If you ever walk into the Common Thread Collective office, you’ll see this formula in giant steel letters on our wall.
V x CR x AOV = $
Visitors (V) times conversion rate (CR) times average order value (AOV) equals revenue.
We’ve used this formula since our inception as a template for ecommerce digital marketing plans:
There’s only one problem. We were wrong.
More importantly, if you run an ecommerce business focused on revenue rather than profit, you’re wrong too.
Here’s our CEO, Taylor Holiday, explaining why …
First, instead of Visitors (V) in general — or even paid visitors through Facebook — what matters is a healthy mix: demand generation, demand capture, and demand retention.
Second, sitewide Conversion Rates (CR) tell you nothing. That’s why you’ll need to invest in specific funnels, creative consistency, and the almighty offer.
Third, rather than AOV, your real focus has to be on accelerating Lifetime Customer Value (LTV) over tight timeframes.
We call it your Cash Multiplier. It includes AOV but extends throughout the funnel to identify and maximize your most-profitable customers.
Fourth, with margins shrinking, no plan is complete without Variable Costs (VC). If you don’t have strong bookkeeping and a detailed marketing budget, here we’ll unpack accounting principles plus a few tactics to increase efficiency.
Fifth and finally, we’ll tie everything back together around profit. Actually … that’s not entirely true. The thing we’ll truly focus on is dreaming.
You’re a business; naturally, profit has to fuel your dreams. And yet, money for money’s sake isn’t enough: not for business goals, not for people.
Table of contents
To make this template actionable, we’ll include 10 ecommerce marketing strategies within those five variables:
Every variable is an opportunity for improvement. Tactically, it always starts with traffic.
If you don’t have enough traffic, you’re dead in the water. Likewise — if you don’t have the right traffic mix — you’ll stunt your growth.
Begin by benchmarking your overall channel attribution (via Google Analytics) against two stages of DTC development:
When we think about visitors, Facebook is still the star of the show. Not because we’re a Facebook ad agency; rather, because Facebook is the core driver of new growth for ecommerce websites.
We’ve written before about diversification being a dangerous ecommerce trend — a siren song that’s led many businesses onto the rocks. Absolutely try other channels and stay keenly aware that what worked yesterday isn’t necessarily what’s going to work tomorrow.
But for our own brands as well as our clients, Facebook remains the single most-powerful demand generation platform in the history of commerce.
Next, we use search engine marketing (SEM) to make sure that the client “owns their real estate,” the top result for branded searches.
Only after demand generation via social and demand capture via search — namely, Google Shopping and Google Ads — are in place do we then turn our attention to diversification on other platforms like Snapchat, Pinterest, and TikTok.
Let’s look closely at each one …
When you start on Facebook, you have zero pixel data. You have to “aim” or “season” your pixel through narrow targeting. As your pixel data begins to aggregate — you can use broad audiences, which essentially means lookalike audiences.
You’re telling Facebook, “Hey, use my pixel data to go find more customers just like my current customers. People (target audience) who will buy this thing (product) at this price (offer) for this reason (creative).”
Unfortunately, you’ll eventually hit a saturation point. Facebook can only find so many new customers like your previous customers. Once that happens, efficiency drops.
When you hit a wall, you need to bring back specificity to unlock new audiences and scale.
To do this, you have to re-aim the pixel through new creative angles and new funnels to attract new customers while still keeping broad audiences.
In other words, scale comes from precision … not breadth.
Replace half-hearted attempts at segmentation with entirely separate funnels for each product or audience.
The type of creative and messaging that resonates with a 20-year old man is often quite different from the type of creative that will resonate with a 50-year old woman.
The reasons that an outdoorsy couple chooses to purchase a silicone wedding ring are going to be much different than the reasons a CrossFit couple opts for the same exact ring.
The secret to scaling isn’t to simply reach a broader audience. It’s to target more customer segments.
There are a lot of variables at play in a Facebook ad campaign. The AIDA framework helps make sense of them and systematically improve ad performance:
All too often, ecommerce businesses run campaigns where 90% of their ad spend is wasted on scrolls — viewers who aren’t even pausing to watch the ad for a handful of seconds.
