your margins, the more you can invest in higher spend tiers on Meta, outpacing competitors and reaching more of your target audience.

 

5. Leverage for Long-Term Success: How High Margins Help You Win

In eCommerce, leverage is essential for long-term success. Brands with strong margins, NCPA, and disciplined expense management are positioned to thrive in any economic climate. This leverage allows you to scale sustainably, withstand changes in the market, and take advantage of new opportunities as they arise.

Benefits of Leverage:

• Greater Resilience to Market Shifts: Brands with leverage can adapt to changes in acquisition costs, consumer behaviour, and platform dynamics without compromising profitability.
• Sustainable Growth: High-margin brands can grow confidently, knowing they have the financial foundation to support both acquisition and retention.
• Adaptability in Strategy: Leverage provides the flexibility to explore new channels, enter new markets, or launch new product lines without sacrificing profitability.

What You Can Do: Track and optimise your margins, acquisition costs, and overall financial structure. Ensure every business decision builds leverage for the future rather than compromising profitability for short-term gains.

 

Final Thoughts: Avoiding the Shrinking Sponge Trap and Building a Resilient Brand

To create a profitable, sustainable eCommerce brand, first-order profitability is essential. Avoid the “shrinking sponge” trap by ensuring that every new customer contributes immediate value to your business rather than becoming a future liability. Here’s a summary of the key points:

1. Focus on NCPA: Make every customer acquisition profitable from day one, so your brand doesn’t depend on repeat purchases for sustainability.
2. Optimise Margins Relentlessly: High margins give you the leverage to absorb rising ad costs, scale more aggressively, and maintain profitability.
3. Use High Margins to Access Higher Spend Tiers on Meta: With greater margins, you can confidently operate in higher spend tiers, reaching larger audiences and accelerating growth.
4. Leverage for Long-Term Success: Ensure your business model builds leverage, enabling sustainable growth and adaptability over the long term.

At Social Nucleus, we’re dedicated to helping brands drive sustainable, profitable growth. If you’re ready to take your brand to the next level, reach out to us today to learn how we can help you optimise margins, achieve NCPA, and unlock the full potential of your paid media strategy.

In today’s competitive eCommerce landscape, building a profitable brand that generates consistent cash flow requires more than just clever marketing. Successful brands are designed with a specific “genetic code” that enables them to thrive, scale sustainably, and create free cash flow. These brands don’t just grow; they flourish in any economic environment, thanks to a set of strategic traits.

At Social Nucleus, we’ve distilled these critical elements into a blueprint for building a cash-flowing eCommerce brand. By focusing on these eight essential traits, you can position your business for long-term, sustainable growth that goes beyond short-term wins.

 

1. High Gross Margins: Setting the Foundation for Profitability

Gross margin is the lifeblood of profitability. Aiming for 70% or higher in gross margin ensures that every sale contributes meaningfully to covering costs, generating profit, and funding growth. This includes everything from production costs to return rates, creating a solid foundation for reinvestment and stability.

What You Can Do: Calculate your current gross margin, factoring in all costs involved in getting your product to customers. If your margins fall short, explore opportunities to renegotiate with suppliers, reduce production expenses, or consider strategic pricing adjustments.

 

2. Lean Operational Expenditures (OpEx): Keeping Costs Under Control

Efficient operations allow brands to scale profitably. For the most resilient eCommerce brands, operational expenses (OpEx) remain under 15% of revenue. Lean operations mean more revenue flows directly into profit, which provides the business with flexibility and resilience in the face of change.

What You Can Do: Regularly audit your operational expenses. Identify areas where you can streamline, automate, or even cut costs. Focus on core activities that drive value, and avoid unnecessary overhead that can weigh down profitability.

 

3. Flexible Supplier Terms: Freeing Up Cash Flow with Strategic Agreements

Cash flow management is crucial for scaling. Negotiating favourable payment terms with suppliers—like net on delivery (N.O.D.) or extended payment timelines—can create a “negative cash conversion cycle.” This means you receive products, sell them, and collect revenue before payment is due to your supplier, giving you a powerful advantage in terms of cash flow.

What You Can Do: Approach suppliers to explore terms that allow delayed payments, ideally after the products have sold. This approach reduces pressure on your cash reserves, making it easier to grow and invest in new opportunities without needing outside capital.

 

4. First-Order Profitability: Acquiring Customers Profitably from Day One

One of the biggest indicators of long-term success is achieving profitability on the first order. When you’re acquiring new customers at a cost that is fully covered by the profit from their initial purchase, you’re creating a sustainable model that doesn’t solely rely on repeat purchases to recoup acquisition costs.

What You Can Do: Evaluate your average order value (AOV) in relation to your customer acquisition cost (CAC). If CAC exceeds AOV, consider strategies to increase immediate profitability, such as bundling products, offering upsells, or refining your ad targeting to capture high-value buyers.

 

5. Increasing Customer Lifetime Value (LTV): Unlocking Long-Term Revenue Potential

While first-order profitability is a powerful growth driver, enhancing customer lifetime value (LTV) amplifies long-term profitability. Ideally, brands should aim for a 30% increase in LTV within 60 days and a 100% increase within a year. This ongoing value from each customer supports scalable growth without needing constant new acquisitions.

What You Can Do: Create strategies to encourage repeat purchases and increase LTV, such as loyalty programs, personalised email marketing, or exclusive offers for returning customers. Track these metrics carefully to measure the impact on profitability over time.

 

6. Strong Organic Demand: Reducing Reliance on Paid Ads

Paid advertising is essential, but over-reliance on it can create dependency and strain profitability. The most successful brands generate a substantial portion of their traffic organically, aiming for at least 50% organic traffic. Organic demand lowers acquisition costs, improves margins, and builds a more loyal, engaged customer base.

What You Can Do: Invest in non-paid traffic sources like SEO, content marketing, and social media engagement. Cultivating a strong organic presence can significantly reduce acquisition costs and create a lasting brand reputation.

 

7. Revenue Peaks: Leveraging Seasonal Moments and Product Launches

Brands that know how to strategically create demand spikes enjoy revenue peaks that fuel growth without sustained ad spend increases. The best eCommerce brands achieve at least four revenue peaks per year, leveraging moments like seasonal launches, product drops, or special sales events. These peaks boost sales, acquire customers efficiently, and add excitement to the brand.

What You Can Do: Map out a yearly calendar of high-impact revenue events, aligning with holidays, product launches, or exclusive promotions. Create targeted campaigns that build anticipation and drive urgency to maximise these periods.

 

8. Large Total Addressable Market (TAM): Ensuring Scalability

A large total addressable market (TAM) allows brands to scale without quickly reaching audience saturation. Having a broad TAM means that there’s significant potential for growth, providing long-term scalability and reducing the risk of stagnation. Categories with wide appeal, like basics or wellness products, often benefit from this advantage.

What You Can Do: Analyse the size and characteristics of your target market. If your TAM is limited, consider expanding your product range or exploring adjacent demographics to widen your customer base and support future growth.

