How to increase your Shopify store’s revenue with data and insights with Duane Brown

Anna Shutko:

Welcome to another episode of the Marketing Analytics Show, the podcast that helps you get better at marketing analytics.

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I’m your host, Anna Shutko, and today our guest star is Duane Brown, Founder and Head of Strategy at Take Some Risk Inc. where he worked with brands, such as Birdies, WooCommerce, and Walmart among others.

Today we’ll talk about Shopify marketing and reporting.

From this episode, you’ll learn what kind of reports you should have in place to measure the success of your Shopify campaigns; how to keep track of the pulse of your Shopify store; what key metrics to pay attention to; Why Duane thinks add-to-cart CPA is your new north star of the marketing spend; what you can do with the data about recurring orders

I hope you’ll enjoy this episode.

Hello, Duane, and welcome to the show.

Duane Brown:

Thanks for having me, Anna.

Anna Shutko:

Awesome. I’m excited about this episode, and to kick things off let’s start with the first question. So first of all, what kind of setup should you have in place before you start reporting on your Shopify data? And maybe you could tell us, is there anything specific marketers should pay attention to?

Duane Brown:

Yeah, so all our clients when we take them on, we make sure that all of the apps they have installed work and are set up correctly, whether they’re apps that connect to Facebook, or Google, or any other ad platform. Make sure they have Google Analytics set up correctly as well as Shopify. You’d be shocked how many times those things are not set up correctly or not connected. And then even just within their store, make sure things are tagged correctly, whether it’s size, we’ve seen stores that have size spelled out as the words, so S-M-A-L-L, but then also size just as the big S, so just making sure all the things like that are consistent across the store whenever possible.

Because you want to be able to pull data and understand who’s buying what sizes, what money is being made where. You need to make sure that just your store is set up correctly, it’s connected to the different technology platforms that you’re going to use to run your campaigns. And then obviously, outside of the obvious, a site that functions and looks great, helps as well to just make sure you can get sales.

Anna Shutko:

All right, great.

And now, let’s talk a bit about the reporting part. So first of all, what kind of report should you have in place to measure the success of your Shopify campaigns? And, as a follow-up question, maybe you could tell us more about the metrics? So which key metrics should you pay attention to if you want to track the pulse of your Shopify store, so to say?

Duane Brown:

Yeah, totally.

So whenever you run campaigns across any of the app platforms, whether it’s Snap, or Facebook, or Google, a big thing we look for is just revenue. How much money is the store making? If you’re spending $2,000 a month in advertising on a platform, but your store’s only making $1000 a day, right? $2,000 a day in ads and $1000 a day in revenue, that’s not a really good combination because obviously, that means you’re losing $1000 a day in ads.

So one of the bigger things we look for is, is the store just making enough money to make sure that it can support, not only just spending money on advertising, but paying our fees, paying people on the team. So revenue’s a big metric.

And then beyond revenue, we also look at just the profit margin, right? A client that has an 80% profit margin, which is pretty high, is a lot different than a client that has a 20% profit margin. So understanding what return on ad spend when running campaigns does a client need to have in order for it to be successful.

Obviously, for clients that have tons of sales every month, it’s a lot easier to get a better return on ad spend because people assume people will buy more when there’s a sale. But we work really hard with our clients not to rely on sales to drive the business. And so when we run campaigns, let’s make sure we’re getting people who want to pay full price for the product. Because that just builds better business in the long run. And that one just leads to also just understanding how many net new customers are coming to the business versus returning customers. Yes, returning customers and retention is really important for a business, but you also need to add new people to the business. So you can just grow the business as a whole and afford to pay everybody on the team.

So we look at revenue to start, we also can just net new customers versus returning customers, and look at all that revenue numbers versus what we’re spending on advertising.

Anna Shutko:

All right.

Yeah, I actually do very much like the idea of the revenue orientation there. And now, if we talk a bit more about spend, costs, revenue metrics. So, you mentioned previously that add-to-cart CPA is your new north star of marketing spend. So could you please elaborate on that and tell us why you think so?

Duane Brown:

Totally.

So when you’re running campaigns across any ad platform, and when you run a website that these campaigns send to as an e-commerce website, one of the first things you want to get people to do is add something to a shopping cart, right? If people don’t add to a shopping cart, they can’t check out, if they can’t check out they can’t purchase. And when we run campaigns for clients, I’m always trying to understand what is the add to cart CPA or cost acquisition to get to an add to a cart.

A good example would be, if you spent $100 and only two people added to cart, that means your add-to-cart CPA is $50. Conversely, if you spend that same $100, but you got 10 people add-to-cart, then your add-to-cart CPA is $10. And that’s really important to understand because if your average order value is only $75, $150, spending $50 for each add-to-cart cost is way too high. You’ll never be able to become profitable because you’re just spending so much in getting someone to add to a shopping cart.