Attention always comes first: three-second video view divided by impressions.
Set a minimum goal of 25%-30% of your audience to stop and view the ad. If not, revisit your ads’ first three seconds.
In fact, we have target metrics for each stage of the AIDA framework, which you can view below:
To drive results, you must go in order.
Make sure you’re grabbing Attention first. When you have Attention, make sure you are holding viewers’ interest. If both Attention and Interest are being met, evaluate Desire. Then, Action.
This is a simple point, but important enough it deserves it’s own header. At CTC, we always, always bid for the conversion objective.
Bidding for top of the funnel metrics related to “Brand Awareness” or middle of the funnel actions like “Add to Shopping Cart” or “Initiate Checkout” to season the pixel can be seductive.
By doing this, you’re telling Facebook to go find people who will Add to Shopping Cart or Initiate Checkout, but who won’t ultimately convert.
I doubt you want people like that clogging up your funnel — even less do you want window shoppers, who start buying … but rarely complete purchases.
Facebook dominates demand-generation. Google Ads and Shopping owns demand-capture. The first thing that many people do when they see an ad is go to Google search and look up the brand.
It’s critical to “own your own real estate” at minimum. In other words, maintaining control over what people see and find when they search for your brand.
The more competitive your landscape, the more important this becomes.
Maximizing brand search is the very first step to take in your order of operations. But search-engine marketing doesn’t end there …
1. Maximize Brand Search: Less than 10%
Low-hanging fruit with the highest ROAS; make sure nothing’s left on the table
2. Major on Google Shopping: More than 60%
Invest heavily, both in terms of spend and energy toward product-feed optimization
3. Get into Categorical Search Ads: 18%
Combine Dynamic Search Ad targeting with Conversion Optimized bidding; then, enlist RLSA Campaigns
4. Push & Pull through YouTube: 7% (Split)
Start by remarketing on YouTube to dial-in audience and content; once the account is healthy, begin prospecting as well
5. Remarket on Display & Prospect Carefully: 5%
Leverage the built-in remarketing capabilities from Smart Shopping and reserve display prospecting for only the most mature and stable projects. Display prospecting will always have sub-1.0 ROAS; it requires measuring top-of-funnel metrics and including view-through attribution
Two-thirds of all PPC clicks on Google go to product listing ads (PLAs), also known as Google Shopping Ads or Smart Shopping Campaigns.
Unfortunately, most budgets dramatically underspend on this prime and high-intent ad space. Worse, rather than optimize product feeds to display buying triggers — like reviews, custom images, discounts, shipping, and more — data gets abandoned to its default setting.
Still, the real key to scaling search engine marketing goes beyond search.
It’s a full-funnel approach that infuses your best creative into digital channels like YouTube and display advertising. Customizing content for placement and performance unleashes your brand everywhere customers turn.
Google calls this new shopping behavior the “messy middle.” We call it the “brand lasso” — uniting demand generation with demand capture:
If an ecommerce brand makes it to three years, we can pretty much guarantee that they’ve either succeeded with Facebook ads or experienced some viral moment that jump-started sales.
If an ecommerce brand makes it to 10 years, then they have very likely succeeded at content marketing as well — i.e., organic traffic.
Content and commerce is a slow-burn, long-term play.
For some brands, relevant search volume will allow them to scale to tens of thousands — if not hundreds of thousands — of qualified shoppers per month through search engine optimization (SEO).
To do that requires a combination of three factors.
One, optimizing your collection and product pages for high-buying-intent keywords. Two, optimizing those same pages for technical considerations — chiefly, correct H tags, alt image tags, and load speed. Three, producing additional content for non-buying-intent keywords.
Not every product comes with a lot of search intent. Successful content marketing for other niches can include:
Organic content costs less than paid for each marginal visitor — its upfront investment offset by reduced CAC, more loyalty, and a much longer ROI window.
None of that, however, is why content truly matters.
As our VP of Marketing, Aaron Orendorff, puts it: “The power of content lies in entering an audience’s heart and mind through a consistent story well told; one with people, not products, at its core.”