 

Combining These Traits to Build a Cash-Flowing Brand

A thriving eCommerce brand doesn’t need to have every one of these traits, but a successful combination of several can create a robust model for generating free cash flow and sustainable growth. Here are a few examples of how these traits might work together:

• A Health Supplement Brand: With high gross margins, favourable supplier terms, and a subscription model that boosts LTV, health supplements often operate with high cash flow potential. A large TAM and strong organic demand due to health trends create additional opportunities for sustained growth.
• An Influencer-Led Apparel Brand: Apparel brands that leverage an influencer’s organic audience can generate significant demand without excessive paid spend. Frequent product drops, high margins, and regular revenue peaks allow these brands to maintain high engagement and profitability.

 

Building a Cash-Flowing Brand: Key Takeaways

Creating a cash-flowing eCommerce brand requires intentionality and strategic focus. By prioritising attributes like high gross margins, lean OpEx, and first-order profitability, brands can create a foundation for sustained growth and resilience. Whether you’re just starting or looking to scale an established brand, these traits offer a blueprint for turning your business into a cash-flowing success story.

At Social Nucleus, we specialise in helping brands unlock their growth potential by implementing strategies that drive sustainable, profitable growth. If you’re ready to elevate your eCommerce brand, reach out to us today to learn how our expertise can help you achieve your goals.

In the competitive eCommerce market, growth isn’t just about seeing immediate returns on individual ads. It’s about long-term sustainability, being first-order profitable, and trusting the process for incremental gains. With a focus on backend metrics and consistent creative testing, brands can build a foundation for scalable, lasting success. Here, we’re sharing insights that have driven millions in revenue for our clients, crafted to help UK brands grow strategically.

 

1. Defining Key Metrics: Backend Blended Data for Sustainable, Incremental Growth

Tracking clicks and on-platform metrics only scratches the surface. For growth that’s genuinely profitable and sustainable, you need a clear view of backend blended data that shows causality, not just attribution. By focusing on first-order profitability, customer acquisition cost (CAC), and blended return on ad spend (ROAS) across all channels, you’ll be able to grow without chasing vanity metrics.

• Set Key Blended Metrics That Reflect Real Growth: Blended ROAS and CAC give you a clearer picture of profitability, accounting for all channels rather than attributing value to single touchpoints. One UK fashion client switched to a blended ROAS approach, which helped them double profitability by reallocating spend to channels with real incremental impact.
• Trust the Machine: Valuing Incremental Scale over Platform ROAS: Relying solely on in-platform ROAS is limiting; it may show immediate success but often skews toward retargeting or high-frequency ads, which don’t generate new customers. Instead, focus on incremental growth by observing your backend metrics and trusting the machine to scale based on true value. This shift in focus allows you to put spend where it actually drives first-time customers, not just recycled buyers.
• Prioritise First-Order Profitability: Achieving first-order profitability ensures that each new customer is acquired at a cost that immediately covers their purchase. This approach builds a stable foundation for growth, rather than relying on hopes of long-term retention or future purchases. Action Point: Set benchmarks for first-order profitability by analysing backend blended CAC, adjusting spend to ensure your acquisition cost aligns with immediate revenue.

Why This Works: Focusing on backend blended data and first-order profitability means you’re building a sustainable growth model that’s resilient, not reliant on short-term tactics.

 

2. High-Impact Creative Testing: Win by Testing Emotional Drivers at Scale

In the UK, where consumers are highly savvy and values-driven, brands must tap into emotional buying triggers and test them at scale. Success in eCommerce advertising isn’t about creating one perfect ad; it’s about testing volumes of creative to find the emotional drivers that resonate with your audience.

• Develop Campaigns with Emotional Drivers in Mind: Consumers buy for emotional reasons, so build campaigns that connect with these drivers. For example, a recent wellness client focused on themes of “self-care” and “rejuvenation,” which led to a 45% increase in engagement when emphasised in creative assets.
• Test Creatives at High Volume: The more creative variations you test, the better your chances of finding what resonates. For one fashion brand, rotating through a large volume of creatives that focused on themes of individuality and self-expression increased conversions by 60%.
• Customise and Refine for Platform Nuances: Tailoring creatives to the specific strengths of each platform maximises reach. Use fast, visually captivating ads for Instagram Stories, storytelling formats for Facebook carousel ads, and longer, dynamic videos for YouTube.

Pro Tip: Refresh your creatives every 2-3 weeks. UK audiences see thousands of ads daily, and a constant flow of new creatives will keep engagement high and avoid ad fatigue.

 

3. Scaling Intelligently: Prioritising Incremental Scale over Short-Term ROAS

Scaling in eCommerce isn’t about chasing the highest ROAS on individual ads; it’s about achieving incremental growth that’s sustainable. Incremental scale, built on backend blended metrics, ensures you’re growing with purpose and profitability in mind. Here’s how to build a scalable approach:

• Shift Your Focus from In-Platform ROAS to Incremental Scale: While platform ROAS can show short-term success, it often highlights low-hanging fruit—like retargeting or overly niche targeting—rather than bringing in new, high-value customers. Incremental growth means focusing on attracting new customers at scale, not just retargeting those already in your funnel. For a high-end apparel client, shifting focus from platform-specific ROAS to backend blended metrics provided a more accurate measure of profitability, helping them optimise budget for maximum first-order profit.
• Be Intentional with Spend Allocation: Spend should be distributed across channels based on backend performance, not platform ROAS alone. By testing incremental budget increases and adjusting based on blended ROAS, you can pinpoint high-ROI channels without being misled by platform attribution.
• Prioritise Channels that Drive First-Order Profit: Sustainable growth relies on ensuring every pound spent drives immediate profitability, not future promises. For one UK wellness client, this approach yielded a 30% increase in first-order profit by focusing spend on channels with high backend ROAS, rather than those with the highest platform-attributed conversions.

Insider Insight: Scaling isn’t about chasing short-term ROAS. Incremental scale, backed by backend metrics, is the only way to drive growth that’s both profitable and sustainable.

 

4. Cost Control Campaigns: Optimising Ad Spend with Strategic Cost Management

Rather than relying on automated rules for optimisation, cost control campaigns offer a robust approach to managing ad spend and maximising ROAS. This approach lets you control your cost structure, allowing for targeted growth without budget overruns.

• Structure Campaigns to Cap Costs by Objective: Cost control campaigns allow you to set hard limits on spend, ensuring that ads are only served when they align with your profitability targets. This approach allows for greater predictability in ad spend and keeps costs aligned with business goals.
• Use Cost Caps for First-Order Profitability Goals: Set cost caps that align with first-order profitability to ensure each sale covers acquisition costs. For a beauty client, implementing cost caps resulted in a 25% improvement in incremental profitability by ensuring each campaign drove sales at an acceptable acquisition cost.
• Control Bids Based on Backend ROAS Insights: Adjust bids to optimise campaigns based on backend ROAS rather than relying on platform automation. Monitoring backend data regularly allows you to make bid adjustments that keep campaigns aligned with your profitability targets.

Pro Tip: By implementing cost control campaigns, you gain more control over your budget and can ensure spend is directly linked to incremental growth, without relying on platform-specific automation.

