eCom Unity #4 - Optimizing Marketing Channel Efficiency and Budget Allocation

Deep-Dive | Why brands fail to allocate their marketing budget most effectively

From what I experienced, there is one single biggest reason why eCom brands are failing to make significant progress when trying to increase marketing efficiency:

They are scared to make the wrong decision.

But it's tough to blame them when you see the data that they have to work with.

Let's look at the example below.

Google Analytics is reporting a 0.64 ROAS for TikTok whereas the ads manager reports a 4.81 ROAS.

One is horrible, the other potentially great.

The truth is probably somewhere in the middle.

But whether or not it's closer to one or the other is critical to deciding if you want to double down on the channel.

So what are you supposed to do with that?

What usually happens is that small changes are being made like allocating 5% more budget to a channel for the next month.

This is bad for two reasons:

1. It's slow

2. It's not enough to result in a meaningful change.

So essentially you are starting next month in the same place.

When it comes to attribution you must have confidence in the model that you are working with.

Only then you can make big changes and see big results.

Let me talk you through how we tackled this situation with one of our customers - an 8-figure brand:

1️⃣ Establishing a single source of truth for attribution

We onboarded the customers on our Klar marketing mix attribution model that measures the total impact of each marketing channel.

Not just based on clicks but also the awareness it creates that leads to conversion at a later stage.

Sounds great, but that’s just the beginning.

2️⃣ Building confidence in the model

We then explained the entire marketing team in detail and how the model works so that everybody can get behind it and agree to make media buying decisions based on it.

This part is crucial in can take a bit of time but is necessary if you want to make progress.

3️⃣ Measure impact and verify results

The Klar MMM attribution model said TikTok had a ROAS of just above 3x.

We then verified the share of new customers (60%) which gave them a new customer ROAS of around 2x meaning that they are breaking even on the first purchase (which is their optimizatiion goal).

Finally, we verified that the LTV of customers acquired via TikTok is not worse (it wasn't).

4️⃣ Scaling/shifting budgets to TikTok

This gave the brand the confidence to increase its budget in the channel.

Not by 5%.

But 100% month on month.

We kept on measuring performance to ensure that performance would fall off a cliff with scale (it didn't).

And now TikTok accounts for >10% of their marketing spend (and growing).

So the foundation to diversify your marketing mix is an attribution that measures the total impact of a channel (not just based on clicks) and that everybody in the team understand so that you can build confidence and take bigger swings.

More on how to shift your budgets based on each product’s channel performance in the next section below. 👇️ 

Deep Dive | How to increase marketing efficiency by shifting budgets

This is one of the biggest wins that I often find (especially for brands doing >20m in revenue) that can easily increase marketing efficiency by 20-30%.

Understand the efficiency of the marketing channel for each specific product you’re advertising.

If you advertise multiple products for your eCom brand, it’s something you just have to do.

Here is what I mean.

I recently did a data audit with one of our customers. By using our attribution they shifted spend to what appears to be a pretty ideal allocation:

Meta

Spend: €491.766

ROAS: 2.91

Google

Spend: €440.124

ROAS: 3.19

Both channels at roughly the same scale as well as return. Sounds great, right?

However, when going a level deeper, things started to look a lot different.

Product A:

Meta ROAS: 4.31

Google ROAS: 1.97

Product B:

Meta ROAS: 1.92

Google ROAS: 5.21

Completely different performance for these products across the two channels.

That’s because there is also something called product/channel fit.

Some products are just easier to advertise in a push channel whereas other are better served in a pull channel.

Just shifting budgets per product to the channel with the highest performance is going to unlock a massive increase in performance.

They are still in the process of doing that to find the sweet spot and understand marginal returns.

But just so far, MER and CAC have decreased 20%.

Quick Disclaimer: The campaigns obviously weren’t named the way I am showing in the screenshot so that information was a bit more hidden in the data. That is why naming conventions are so important.

Brand Breakdown | True Classic’s Customer Journey

True Classic has hit $500M in revenue in just 4 years - selling $30 t-shirts. How did they do it?

I dove deep into their entire user journey and created a Brand Map covering:

• Organic Content

• Paid Ads on Meta & TikTok

• Influencer Partnerships

• Landing & Checkout Pages

• Loyalty Programs

• Newsletters

Plus, I recorded 3 audit videos breaking down their strategies to boost AOV, scale paid ads, increase conversions, and maximize LTV.

You can get access for free here: https://getklar.typeform.com/trueclassic

Event Aftermovie | eCom Unity Unplugged (26.09.24)

The team just finished the after-movie from our recent eCom Unity Unplugged event in Berlin.

Two weeks ago, we brought together over 40 founders and C-level executives from leading eCommerce brands - each generating $25M+ in revenue. And put them into 1:1 sessions to exchange knowledge, along with keynotes from top experts.

For me, it was hands down the most insightful and exciting event in the eCom space this year. I can’t wait to bring this event format back next year.

So I wanted to share with you a glimpse of what went down.

If you want to join for the next Unplugged in 2025, send me a message so that I can put you on the list already.

Thank you for reading :)

I am on a mission to help eCom brands build better, more profitable businesses. If you missed any past issues, you can catch up on all of them here.

I have built one 8-figure and one 9-figure eCom brand in the past and with Klar, I work with over 700 eCom brands today.

If you have specific questions you would like me to cover next, just reply to this email.

Have a great week.

Max ✌️

Not part of the eCom Unity yet? (Brands only)

Click here to directly exchange with hundreds of other eCom decision-makers from the coolest brands such as Kapten & Son, Purelei, KoRo, Junglück, Blackroll, and many more in our closed Slack community.

No agencies. No sales pitches. High-class content & events. 100% free.