A robust content strategy gives your brand a reservoir of assets for every other type of marketing this template mentions. From ads to email, acquisition to retention, content has become a moat.
One that will only widen in the years to come, separating winners from losers.
Ecommerce isn’t unique when it comes to conversion rate optimization (CRO).
That said, we don’t typically find that going through an extensive, sitewide CRO process brings in a notable return for our clients.
Instead, we focus primarily on assets that make up our core Facebook ad funnels. Why? Because the lessons from paid traffic are rapidly testable and more widely applicable to other sources.
In the same way, your plan should monitor each metric within your flywheel — both from paid and organic — looking for weak points or opportunities for improvement to inform creatives.
Pulling from Google Analytics, two evaluations stand out.
First, a simple table or spreadsheet detailing your conversion rate by channel. Second, a conversion rate versus average order value (AOV) scatter plot.
While conversion rate optimization (CRO) for ecommerce isn’t much different than in any other industry, we approach it in a very specific way.
When most people talk about CRO, they are talking about sitewide conversions.
At CTC, we zero in on social-media marketing campaigns to an almost compulsive level.
Mastering paid traffic lets you apply those same lessons on easier-to-convert sources like organic, direct, referral, and email. You can also test paid traffic faster and more accurately than other sources because you’re in control of all the levers.
As we talked about earlier, we use AIDA to evaluate funnel performance from ad to site, but that’s just the beginning.
The job of an ad, in its simplest form, is to get someone off of Facebook and onto the website. From there, it’s the website’s job to convert.
To improve conversion rates, we utilize Message Mapping.
Message Mapping ensures that a customer who sees your ads sees the same message as they continue forward in the funnel — copy, creative, aesthetics, and offer.
We want consistency from the ad all the way through the purchase.
Does the experience flow seamlessly from?
Nothing creates a worse user experience than clicking an ad for a specific product and being dumped onto a generic homepage or product collection, where the user then needs to find the product they clicked the ad to buy.
While this might sound like common sense, many ecommerce businesses have abandoned this work-intensive process in their desire to scale quickly.
Five years ago, it might have worked, but with ad costs having risen dramatically, this method of scaling is no longer cutting it.
Zooming out a bit, we often find that conversion improvements fall into one of these buckets:
Consistency rules for a reason. You likely have elements of segmentation in your ads.
Without consistency through the entirety of the funnel, that can actually hurt performance even more than if there were no elements of segmentation at all.
When the message is focused and consistent from start to finish, the conversion problems will often work themselves out.
Offer doesn’t mean discount. Rather, your offer is the sum total of two ingredients: product and price.
We might add another “P” — how you position product and price (i.e., your creative) — but, honestly, that only muddies the water until you nail the first two.
It’s impossible to overstress the centrality of what you offer shoppers (product) coupled with the cost of buying it (price). This is the main event … and where the bulk of onsite conversion efforts should take place.
Naturally, tons of variables affect your funnels. We’ve covered many of them already. In terms of performance, they’re sideshows compared to the offer.
To illustrate, consider Slick Products — one of CTC’s own brands.
Slick specializes in wash products for off-roach vehicles. Shipping heavy bottles of liquid makes low-AOV purchases disastrous to margins. As a result, it exclusively drives traffic to kit landers to bundle multiple products in each order.
Or rather … it did.
“What we realized is that people love the shine product; it’s the one part of the kits we get the most comments on,” says Andrew Faris, CEO of 4x400, which owns Slick beneath CTC as a parent company.
“So we thought, ‘What if — instead of trying to sell the whole kit and explain everything about why this is the best way to wash your vehicle — what if we just sell people on the shine?’”
Earlier this year, the team decided to do exactly that: launch a new funnel that placed the shine front and center:
The results were nothing short of a revelation. The first version “popped off” at an over 3-to-1 prospecting ROAS that held even as Slick scaled spend.
“It was such a change of direction in what we try to sell people, we ended up 6x’ing our next order from the supplier,” notes Faris. “The ads are good. The landing page is good. We did a good job. But the reason it worked is not those things.
“The reason it worked is because we totally, fundamentally changed the customer acquisition offer: the product and the first-purchase price point.”