 

5. Customer Experience: Ensuring Profitable Long-Term Relationships

Exceptional customer experience doesn’t just convert clicks into sales; it converts sales into lifelong relationships. Brands that build a seamless, value-driven customer journey are better positioned for profitable, sustainable growth. Here’s how to elevate your customer experience:

• Optimise for Mobile and Speed: With most UK eCommerce sales happening on mobile, a fast, seamless mobile experience is essential. A fashion client improved mobile load times, leading to a 20% conversion increase.
• Streamline Checkout to Minimise Abandoned Carts: A simpler checkout reduces cart abandonment and boosts conversion rates. For one client, reducing form fields and offering guest checkout increased conversions by 15%.
• Personalise Post-Purchase Engagement for Repeat Purchases: Keep customers engaged with tailored follow-up emails recommending complementary products or offering discounts for future orders.

Bonus Tip: A loyalty programme can further increase retention, building value over time and reducing the pressure on paid acquisition.

 

The Bottom Line: Building a Profitable, Sustainable Brand

In the eCommerce space, the path to success involves focusing on backend blended data, high-volume creative testing, incremental scaling, and an exceptional customer experience. These aren’t just theoretical strategies; they’re proven approaches that have driven sustainable growth for our clients.

If you’re ready to scale profitably and sustainably, reach out to us today. Our team of experts is here to help you implement these strategies and turn your brand into a long-term success story in the UK market.

For eCommerce brands, creative testing campaigns on Meta (Facebook and Instagram) have long been a staple for identifying high-performing ads. But here’s the reality: running separate creative testing campaigns often results in a massive waste of budget, time, and resources. At Social Nucleus, we believe there’s a more efficient way to optimise ad performance—one that lets Meta’s algorithm do the heavy lifting without sinking money into forced testing.

By rethinking your approach to ad testing, you can avoid burning cash on creatives that don’t deliver and instead rely on Meta’s advanced machine learning to point you toward winning ads quickly and cost-effectively. Here’s our approach to making your ad spend work harder and go further.

 

1. The Costly Trap of Traditional Creative Testing Campaigns

Creative testing campaigns might seem like an essential part of every eCommerce ad strategy, but they come with serious downsides. Forcing Meta to spend on unproven creatives in a separate testing environment often ends up wasting budget and delivering unreliable insights. You’re paying for Meta to spend on ads it would naturally deprioritise, leading to skewed data and reduced profitability.

Why Forcing Spend on Ads Doesn’t Work:

• Expensive with Minimal Return: Separate creative testing campaigns require a large budget allocation, especially when pushing spend to ads that might not perform. This approach often results in lost revenue, as it diverts budget from ads that could be scaled profitably.
• Unreliable Data: Ads that succeed in a testing campaign don’t always perform at scale. By the time you move these “winners” into real campaigns, Meta’s algorithm may suppress them or shift spend to other ads, revealing the flaws in forced testing.

The Solution: Instead of separate creative testing campaigns, allow Meta’s machine learning to indicate which ads are likely to succeed by monitoring natural spending patterns.

 

2. Rethink Ad Success: Why Meta’s Spending Patterns Are the Best Performance Indicator

Meta’s machine learning model doesn’t just look at clicks or purchases; it makes decisions based on a sophisticated understanding of user engagement. Using probabilistic forecasting, Meta’s algorithm relies on a range of early signals to predict ad performance, meaning it can quickly identify the most promising ads. In short, if Meta’s algorithm chooses to allocate budget to a creative, that’s usually the strongest indicator that the ad has real potential.

Why Meta’s Natural Spend Is the Ultimate Test:

• Data-Driven Decision-Making: Meta’s algorithm assesses each ad’s performance potential based on a range of signals, such as early engagement rates and past performance. By using probabilistic forecasting, Meta can quickly determine whether an ad is worth spending on, even without extensive testing data.
• Instant Feedback: When Meta spends on an ad, it’s a strong indication of quality. If it doesn’t spend, that’s often a sign that the ad isn’t likely to perform. Trusting this natural selection process saves you money and avoids the trap of trying to “force” an ad to perform.

What You Can Do: Monitor Meta’s spending patterns rather than running forced testing. Ads that receive spend in real campaigns indicate promise; those that don’t likely won’t improve with extra push.

 

3. Why Manual Bidding Outshines Traditional Testing

A more efficient alternative to creative testing campaigns is to eliminate them entirely and rely on manual bidding instead. Launching ads with manual bids allows Meta to allocate spend based on performance potential from the start. This way, you let Meta’s algorithm decide which ads deserve budget, reducing wasted spend on low-potential creatives.

Benefits of Using Manual Bids:

• Efficient Spend Allocation: Manual bidding enables Meta’s algorithm to naturally pick the best ads, directing spend only to those with high performance potential. You’re not wasting budget forcing ads to spend in an artificial testing environment.
• Faster Identification of Winners: By launching directly into real campaigns with manual bids, you allow Meta to quickly identify the ads that will deliver results, skipping the need for prolonged testing.

Actionable Step: Start new ads with manual bidding, and let Meta’s algorithm make spending decisions. Ads that receive budget under this approach are likely to perform well, allowing you to scale the best creatives with confidence.

 

4. The Power of Micro-Engagements: How Meta Predicts Ad Performance

One common misconception in ad testing is that Meta needs lots of clicks or conversions to determine an ad’s effectiveness. In reality, Meta’s machine learning model relies on micro-engagements—small signals of interest, such as scroll stops, short video views, and pauses—to assess ad quality. These micro-engagements offer early, valuable insights into how an ad might perform at scale.

Key Micro-Engagements Meta Tracks:

• Scroll Pauses: When users pause on your ad, Meta records this as a sign of potential interest.
• 3-Second Video Views: If viewers engage for the first few seconds, Meta interprets this as a positive indicator, often predicting higher engagement rates.
• Click-Through Rate (CTR): While not definitive, CTR helps Meta gauge user interest and optimise delivery based on early interactions.

What You Can Do: Recognise the importance of these micro-engagements as early indicators of ad quality. Meta uses them to predict success without needing extensive data, which can save you from spending excessively on traditional testing.

 

5. Avoid the “Statistical Significance” Trap

Many brands aim for statistical significance when testing ads, but on Meta, waiting for statistical significance is both costly and largely unnecessary. Meta’s algorithm uses a predictive model that doesn’t require thousands of clicks or purchases to make decisions, making traditional statistical methods impractical and expensive.

Why You Don’t Need Statistical Significance:

• High Cost, Low Reward: Achieving statistical significance for every ad test would require a large testing budget, which isn’t feasible for most eCommerce brands.
• Irrelevant in Meta’s Model: Meta’s machine learning doesn’t depend on statistical significance. Instead, it relies on probabilistic forecasting to predict an ad’s performance using smaller, faster insights.

The Solution: Don’t let “statistical significance” dictate your ad strategy. Meta’s algorithm is designed to make data-driven predictions without the need for large sample sizes, so you can avoid costly testing campaigns.

 

6. High Margins Give You Access to Higher Spend Tiers on Meta

One of the biggest advantages of strong gross margins is the ability to compete in higher spending tiers on Meta, which can significantly accelerate growth. Brands with higher margins can afford to increase their ad spend, reaching a broader audience and scaling faster than competitors with thinner margins.

