Meta Ads can change the growth trajectory of your fashion brand. But Meta Ads can also become a money pit.
I’ve worked with several fashion brands with strong wholesale distribution and $1-5M in eCom sales who couldn’t get Meta Ads to scale (until I came along). Lesson: brands that scale outside of Meta won’t automatically scale within it.
If you've tried Meta ads but can't seem to crack $1k/day in profitable daily spend, or you haven't tried Meta ads before and don't know where to start...this post is for you.
Before we get into it, I want to give a big thank you to our launch partner: TESMO. TESMO is a full-service Amazon management agency for DTC brands.
TESMO specializes in scaling the Amazon channel for tricky categories like fashion. If you've considered launching on Amazon, or are unhappy with the state of your Amazon business, you should reach out to them.
The strategies I’m about to share will work for brands starting from scratch and brands who have already built a business in other sales channels.
This week I’m going to tell you how to validate your current level of product-channel fit with minimal effort. Next week I'll tell you how to use what you learn to find your first scalable ad creative.
But...next week the free trial period ends, so members will be the only ones who can access next week's issue. Click here to get a monthly membership, or save 15% on an annual membership here.
Like all “recipes”, make sure you read the whole thing from end to end before you get started.
Validate Your Product-Market-Channel Fit
Before you invest a boatload of money on Meta Ads, you want to confirm that there is nothing happening outside the ad account that’s sabotaging your performance.
These are the things “outside the ad account” that prevent brands from scaling:
- Issues with your website
- Featuring the wrong products
- Unrealistic financial goals
- Product is a poor fit for Meta
- Product is a poor fit for the market
To get a read on these issues, we’re going to run an ad campaign against your site’s existing visitors to benchmark performance.
If you’re starting a brand from absolute zero and have no site traffic, you’ll have to skip this step and wait for next week's newsletter OR run this strategy with broad targeting.
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There were almost 175 million U.S. Amazon Prime members in 2023–that's about half of the country!
And Prime over-indexes for high income households who love to shop online–the perfect audience for a fashion brand.
Getting Amazon right can unlock life-changing scale. But Amazon isn't just another wholesale channel. It has its own conventions, unspoken rules and best practices–if you ignore these rules, Amazon shoppers will ignore your brand.
TESMO is a full-service Amazon agency that has scaled some of the largest and fastest growing brands on Amazon. They're channel experts who have managed over $500 million in Amazon sales since 2008. And they specialize in complex categories like premium apparel.
Click here to book a call with the TESMO team to discuss the size of your brand's Amazon opportunity.
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Step 1: Set Your Cost Per Acquisition Target
Everyone seems to have their own “secret sauce” for setting paid marketing performance targets. But if you want to acquire new customers profitably, you’ll do it my way: set CPA & ROAS targets based on first order contribution margin.
Contribution margin is the profit you make on each eCom order after all of the variable costs of fulfillment have been factored in. Marketing is the variable cost you can control.
You’re essentially saying (for example) “I make $50 on every $100 order before marketing. I’m willing to spend up to $30 to drive the sale, so I still walk away with $20.”
To do this, gather the following information. Averages are fine, but remember to take seasonality into account. You might have to work with finance to get this info.
- Average Order Value (AOV) before markdowns & promos are applied
- Average markdown percent per order
- Average promotion percent per order
- Average landed COGs per order
- Average cost to pick, pack and ship an order
- Average cost of shipping (this might add money to your total if the customer pays for shipping)
- Average transaction fee per order (ie. payment processing fees)
- Average return rate
- Any other costs that you incur to fulfill an order (ex. apps that charge based on order volume)
Using this information, pick a cost per acquisition target you think is reasonable. You want to pick a CPA target that allows you to compete in the Meta ads auction, but also allows you to make money on each new customer order.
Once you have a CPA, translate it into a ROAS goal. Using my previous example:
- AOV: $100
- Target CPA: $30
- ROAS: ~3.3x
In plain English: you’re willing to spend $30 to generate $100 in sales. $30 is roughly 3.3x $100. So your ROAS target is $100.
Now you’re going to run a campaign against existing site traffic and see how close you can get to a 3.3x ROAS (or whatever your target is).
If I've already lost you, don't worry: I'll do a deep dive on KPI setting in a future issue. Most brands are profitable with a ROAS target of 2.5-3x, so use that for now.
Step 2: Set Up A DCA Campaign
DCA stands for Dynamic Catalog Ads. If you’ve ever gotten an ad on Facebook or Insta that lets you scroll through a carousel of what looks like eCom product photos…that’s a DCA ad.
This format takes the guesswork out of product selection for your ads, because you’re running the entire catalog.
Meta will match products with relevant buyers. Certain products will get more eyeballs and drive more conversions–those are the products you want to focus on.