For more on the centrality of offers, check out three resources also from the 4x400 team:
For years, ROAS functioned as a great proxy for online revenue or even money in your pocket. If ROAS was doing well, you were doing well.
Then, the digital marketing world changed.
Established ecommerce businesses are beginning to face what Uber marketer Andrew Chen calls “the law of shitty cohorts.” Over the last few years, we’ve seen a notable increase in customer acquisition costs (CAC) via Facebook as well as across the ecommerce landscape.
Some treat this as a paradigm shift.
However, all it really means is that margins are tightening, ecommerce businesses are having to pay more for their customers, and more competitors are entering the space.
You need to be able to adjust your ecommerce growth strategies to work under new parameters. How?
The trending answer to this problem in 2019 was to replace AOV with lifetime customer value (LTV). Unfortunately, traditional LTV has two fatal flaws:
As a result, we came up with a different metric that we think does a better job of accomplishing what we want to accomplish with LTV while keeping it within an actionable time window.
While LTV is a nice buzzword for potential investors, most ecommerce businesses don’t have the luxury of waiting around for a “lifetime.” They’ll be long gone by the time LTV is fully realized.
Your businesses need cash flow within a much shorter time frame, and that’s why we’ve come up with a different metric that we think does a better job of accomplishing what we want to accomplish with LTV while keeping it within an actionable time window.
We call it the “cash multiplier” (CM); essentially, your 60-90 day LTV followed by the one-year mark.
To make those two time frames practical, aim for a 30:100 ratio — that is, aim to increase your brand’s CM by 30% in 60-90 days and by 100% in a year.
If you hit the first goal, then you know your product quickly found a place in your customer’s life and they came back for more. If CM hits 100% within a year, you know you’re building a brand that provides value, far more than the initial amount of money that they paid you.
Keep in mind that 60-90 days is an average.
You can adjust this window based on your business model, but to make things really simple, if you increase your 60-day customer value, you will increase your revenue and cash in your pocket.
The name isn’t really that important. What matters is understanding that your 60-90 day LTV, cash multiplier, or whatever you want to call it … will determine the ultimate success of all customer acquisition.
For example, let’s say your lavender deodorant results in the highest AOV at $12, but when you evaluate for CM data, you find that coconut vanilla deodorant results in a $20 CM, while lavender only yields a $15 CM.
Prioritizing coconut vanilla, both via your Facebook ads and your retention-focused remarketing will then increase your cash in pocket.
You’ve increased your revenue over a 60 or 90-day window, which is a more tangible benefit to your business than increasing either the average initial order value or the lifetime value of the customer.
For CTC clients, we carefully track cohorts through a new tool we’ve developed in-house. This brings together data from Shopify, Google Analytics, email marketing platforms (like, Klaviyo), recurring subscriptions (i.e., ReCharge), and paid-media channels.
The Growth Data Tool makes it possible to far more easily track payback windows based on a variety of cohorts:
No other digital marketing tactics have yet to outperform the online-sales power of email. Affordable, effective, and (with the right ingredients) personal.
A relatively new kid on the digital block, SMS gives email campaigns a run for their money. SMS gets your messages in front of consumers where they’re already spending their time.
Leveraging email and SMS in coordination yields more than the sum of their parts. SMS for timely, action-oriented messages and email for visual storytelling and merchandising.
Failing to launch and optimize capture tactics for these two channels is akin to setting your money on fire. You might get that first conversion, but your repeat purchase rate will suffer without the ability to bring customers back again and again.
Utilizing a pop-up to collect email addresses and mobile numbers is the most effective way to build up your owned audience for future retargeting.
Critics of pop-ups will tell you they’re an intrusive interruption to the shopping experience. When done well, they can serve as a friendly invitation to stay in touch with a brand they’ve already expressed interest in.
The best pop-ups should …
Keeping the messaging customer-centric will drive high sign-up rates. Providing an incentive in exchange for their personal information greases the wheels for a same-session conversion.
But the real magic comes after the sign-up. If you’re unable to get that coveted first purchase right away, an effective welcome series nurtures prospects to purchase.