How High Margins Enable Faster Growth on Meta:

• Greater Reach Potential: Higher margins allow brands to confidently spend more, reaching larger audiences and boosting brand awareness.
• Competitive Advantage in Bidding: Strong margins enable more aggressive bidding strategies, which means your ads can secure better placements even in competitive markets.
• Sustained Profitability: As acquisition costs increase, brands with high margins can maintain profitability even at higher spending levels, making scaling more sustainable.

Actionable Step: Focus on improving your margins so you can confidently scale ad spend. By creating room for growth through strong margins, you’ll have a competitive edge on Meta, where ad costs continue to rise.

 

Final Thoughts: Trust Meta’s Algorithm to Optimise Your Ad Spend

Ultimately, Meta’s algorithm is built to help you achieve efficient ad performance by leveraging its vast data and machine learning capabilities. By moving away from traditional creative testing campaigns and embracing a strategy that lets Meta’s algorithm guide your ad spend, you can achieve higher efficiency, conserve budget, and focus on scaling what truly works.

Key Takeaways:

1. Skip Separate Creative Testing Campaigns: Allow Meta’s algorithm to dictate which ads perform by monitoring spend in real campaigns.
2. Value Micro-Engagements as Early Signals: Small interactions like video views and scroll pauses can provide valuable insights into ad potential.
3. Avoid Costly Statistical Significance Requirements: Meta’s probabilistic forecasting model eliminates the need for large data samples to pick winning ads.
4. Leverage High Margins to Compete in Higher Spend Tiers: Strong margins give you the flexibility to bid more aggressively and accelerate growth.

At Social Nucleus, we’re experts in making Meta’s algorithm work for your brand. Get in touch with us today to learn how we can help you streamline your ad strategy, eliminate budget waste, and scale your business sustainably.

In the fast-paced world of digital advertising, controlling costs while driving conversions is a balancing act. Meta’s bid caps and cost caps are invaluable tools for advertisers who want to optimise their campaigns, ensuring efficient spend without sacrificing performance. The key to their success lies in Meta’s advanced forecasting system, which uses predictive data to guide ad performance. This white paper delves into how Meta’s forecasting powers these caps, making them work more effectively for advertisers.

Meta’s Forecasting: The Foundation of Bid Caps & Cost Caps

At the heart of Meta’s predictive power are two core metrics:

• Expected Click-Through Rate (eCTR): Meta uses early user engagement data (clicks) to predict how often an ad will be clicked. Since clicks happen frequently and early in a campaign, Meta quickly develops a reliable eCTR.
• Expected Conversion Rate (eCVR): The second, more nuanced metric, eCVR, is Meta’s prediction of how many users who click an ad will go on to convert. Because conversions require more data than clicks, Meta’s eCVR predictions take longer to refine but are crucial for estimating the eventual Cost Per Acquisition (CPA).

Formula:
Amount Spent * eCVR = Expected CPA
This simple formula drives both cost and bid caps, allowing Meta to determine how much it should bid to ensure profitability within your target CPA.

Deep Dive into eCVR: The Key to Optimising Performance

eCVR (Expected Conversion Rate) is a fundamental piece of Meta’s forecasting model. While eCTR can be quickly assessed through clicks, eCVR requires a more detailed analysis of post- click behaviour—how likely users are to make a purchase or complete a goal once they engage with your ad.

• How it works: Meta needs a critical volume of clicks to predict conversion likelihood. It uses data from interactions such as time spent on the landing page, adding products to a cart, or completing forms to gauge the likelihood of conversion.
• Impact on CPA: A lower eCVR can lead to higher CPA predictions, causing Meta to adjust bids downward to avoid inefficiencies. Conversely, a higher eCVR means Meta will confidently bid more, knowing that the chances of conversion are higher.

Why eCVR is crucial for advertisers:

If your conversion rate prediction is off, it can significantly affect the performance and profitability of your campaign. Therefore, optimising for both click-through rate and post-click conversion is critical to success. If an ad performs well in engagement but falls short in driving sales, Meta will adjust bids to prevent overspending.

The Role of Engagement Signals in Meta’s Forecasting

Meta’s ability to predict the success of your ad is powered by a vast dataset of engagement signals. These signals include user interactions like clicks, shares, comments, and video views. Meta draws on its extensive historical data, also known as priors, to predict how your current engagement will lead to conversions.

Examples of signals that fuel forecasts:

• If an ad receives a high number of shares, Meta knows this is a strong sign of purchase intent.
• If users watch a video ad for a long time, Meta recognises the high interest and increases bids accordingly.

By combining real-time user engagement with its enormous backlog of data, Meta’s forecasting becomes highly accurate, ensuring your ads are positioned to succeed without unnecessary overspending.

Ad Set-Level Metrics and Adjustments

• Meta’s forecasts are dynamic. As your ad gathers more data, the system continuously updates predictions at the ad set level. If the actual conversion rate deviates significantly from the expected eCVR, Meta adapts its bidding strategy to reflect this new data.

For example:

• If an ad gains lots of clicks but fails to convert, Meta will eventually throttle back bids to avoid wasting budget. This prevents campaigns from spending inefficiently on engagements that don’t lead to sales.

Why this matters:

Dynamic forecasting ensures that even if an ad overperforms or underperforms in the early stages, Meta’s system will gradually adjust its bidding strategy to optimise for better efficiency and profitability over time.

How Meta’s Forecasting Makes Bid & Cost Caps Effective

Meta’s forecasting system allows cost caps and bid caps to function seamlessly by ensuring that each dollar spent aligns with expected performance. These caps provide critical cost control while Meta’s system continually fine-tunes bidding decisions based on predicted outcomes.

Here’s how this benefits advertisers:

1. Maximising Efficiency: Meta predicts where bids will drive conversions, ensuring that you’re not wasting budget on ineffective placements.

2. Cost Control: Forecasts allow Meta to maintain your CPA target within budget by continuously adjusting bid amounts.

3. Scaling Confidence: Accurate forecasts enable you to scale campaigns without fear of overspending, knowing Meta’s system is constantly working to optimise costs and bids.

Conclusion: Unlocking the Power of Meta’s Forecasting

Meta’s forecasting system is the engine behind the success of bid caps and cost caps. By leveraging real-time engagement data and vast historical insights, Meta helps advertisers maintain control over their spending while optimising for the highest possible performance. Whether you’re scaling a campaign or tightening cost control, understanding how Meta’s forecasting works is essential for getting the most out of your ad spend.

If you’re ready to explore how Meta’s forecasting can help you drive efficient growth, reach out for a consultation. We can help you harness these powerful tools to optimise your ad campaigns for profitability and scale.

This white paper breaks down how Meta’s bid caps and cost caps work, emphasising the role of forecasting and the impact of metrics like eCVR on ad performance. It serves as a comprehensive guide for advertisers looking to understand and leverage Meta’s advanced ad system for more effective campaigns.

As a savvy marketer, you understand that maximising returns while controlling costs is critical to running successful Meta (Facebook and Instagram) ad campaigns. One of the most effective tools in your arsenal for achieving this balance is cost controls, which include mechanisms like bid caps and cost caps. These tools allow you to manage your ad spend more strategically, ensuring you stay within budget while optimising performance.