Set up a campaign with the following settings:
- Objective: sales > conversions
- Campaign Type: CBO, maximize conversions
- Audience: anyone who viewed a page on your site in the last 182 days (pixel-based audience)
- Audience Exclusion: anyone who purchased in the last 182 days (pixel-based audience)
- Creative Type: DPA/product catalog, all products*
- Ad Description: 1-2 short sentences about your brand
- Product Card Copy: Item name (don’t show the price)
- CTA: Shop Now
*If you have a wide range of price points on your site, exclude the lowest price categories from your catalog. If you have low-margin products or categories, exclude those. If part of your site is on sale, either exclude sale items or ONLY run a feed of sale items (and adjust your CPA/ROAS target accordingly).
You’ll need to set a daily budget that will enable you to drive 50 conversions per week at your target CPA/ROAS. Using the previous example:
- AOV: $100
- CPA: $30
- Weekly Budget: $30 * 50 = $1,500
- Daily Budget: $1,500/7 = ~$215
This budget is fine if you’re comfortable using Meta’s in-platform metrics as your “source of truth” and/or you’re not spending much on other paid marketing channels.
But if your eCom store is already driving at least 25-30 new customer orders per day, you might want to spend more.
In the previous example, you’re driving 7 new conversions per day. If your average daily order volume varies by more than 7 conversions, it’s going to be difficult to see the impact of this test on your daily sales. So you’d want to spend enough to surpass the average daily fluctuation in new customer orders.
For a mature business with broad sales distribution, this can get very expensive. You’ll want to run this test as a conversion lift study instead. You can use Meta's lift test or your own software vendor/in house method of choice.
I'll dedicate a future issue to media buying strategies for large brands with broad awareness and a complex media mix.
Step 3: Run It For A Week & Gather Data
Now the fun begins: you’ll run the campaign for at least seven days and analyze how the actual results compare to your CPA/ROAS targets. You’ll also get to see how Meta’s in-platform CPA and ROAS numbers compare to your business-level results.
For each day of the test, track the following metrics in a spreadsheet:
- Meta Ads Spend
- Spend from other digital marketing channels
- Revenue from new customers (net of promotions & markdowns)
- Orders from new customers
- Total revenue (net of promotions & markdowns)
- Total new customer sales / total digital marketing spend
- Total new customer sales / Meta Ads spend
- Meta’s in-platform ROAS for your campaign
- Meta’s in-platform CPA for your campaign
Step 4: Evaluate Your Results
When the seven days are up, compare the last four metrics in the list to your target CPA/ROAS. You’ll get one of three results:
- Your actual metrics were very close to your target.
- Your actual metrics were much better than your target (higher ROAS, lower CPA).
- Your actual metrics were much worse than your target (lower ROAS, higher CPA).
If you got results 1 or 2, try increasing the daily budget of your campaign by 20%. Continue to track the metrics I listed in step 3 for 4-5 days and see if performance holds. If it holds, scale up the budget 20% again, rinse and repeat.
Congrats: you’re scaling your first campaign!
But be aware: there is a ceiling to how far you can scale this strategy because you’re not pushing new folks into your marketing funnel. At this point, you can stop reading and wait for next week's issue, where I'll walk you through your first true prospecting campaign.
What If I Didn't Hit My ROAS Target?
If you got result 3, you’re not able to convert your existing site traffic at the price you want. You have a few options:
Run A Technical Audit Of Your Meta Setup
Head over to the Events Manager section in Ads Manager and check your match scores. Download the Meta Pixel Helper and audit key events as you navigate through your site.
Then head over to Catalog Manager and check if your entire catalog is being passed to Meta accurately. Are stock levels accurate? Is price data accurate?
Curate Your Product Catalog
Try re-running the campaign with a product set that features the best selling 20% of your styles. This might improve your conversion rate, yielding higher ROAS.
Audit & Optimize Your Path To Purchase
DCA ads click through to the PDP of the featured product. Revisit your mobile PDP experience: does the page load quickly? Is key information above the fold? Any buggy or frustrating site elements? Resolve these issues.
Repeat the process for key pages on your site: the homepage, high traffic category pages, and the checkout process. If you can get someone outside the business to do this and provide feedback, even better.
Lower Your ROAS Goal/Increase Your CPA Goal
Your ROAS goal might not be realistic. If it’s any higher than a 3-3.5x, you’ll probably struggle to scale. Think about ways you can reduce the other variable costs that go into order fulfillment so you can spend more on ads.
Skip To Part 2 (Prospecting) Anyway
Many brands achieve better CPA/ROAS when they feature individual products in photo or video ads. If you can afford to run another test, run the prospecting campaign I outline in next week's issue.
Invest In An Audit Or Troubleshooting Session
You can hire a subject matter expert to review your account setup and the results of this test. These audits typically cost between $1-3k for ad accounts with simple setups and limited history.
You can also get shorter live audits on platforms like Mentorpass for $250-500. If you're really strapped for cash, you can reach out to agencies who offer free audits. But free audits typically hold back the actionable info to incentivize you to sign on as a client.
Put Meta On The Back Burner For Now:
Meta isn’t a great fit for some brands. That might change when you release your next collection. Re-run this test when you have new product live on your site. Or focus your energy on other growth opportunities.
Reminder: this is the last week of your free trial of DTC (fashion) Decoded. Next week, every other issue of this newsletter will go behind a paywall.
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