And so that cost, we look at as one of the first things to understand why. Is this ad resonating with this audience? It could be a great creative, it could be the best ad copy, the website could be amazing, but if you pick the wrong audience to show an ad to, it’s just not going to convert. And so we’re always looking at add to cart cost to understand what we’re spending there.

And then, obviously, as we understand what our add to cart cost is, we look at are people checking out, and are people purchasing. It doesn’t happen often, but at times we’ve seen clients get tons of add-to-cart on an ad, but then nobody checks out, and nobody purchases. And so you always want to make sure you don’t have one of those ads that are great for getting people to add to cart, but just never lead to any actions farther down into the funnel.

And once we have the add to cart cost CPA in line, we start to obviously look at, what is our ROAS, or return on ad spend, i.e. for every dollar spent on ads, how much I’m getting back. That leads to what I said obviously a second ago, is how much revenue are we bringing into the store? Are we bringing in new customers versus returning customers? And so add-to-cart cost is the first thing we look at. But we started this podcast today, there are so many things we look at farther down of the funnel when we get to just the business as a whole to make sure that at each step we’re not actually just become unprofitable. Because it’s sometimes easy when you’re running an e-commerce store to just look at your top-line numbers and not dig into it to make sure that those numbers actually make sense and you’re actually running a profitable business.

And so you always got to know your numbers of percentage of returning customers, net customers, what’s your profitability margin, how much money you’re spending on advertising versus how much money you’re making in your store. And then when you know all these numbers it becomes a lot easier to run a more profitable business.

Anna Shutko:

Yeah, definitely.

And I very much support the idea of looking at the business more holistically and putting all those different metrics into context and thinking about this.

And now if we move a bit further down the funnel, and talk about the orders. So recurring orders, in your opinion, how many days is the optimal amount of time between a customer’s first and second order? And maybe you should cover different scenarios, that would be great. And my follow-up question would be, what can you actually do with this data? So in what ways can you analyze this data?

Duane Brown:

Sure, yeah, that’s a great question.

Obviously, the distance between someone’s first purchase and second purchase is going to vary from store to store. We’ve had some clients where it’s 30 days or less because they’re selling, let’s say a convenience type item, they’re selling, let’s say, candles or skincare. So people need to order that more consistently. We have other clients where the distance between someone’s first order and second order is six months because they’re selling some sort of clothing that you just don’t buy more than every six months or every year. And so, obviously, the distance between those is different, but that’s a good number to know because it helps you understand how long it is going to take you to maybe make money back on what you spent. If it costs you $100 to acquire a customer and, for some reason, each customer always spends $100 and you need that second purchase for them to be a profitable acquisition of a customer. It helps you understand how long it’s going to take for you to make money off that customer.

But the other thing you can do with that data is you can start to show them retargeting ads. If you sell products that people buy on a pretty consistent basis, every month, every two months, every quarter, you could set up your email marketing and your paid ads to show people ads when they’ve hit their 30 days, 60 days, 90 days, and have them come back and make that second purchase or that third purchase. So it’s a good metric to know just how often people buy from you and how often they come back as an average. And then you can use that to show them ads; whether it’s on Facebook, Google; you can use it to send them an email from the email marketing platform, whether it’s Klaviyo or Mailchimp. Because any business isn’t going to, in the long run, survive if all you ever do is acquire one-off purchases. You want to work really hard to get those one-off purchases and then turn them into customers who come back for a second and third purchase.

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Anna Shutko:

Awesome.

And now, let’s talk a bit more about the metrics that support that conversion, and support helping customers make recurring purchases. So, the average order value, and also you mentioned previously that it is a key metric, so could you please elaborate more on why your average order value is actually a key metric?

Duane Brown:

Yeah, it’s an important metric because it helps you understand how much you can spend on advertising. So if you know your profit margin is 20%, and you know your average order value is $100, well, that means you only have a 20% margin in your product to probably spend on advertising if you want to break even. Because the other 80% of your costs are going towards just getting the product out the door and to the customer. So knowing what your average order value helps you figure out, based on your profit margin, how much money can you spend on ads and everything else that isn’t directly related to producing the product and getting it out the door to the customer. And that’s an important metric because if your profit margin is only 20% and your average order value is only $100, you only have $20 to spend, well, spending $30 or $40 to acquire a customer, unless you’ve got tons of money in the bank, is probably not the most profitable way to run a business.