In this white paper, we’ll explore why cost controls are essential for your Meta ad campaigns, how they help optimise budget allocation, and when and how to use them effectively.

What Are Cost Controls?

Cost controls in Meta advertising refer to settings that enable you to limit the amount Meta can bid for each impression or regulate the overall cost per action (CPA) in your campaigns. The two primary types of cost controls are:

• Bid Caps: These set a maximum bid for your ads, ensuring Meta doesn’t bid more than the specified amount in auctions for impressions.
• Cost Caps: These allow you to set a target cost per action (CPA), like a purchase or lead, and Meta’s algorithm adjusts bids to keep the average cost within your desired range.

By using these tools, you gain better control over your ad spend, allowing for flexibility in how you scale and manage your campaigns.

Why Cost Controls Matter

Meta’s advertising platform operates on a real-time auction system, where the highest bidder typically secures the best ad placements. Without cost controls, you leave Meta in charge of how much to bid on each impression, potentially leading to overspending. Cost controls provide the following key benefits:

1. Optimising Return on Ad Spend (ROAS)

Using cost caps ensures that Meta’s algorithm adjusts your bids to keep acquisition costs within a specific range. This enables you to optimise for the best Return on Ad Spend (ROAS) by maintaining acquisition costs that don’t erode profitability, ultimately maximising your profits.

2. Improved Budget Allocation

Cost controls allow for more efficient allocation of your ad budget. For example, a bid cap ensures that Meta doesn’t overspend on impressions that don’t align with your profitability goals. This means your budget is spent on impressions that are more likely to convert at a price point that works for your business.

Example:

If you set a bid cap of £50, Meta’s algorithm will never bid more than that for an impression. This ensures that your ads are served only when they have a strong chance of driving a conversion at your desired cost. Without this control, you could pay £60 or more for the same impression, reducing your overall effectiveness.

3. Controlling Customer Acquisition Cost (CAC)

With cost caps, you can directly control your Customer Acquisition Cost (CAC) by setting a maximum amount you’re willing to spend to acquire a new customer. This prevents overspending on impressions that don’t align with your CAC targets.

Example:

If your target CAC is £70, Meta’s algorithm might go beyond that without a cost cap, leading to unsustainable acquisition costs. By setting a cost cap, you ensure that Meta’s bids stay within a range that keeps your campaigns profitable.

4. Increasing upside potential and minimising downside risk

• Advertising is an auction, and we’re selling to real people. Performance fluctuates depending on real time events, and many different factors. By utilising cost controls, we can massively increase the upside potential of our campaigns, by setting an extremely high campaign budget, on good days in the market Meta will spend the entire budget at our target CAC. On the flip side, on quieter days in the market, public holidays/busy times etc, Meta will simply pull back spend, and remain efficient. Using highest volume/lowest cost, Meta will spend the entire daily budget on bad days giving us hugely unprofitable days. 1 inefficient day can wildly change our P&L for the whole month.

When and How to Use Cost Controls

While cost controls can provide excellent results, they must be used strategically to unlock their full potential. Below are some best practices for implementing cost controls effectively:

1. Scaling Campaigns

When scaling a campaign, controlling acquisition costs becomes critical. Cost caps help you increase your budget without disproportionately inflating your costs, ensuring that scaling doesn’t come at the expense of profitability.

2. Long-Term Profitability

For brands focused on sustainable growth, keeping acquisition costs under control is essential. Cost caps allow you to maintain profitability over time by ensuring that conversion costs stay within a manageable range.

3. Combining Bid Caps and Cost Caps

One challenge marketers face is balancing auto-bid campaigns with cost-controlled campaigns. If most of your budget is allocated to auto-bid campaigns, your bid cap campaigns may not receive enough spend. To avoid this, allocate at least 50% of your budget to campaigns using cost controls, ensuring they receive sufficient delivery.

Example:

If your total ad budget is £10,000, ensure that at least £5,000 is dedicated to campaigns with bid or cost caps. This allows Meta’s system to optimise your spend for lower-cost impressions, giving you better results for your money.

Pitfalls to Avoid with Cost Controls

While cost controls are highly effective, they can become counterproductive if not used carefully. Here are some common pitfalls to avoid:

1. Setting Caps Too Low

If your bid caps or cost caps are set too low, your ads may not get enough visibility, leading to limited impressions and poor delivery. Ensure your caps are realistic, aligned with historical performance data and industry benchmarks.

2. Over-relying on Caps During High-Competition Periods

In periods of high competition, such as during major sales events or holidays, strict cost controls may prevent you from competing effectively. Consider adjusting your caps during these periods to ensure you can still win prime placements while maintaining overall profitability.

3. Giving in too early

The most common mistake people make when using cost controls is giving in too early, a few days of £0 spend and moving back to lowest cost campaigns. We have to play around with the cap for some time before we find the sweet spot of profitable spend.

Conclusion: The Strategic Power of Cost Controls

Cost controls are a vital tool for ensuring your Meta ad campaigns run efficiently while driving profitable results. Whether you’re scaling your campaigns, optimising ROAS, or controlling CAC, cost controls allow you to manage your budget effectively and maximise the impact of your ad spend.

If you’d like to explore how to implement cost controls for your Meta campaigns or need help optimising your ad strategy, we’re here to assist. Get in touch, and we’ll work with you to drive sustainable growth and maximise your marketing budget.

At Social Nucleus, we are dedicated to helping direct-to-consumer (DTC) ecommerce brands scale in a sustainable and profitable way. Through optimisation models, we have successfully driven incremental growth for our clients, particularly through Meta’s advertising platforms. In this edition of our newsletter, we will dive into why we prioritise the 7-day click optimisation window, avoid using the 7-day click and 1-day view model, and in which situations a 1-day click optimisation might be appropriate. Our goal is simple: ensure every click adds measurable value.

The Importance of Incremental Growth in DTC Advertising

For ecommerce brands, the objective is clear: growth. But sustainable, long-term growth depends on incremental improvements, small but consistent gains that accumulate into significant results over time. Incremental growth ensures that every advertising effort contributes measurably to business objectives, making scaling both profitable and
sustainable.

Choosing the right optimisation model is central to achieving this. At Social Nucleus, we primarily use the 7-day click window to focus on high-intent, incremental actions. In specific cases, we may consider a 1-day click optimisation model. Let’s explore why these choices matter.

Why We Use 7-Day Click as Our Primary Optimisation Model

The 7-day click optimisation model focuses on high-intent actions that reflect consumers who are more likely to convert. Here’s why it is the best fit for scaling DTC brands:

1. Aligns with Consumer Behaviour

The 7-day click window is well-suited to typical ecommerce buying behaviour, where consumers often take time to consider their options before making a purchase. Whether comparing prices or considering alternatives, many customers don’t make immediate decisions. Allowing for up to seven days from the initial click captures higher-intent buyers who may take longer to convert but are still valuable.

2. Greater Control Over Incrementality

The 7-day click model provides clearer attribution, focusing on actions that reflect meaningful engagement. By only tracking clicks, we can measure the incremental impact of our efforts. This ensures that conversions are more likely driven by advertising and not merely passive views, giving us confidence that our spend is contributing to growth.