Sure, the flow should reiterate the incentive from your pop-up, but this series can also educate new subscribers about the “why” behind your brand and share more about your product assortment.
Merchandise these emails with your top-sellers along with the products that are most likely to drive repeat purchases. Getting the first purchase is not the end goal; instead, it’s the jumping-off point of a more serious relationship with your customer.
As much as we want to believe our products alone should be a driver of retention, customers have a myriad of distractions in the online and offline world, so creating a more memorable online shopping experience — and generating a second order — can be achieved through a compelling post-purchase series.
Arguably the most under-utilized arrow in a marketer’s quiver, post-purchase emails have incredibly high engagement as users open and reopen confirmation emails to check the status of their order or progress of their highly anticipated shipment.
Use your post-purchase series to …
Once a product is delivered, solicit feedback from your customers about the product and purchase experience.
Positive reviews or testimonial videos can be powerful pieces of social proof that you can leverage in prospecting campaigns or to add conversion-driving content to your site or emails.
Negative reviews can be addressed via high-touch outreach from your customer service team, providing you the opportunity to make things right, winning back trust, and building the brand affinity necessary to sustain a long-term customer relationship.
While we all enjoyed ignoring expenses in ecommerce marketing for the better part of a decade, those days have ended.
Variable costs are now something that large and medium online stores need to consider. So, what’s a variable cost?
When costs increase as orders rise, that’s a variable cost (VC).
Opposed to fixed costs — like rent and operational overhead — VCs cover COGS, platform and payment processors, pick-and-pack, fulfillment, and CAC: total spend including agency fees.
Once again, we have a great whiteboard breakdown from Taylor for those who have a few minutes to check it out:
How do you measure and optimize variable costs?
There are plenty of ways, but we strongly recommend you follow a four-quarter accounting matrix. Each represents a portion of your revenue that signals the health of that component as well as areas of opportunity:
Ideally, aim at 25% of revenue going to each of these categories. Obviously, that’s a pretty high bar for profit, but it works better as a signal metric for our other categories.
Is CAC 25% or less? We’re going good there.
Are variables costs higher than 40%? That looks like an opportunity for improvement.
While OPEX is usually going to be out of our reach as growth marketers, we obviously have a lot of sway over CAC, and then Variable Costs are another area where we can help make a difference.
How do you improve these?
We can try to minimize packaging cost while still providing an exceptional unboxing experience. We can analyze how more expensive packaging impacts LTV (CM) and adjust around the best outcome.
We can push our team or clients to renegotiate their platform fees, payment processing fees, shipping costs, etc. Or, we can push our team or clients to renegotiate ingredient or materials pricing.
Simply put, there are numerous avenues to reduce variable costs, and we need to be looking for them.
You may have already guessed … I’ve based this digital marketing strategy on Common Thread Collective’s internal processes. Two documents, in fact: first, our Pitch Template for new leads; second, our Scouting Report for new clients.
What you couldn’t have guessed is that the language of dreaming infuses both of those resources from start to end.
Why? Because business owners easily get lost in the weeds and forget about the big picture.
Regardless of your KPIs — whether they surround ecommerce marketing goals, online marketing efforts, or bottom-line numbers tied to your marketing budget — metrics can’t sustain you through the hard times.
Worse, they’ll lead you astray during the good.
Where your typical digital marketing agency, ecommerce marketing agency, or even growth agency shapes its relationships around those metrics …
We define success by dreams achieved: future realities you long to create.
Of course, if you want to turn your dreams into realities, you need real strategies with specific growth goals. That’s what this guide has been all about.
It’s not altruism; nor is it about having your head in the clouds. It’s a practical mandate for success.
It’s where tactical planning meets passion. It’s taking the sparks of big ideas and putting it into small actions. And, it’s a mindset that guides you through the highs and lows of running an ecommerce business.
The strength of our dreams binds together passionate entrepreneurs — they’re the “common thread” that unites us.
Matthew Axline is the Business Development Manager of Common Thread Collective. He's passionate about helping brand owners uncover the best eCommerce growth strategies for their business. Should you be curious as to what this entails, or you'd just like to talk shop, you can connect with him on LinkedIn or on Twitter.