3. Cleaner, Actionable Data

With the 7-day click model, we avoid passive data points like view-through conversions. The data we gather is cleaner and more actionable, allowing us to optimise for high-quality clicks that drive revenue. By focusing on active engagement, we ensure that Meta’s machine learning algorithms optimise for users who are likely to convert, improving long-term campaign performance.

When using the view window, this skews ad account data to create cases like capo/ other big spenders where the ad account ROAS is better then blended ROAS which creates confusion. Using click only attribution ensures that the ad account aligns more with backend numbers.

Why We Avoid the 7-Day Click and 1-Day View Model

The 7-day click and 1-day view model can be tempting because it tracks both clicks and views, but it comes with notable drawbacks:

1. Lower Incremental Value

This model includes passive views, which can dilute the incremental value of each conversion. Users who simply see an ad may not be actively considering a purchase. By including these passive engagements, the model makes it harder to accurately assess the real value your ads provide.

2. Overestimation of Impact

The 1-day view component can inflate your performance metrics, as conversions might be falsely attributed to users who saw an ad but were already planning to purchase. This leads to an overestimation of impact, making it harder to optimise for true, measurable growth.

3. Focus on Intent

We prioritise high-intent clicks over passive views. While awareness is important, it’s not the goal when optimising for conversion-driven campaigns. We want every click to reflect a strong likelihood of conversion, and the 7-day click and 1-day view model doesn’t align with this goal.

Not only does the 1 day view window mislead us as media buyers, but it also makes the machine lazy and directs it to start optimising for view through conversions, rather than meaningful click conversions.

When 1-Day Click Might Be Appropriate

Though we typically rely on the 7-day click model, there are instances where a 1-day click optimisation window might make sense. This model is suitable when purchase decisions are made quickly, such as with low-cost or impulse-buy products.

Use Cases for 1-Day Click:

• Impulse Purchases: If your brand sells items like fashion accessories or consumables, consumers are more likely to make a decision immediately after seeing an ad. A 1-day click model captures these rapid conversions and ensures we’re optimising for quick, intent-driven actions.
• Frequent Purchases: For brands with products that have a shorter purchase cycle or lower price point, the 1-day click model may help focus on immediate buyers rather than those who need more time to consider their options.

However, for higher-cost products or those with longer consideration periods, the 7-day click model is generally more appropriate. It allows for a fuller picture of customer intent and behaviour, ensuring that we capture those conversions that take a few days to finalise.

Making the Machine Work Hard for Every Click

At the heart of our optimisation strategy is the belief that every click should count. We strive to make the machine learning algorithms that power advertising platforms “work hard” to ensure each click reflects high-intent behaviour. By focusing on models like 7-day click, we maximise efficiency, ensuring that ad spend is tied to incremental growth.

When Meta’s algorithms work harder to identify and target high-value users, we reduce waste on low-intent clicks and passive impressions. This leads to more effective ad spend, higher ROI, and sustainable growth for your brand.

Final Thoughts

As your ecommerce advertising partner, our mission is to align our strategies with your business’s growth goals. By selecting the right optimisation models and focusing on incrementality, we help your brand scale without wasting spend on low-value clicks or passive
engagements. While the 7-day click window is our primary approach, we’re flexible and adjust strategies to meet the unique needs of each client.

It’s not about casting the widest net but about focusing on quality, ensuring that every click we drive contributes to incremental growth and profitability.

Here’s to your continued success and growth. As always, we’re here to optimise, scale, and help you thrive.

In today’s highly competitive ecommerce landscape, your website is one of the most critical tools for turning visitors into paying customers. Optimising your site for conversions not only boosts revenue but also improves the return on your marketing investments. This white paper outlines essential best practices that will help enhance your website’s ability to convert traffic into sales.

1. Simplify Navigation and Structure

A well-organised, easy-to-navigate website is crucial for creating a seamless user experience. Reducing friction for users leads to higher conversion rates.

• Surface Primary Links: Ensure key product categories and links are easily accessible in your navigation bar. Avoid the use of hamburger menus on desktop versions to make navigation more intuitive.
• Use Solid Colours for Navigation: A solid colour background for your navigation bar helps improve contrast and visibility, particularly on mobile devices, where clarity is essential.

A clean, straightforward structure ensures visitors can quickly find what they’re looking for, improving the likelihood of converting them into customers.

2. Optimise Product Pages for Conversions

Your product pages are the heart of your website when it comes to driving sales. A well-optimised product page encourages users to take action and add items to their cart.

• High-Quality Images: Use detailed product images, showcasing multiple angles and user-generated content (UGC) where possible to build trust.
• Social Proof: Display product reviews, “Best Seller” badges, and ratings prominently under product titles to enhance credibility and trustworthiness.
• Clear CTAs: Make “Add to Cart” buttons large, highly visible, and in vibrant colours to catch the user’s attention and prompt action.

By presenting products in an appealing and transparent way, you can better guide visitors towards making a purchase.

3. Leverage Incentives and Urgency

Creating urgency and offering incentives are proven methods to encourage quicker buying decisions.

• Free Shipping Progress Bars: Include a progress bar that shows customers how close they are to qualifying for free shipping, motivating them to add more items to their cart.
• Low Stock Alerts: Show low stock alerts to create a sense of urgency, encouraging users to complete their purchases before the product sells out.

Tactics like these help reduce hesitation and speed up the customer decision-making process.

4. Streamline the Checkout Process

Cart abandonment is a common challenge for ecommerce sites, often caused by complex or confusing checkout processes. Simplifying checkout can dramatically improve your conversion rates.

• Security Icons: Display security icons, such as a lock symbol, near the “Checkout” button to reassure users that their payment information is safe.
• Streamline Payment Options: Offer a few clear and simple payment options rather than overwhelming users with too many choices, which can lead to decision paralysis.

A faster, more straightforward checkout process minimises drop-offs and increases the likelihood of completed purchases.

5. Harness User-Generated Content (UGC)

People trust other customers’ experiences more than polished marketing materials. Leveraging UGC helps build credibility and trust.

• Swipeable UGC Carousels: Display user-generated content in swipeable carousels, featuring customer photos and usernames to highlight authenticity.
• Product Reviews with Photos: Combine customer reviews with real-life photos of your products being used to demonstrate their value in a practical context.

UGC provides social proof, which is a powerful tool in nudging potential customers towards a purchase.

6. Improve Technical Performance for Faster Loading Times

Website speed is critical for both user experience and SEO performance. A slow site can frustrate visitors and lead to higher bounce rates, affecting conversions.

• Optimise Image Sizes: Compress large image files and use the correct formats to ensure faster page loading times without sacrificing image quality.
• Minify HTML, CSS, and JavaScript: Reducing the size of these files helps improve load speed and site performance, which is crucial for keeping visitors engaged.

Fast, responsive websites lead to better user satisfaction, higher engagement, and increased conversions.

7. Test and Iterate for Continuous Improvement

To ensure your site is continually optimised for conversions, regular testing and analysis are essential.

• A/B Testing: Run A/B tests on key elements such as product pages, navigation, and checkout processes to identify which designs and layouts convert better.
• Monitor Site Metrics: Keep a close eye on metrics like bounce rates, conversion rates, and average time spent on the site to identify areas for improvement and adjust your strategies accordingly.

Testing allows you to continuously refine and optimise your website based on data-driven insights.

Conclusion

Optimising your ecommerce website for conversions requires a focus on both user experience and technical performance. By following the best practices outlined above, you can transform your site into a more effective sales tool, turning visitors into loyal customers and maximising the return on your marketing investments.

If you have any questions about implementing these strategies or would like to discuss how to optimise your website for better conversions, don’t hesitate to reach out.

I hope you’re doing well! Following up on our recent discussion about optimisation models and driving incremental growth, I wanted to share insights on how to plan, monitor, and leverage your backend data to ensure sustainable growth for your brand.

At the core of successful growth is ensuring that your incremental media buying efforts are accurately measured and evaluated. This requires focused attention in three key areas: establishing a single source of truth, identifying a clear North Star goal, and aligning all media channels with these standards. Additionally, we’ll discuss why relying solely on in-platform ROAS (Return on Ad Spend) can be misleading and why incremental testing is crucial for understanding the true value each channel provides.

1. Establish a Single Source of Truth

When scaling your brand, it’s essential to have a reliable, unified source of data that you can trust. A single source of truth ensures consistency in reporting across all channels and allows for accurate measurement of the incremental value delivered by your campaigns.

Key Benefits:

• Eliminates Conflicting Data: Using multiple tools for measurement can lead to discrepancies, making it difficult to assess the real impact of your campaigns. A single source of truth removes this ambiguity, ensuring all stakeholders are working with the same, reliable data.
• Better Decision-Making: Clean, consistent data allows you to make well-informed decisions about optimising your media spend and driving incremental growth.
• Seamless Reporting: A unified data source simplifies reporting, making it easier to compare performance across different channels, a vital component of effective campaign analysis.

Actionable Strategy:

Integrate backend sales data with advertising data to ensure every action contributes to measurable business outcomes. This alignment between backend and marketing efforts is crucial for identifying and driving incremental value.

2. Identify Your North Star Goal

Your North Star goal serves as the guiding metric for all media efforts. It’s not just a revenue target or a vanity metric; it’s a reflection of long-term growth for your brand. This goal could represent customer lifetime value (CLTV), repeat purchase rate, or a specific profit margin.

How to Use Your North Star Goal:

• Track Progress Regularly: Use your single source of truth to measure how your media efforts are contributing to this goal. Regular tracking ensures all teams and channels are aligned towards the same outcome.
• Align Incremental Growth: Every campaign should be evaluated based on how it moves your brand closer to this goal. For instance, if your North Star is CLTV, measure how ad spend impacts not only immediate conversions but long-term customer retention and repeat purchases.
• Prioritise Long-Term Success: Focus on strategies that drive sustainable growth. Short- term wins can be tempting, but aligning with your North Star goal ensures long-term profitability and scalability.

Actionable Strategy:

Ensure all campaigns are assessed based on their contribution to your North Star goal, tracking incremental performance through data-backed insights.

Live example:

– For a health/wellness client of ours with a subscription product and a 300% increase in LTV within 3 months of first purchase, our north star is NCPA. This is the holy grail metric, upon which all decisions are made. With every single change, we ask on a weekly basis: “How did this change affect our NCPA?”

– Moving spend to a new channel – How did this affect our overall NCPA?
– Increasing number of weekly email campaigns – How did this affect our overall NCPA?
– Scaling meta spend by 30% – How did this affect our overall NCPA?

Having too many north star metrics creates confusion when deciding if changes have had a positive impact or not.

3. Why In-Platform ROAS Should Not Dictate Business Decisions

While ROAS is a common metric for assessing ad performance, relying solely on in-platform ROAS can lead to misleading conclusions. Here’s why:

Key Issues with ROAS:

• ROAS Can Be Misleading: Platforms like Facebook and Google track and report ROAS based on direct interactions they can measure. However, this can create attribution bias, as they may claim credit for conversions influenced by other channels. A high in-platform ROAS does not necessarily indicate true incremental growth.
• Double Attribution: Multiple platforms may claim credit for the same conversion. For example, if a customer interacts with both Facebook and Google before making a purchase, both platforms might take credit, leading to inflated results.
• Incrementality is Key: The best way to measure true channel performance is by running incrementality tests. These tests determine how much additional value a channel provides that wouldn’t have occurred without the ad spend, giving a clear picture of real growth.
• ROAS is a ‘revenue’ metric, and not a ‘profit’ metric. It doesn’t take into account your transaction fees/ COGS/ fulfilment fees/ returns etc so without context, it doesn’t actually mean that much…
• ROAS does not equal GROWTH. By using ROAS as a north star metric, it’s very easy to start making ad account decisions which do not align with the company’s goal of profitable revenue growth. IE, spending more on bottom of funnel/ retargeting,

Why Incrementality Testing Matters:

• Prove Real Growth: Incrementality testing, through methods like A/B testing with control groups, reveals whether media spend is driving actual growth.
• Use ROAS as a Guide, Not the Final Decision: ROAS can still help understand campaign efficiency, but decisions should be based on incremental value, ensuring every pound spent drives sustainable, long-term growth.

Actionable Strategy:

Run incrementality tests regularly to evaluate the real impact of your media channels and ensure that each contributes to your North Star goal.

4. Monitor Incremental Value Across Media Channels

Not all media buying efforts deliver the same value. To optimise growth, it’s important to assess the incremental contribution of each media channel, particularly when measured against your North Star goal.

How to Monitor Incremental Growth:

• Channel-Level Analysis: Dive deep into backend data to evaluate how each channel performs in driving high-value, long-term customers. This will help determine where to increase spend and where to optimise.
• Focus on Quality of Conversions: Incremental growth is about quality, not just quantity. Go beyond immediate conversions and assess whether a channel brings in customers likely to contribute to long-term growth.
• Be Agile: Incremental insights allow for real-time optimisation. Adapt your media spend and strategies based on the most current data to maximise efficiency and reduce waste.

Actionable Strategy:

Continuously monitor incremental performance across channels, adjusting strategies and spend to focus on areas delivering the greatest long-term value.

Conclusion

By establishing a single source of truth, setting a clear North Star goal, and regularly monitoring incremental value across media channels, you can drive sustainable growth for your brand. Remember, in-platform ROAS should serve as a guide, not the sole basis for decision-making. Instead, focus on incrementality testing to prove that each channel is contributing real, measurable growth.

Let’s schedule a follow-up to review your current data and discuss how we can align your media efforts with these strategies. Together, we can ensure every pound spent is contributing to meaningful, long-term success for your brand.

In today’s increasingly complex digital landscape, ecommerce brands are constantly seeking new avenues for growth. A popular strategy for many is to diversify both their ad spend and sales channels. While this approach can unlock new opportunities, it also introduces inefficiencies that can hinder growth. In this white paper, we will explore why scaling efficiently is critical for long-term success and how over-diversification in both sales channels and ad spend can sometimes do more harm than good.

Channel Diversification: Striking a Balance Between Amazon and Your .com Store

Many brands are choosing to expand their presence across multiple platforms such as Amazon, online retailers, and wholesale in an effort to capture demand from a broader range of customers. However, one challenge that often arises from this diversification is the tendency to silo each channel managing them independently in terms of profit and loss (P&L) and media spend.

Siloing and Its Impact on Efficiency

For instance, many brands fail to allocate Meta ad spend towards driving sales on Amazon, even though both channels target the same audience. This raises a critical question: Is the incremental lift worth it?

As Amazon sales increase, brands often experience a corresponding decline in their .com sales, as customers prefer the convenience and speed of purchasing from Amazon. This creates a trade-off where the growth on Amazon could cannibalise .com revenue. It’s essential to assess whether the additional sales gained from Amazon justify the potential losses on your own website.

Measuring Incremental Lift

When diversifying into new distribution channels, brands need to account for how these changes affect their total revenue realisation. Many fail to measure the incremental lift that paid media brings to each channel, making it difficult to determine whether the overall impact of diversification is positive or negative.

Actionable Solution:

• Evaluate Channel Impact: Analyse the incremental lift across all platforms, measuring the effect that ad spend has on both your .com store and Amazon performance. Ensure that you’re balancing ad spend effectively between channels to avoid cannibalising sales.

Diversification of Ad Spend: Is It Really Helping Your Bottom Line?

Another common approach is to diversify ad spend across multiple platforms. While this may sound appealing, shifting budget away from high-impact channels like Meta and Google to lower-impact platforms such as TikTok, Snapchat, or TV often results in reduced efficiency.

“Now we’re bigger, we feel like we should be spending in more places.” – This is a huge misconception. Being bigger doesn’t mean you need to diversify channel spend – Its vital to remember what got you to this stage in the first place. Focus on the basic channels. We have many clients spending north of £1m a year on only meta alone, you do not need to diversify channel spend to grow.

The Efficiency Trade-Off

Consider this scenario:

• In 2023, a brand allocates 80% of its budget to Meta and 20% to Google, both of which deliver high returns on investment (ROI).
• In 2024, the brand diversifies its spend by moving 30% of the budget into TikTok, Snapchat, and TV.

This shift frequently leads to less effective results because brands are moving budget away from their most efficient channels and into platforms that are harder to measure or provide lower returns. While diversification can open up new growth opportunities and help increase volume, it often comes at the expense of efficiency.

Platforms like TikTok or Snapchat often receive smaller portions of ad spend for a reason they tend to generate lower ROI than more established channels like Meta and Google. Brands that over-diversify their ad spend often find that their media strategy becomes unnecessarily complex, while yielding lower returns.

The measurement issue with additional marketing
channels

Every single channel has a different recommended attribution window:

Meta: 7 day click, 1 day view
Google: Unsure?
TikTok: 7 day click
Pinterest: 28 day view
Snapchat: 28 day view

What does this mean? You could be pumping budgets up based on in channel metrics, when really all of your marketing spend is being measured differently.

Actionable Solution:

• Focus on High-Impact Channels: Prioritise ad spend on platforms that deliver measurable, high returns. Test smaller portions of your budget on new channels, but ensure that the majority of your ad spend goes towards platforms that drive results.
• Data-Driven Decisions: Use data to assess the performance of each platform and allocate spend accordingly. Resist the temptation to diversify purely for the sake of variety; instead, focus on driving the best possible ROI.
• Always having north star metrics we measure come rain or shine: Contribution margin, net profit, blended ROAS, NCPA. Whatever the north star measurement is for your business, live and die by this and come back to it as the primary decision maker when asking yourself ‘is this new channel efficient?’ “How did moving 15% of our media spend affect our blended ROAS?”

Do you have the correct content production systems for different channels?

Building a creative production system for Meta is a huge challenge, and only a small % of the industry has this right. To then underestimate the importance of doing this for new channels, is a mistake. Each channel requires a different kind of content to see success because consumers don’t go to each marketing channel to see the same content. Tiktok content and IG content is polar opposite to one another, as is FB content, as well as snapchat. So before you branch out into channel diversification, are you in a position to produce the right amount of appropriate content to see success?

Rising CPMs and Managing Meta Costs

As Cost per Thousand Impressions (CPM) on platforms like Meta continues to rise, brands are faced with the challenge of scaling efficiently while maintaining profitability. Without cost controls, increasing ad spend in the face of rising CPMs can quickly lead to inefficiency and wasted resources.

Making Incremental Spend More Efficient

There are several strategies that brands can employ to scale efficiently on Meta while keeping costs under control:

1. Set Cost Controls: Establish strict cost controls aligned with your key performance metrics. By setting bid caps and CPA targets, you can ensure that your ad spend remains efficient as you scale.

2. Gradual Budget Increases: Rather than dramatically increasing your ad spend, make incremental adjustments only when your campaigns meet or exceed your target performance metrics. This helps ensure that your growth is sustainable.

3. Continuous Creative Testing: To avoid ad fatigue and keep your audience engaged, regularly test new creatives. By introducing fresh ads into your campaigns, you’ll increase the chances of finding new winning combinations that drive better results.

4. Relentless Testing: Increase the number of variables in your creative testing process. Brands like Loop have more than 5,000 live ads in their Meta account to ensure consistent results and maintain a competitive edge.

5. Creative Production System: Develop a scalable system for rapidly producing and testing new creatives. This allows you to continuously iterate and improve results over time, while keeping your campaigns fresh and engaging.

6. Having what we call a ‘scaling margin’ – Only scaling when your campaigns are ABOVE your desired target, taking into consideration the fact that a slight dip is inevitable when scaling. IE, blended ROAS needs to be at a 2.7, don’t scale ad spend at a 2.7, scale it at a 3x or above allowing for a small margin for efficiency to dip slightly, but keep us in the green.

Actionable Solution:

• Structured Creative Testing: Implement a robust creative testing framework that allows you to frequently rotate new ad formats and messages. This will help combat rising CPMs by ensuring that your ads remain efficient and cost-effective.
• Testing creatives using cost controls – Creative testing is the biggest cost centre for most ecom brands using Meta ads, if we test using cost control campaigns and trust in Metas machine algorithm to only spend on winners, we still find winners, but spend isn’t forced on losers which removes wasted spend = Improves efficiency.

Conclusion: Focus on Efficiency Before Diversifying

While diversification offers growth opportunities, it’s important to prioritise efficiency before spreading your resources too thin. Expanding into new sales channels or allocating budget across multiple ad platforms can seem like a smart strategy, but without careful planning, it often leads to inefficiencies that reduce overall effectiveness.

By maintaining a focus on your core, high-performing channels and only diversifying when you fully understand the potential impact, you can achieve sustainable growth without sacrificing profitability. Remember, efficiency should always be your primary goal, with diversification playing a secondary role in supporting your long-term growth strategy.

If you’re looking to refine your ad strategy or improve the efficiency of your incremental spend, our team is here to help. We specialise in helping ecommerce brands scale efficiently without compromising their bottom line. Get in touch today to learn more.