And so, we use the average order value to help us understand profitability numbers, and what we can spend on acquiring a customer. Obviously, just because your profit margin is 20% and you’ve got $20 to spend, doesn’t mean that you can realistically acquire a customer for $20 in any ad platform, right? Sometimes people sell products or create products at a certain cost that just makes it really hard to acquire a customer at the price point they need. But at least you know what those numbers are and you can have that discussion with your marketing person internally, with your agency, freelancer contractor that you use externally, to understand like, can you use paid ads to build your business? And if you can’t use paid ads, it’s not the end of the world. There’s SEO, PR. There are lots of other ways you can grow a business outside of paid ads, but obviously, I’m biased because I run an agency that handles paid ads and so I think it’s a great way to run a business if you’ve got the margins to do it.

Anna Shutko:

Yeah, definitely.

And now, let’s talk about the promotion side of it a bit more. So with Black Friday passing, could you please tell us if there is something special you should look out for during major sales promos like Black Friday? And maybe this is something our audience can learn from and use for their Christmas promotions.

Duane Brown:

Yeah. I think Black Friday, obviously special in a way, at least in North America, it’s a big time for people to both shops, but also just to have sales in general, like brands have sales. And so, I think a couple of things people need to understand about Black Friday is, the first one is going to be controversial to some people, but I don’t think it should be.

It’s like not every brand needs to participate in Black Friday. Just because your competitors are doing a Black Friday deal doesn’t mean you need to do one. Part of the strategy and part of understanding your business is, understanding what you are and what you are not going to do. And even if all your competitors do something for Black Friday, you could just decide we’re not going to do anything. Even if you’ve done things in the past for Black Friday, doesn’t mean you had to participate this past year.

And the other thing to keep in mind, especially if you’re not a large conglomerate, we saw a lot of brands run sales from the Monday before Black Friday or the whole month of November, or for three weeks, it’s easy to run a week to three-week-long sale when you’re a big brand and you sell lots of products than if you’re a small brand and you make two or three or four million a year. And so, understanding that to compete, it’s probably better to run a shorter sale versus trying to compete with big brands and run a week-long sale or two-week sale. And so, the first thing really is understanding like, do you want to participate in Black Friday? And if so, how can you differentiate yourself? Because a shorter sale is going to create more urgency than having a longer sale where you give people two weeks to buy a product or a week to buy a product.

And then beyond there, I think there’s a lot of advertising fatigue. And so making, both your sales promotion if you’re going to have it, very unique but also making creative that stands out in the marketplace. If your creative looks like everybody else, if your offer is just 20% off your site like everybody else, it becomes a lot harder to stand out. People are going to go to you because you’ve got a good offer and you’ve got good ads, but if you don’t have a good offer and you don’t have good ads you’re not going to make as much money.

And then the final two things is, ironically, for a lot of businesses, the Cyber Monday after Black Friday is usually a bigger sales day. So having money leftover and potentially product leftover on Monday to drive sales is really great. We’ve got a few fashion brands and they did way better on Cyber Monday than they did on Black Friday.

And then even after Black Friday, just understand that people are already fatigued from seeing ads for the last week, two weeks, three weeks. And so you may want to pull back on your ad spend for that week after Cyber Monday, or at least for the first few days so that you’re not just spending money when people are not converting. But then you also want to start to think about, what are you going to do for the rest of the holidays? Because you don’t have another sale in December, right? So if you’re going to have a sale for Black Friday, how is it unique and how is it going to sustain you to the end of the year so you don’t have to have another sale in December? Because having two sales close together is really bad for business.

And I think the last thing, which is kind of interesting, we did it this year with a client, is if you don’t want to have a sale and you don’t want to do anything for Black Friday, you could launch a new product.

So we worked with the client to launch a product on the Thursday before Black Friday. It wasn’t planned until the month out because there was just a late ship in some of the inventory coming in, but we decided, okay well, if it’s going to come in late, why don’t we not do anything for Black Friday or Cyber Monday, have any kind of sale, launch this product because we know that we can differentiate ourselves from our competitors by not having a sale, launch a new product. People love to consume and people love to have something their friends don’t have. And so launching a new product was our way to differentiate ourselves in the market, compete with all the sales ads, and drive a good number of sales. We were all really happy with the number of units we sold. We sold over six figures over a few days of revenue and we didn’t have to have a sale or discount the product and people gladly paid full price.

And so Black Friday’s a special time of year, but you’ve got to understand how you’re going to compete and how you’re going to be different as a brand. And you have to understand, should you even compete in Black Friday? Because if you’re just like every other brand in your market that you compete with, you’re not going to stand out. And if you don’t stand out, you’re not going to build the business.

Anna Shutko:

All right.

Yeah, it sounds awesome. And I also really like that approach of thinking about your sales strategy more holistically.

And actually, again, another question that popped up in my mind. So you were just then talking about short-term promotions for Black Friday or Cyber Monday. And also previously you mentioned that, of course, it’s very important to cultivate a relationship with the customer so there are repeat purchases, so it’s not just a one-off purchase to justify your ROI or ROAS in this case. So could you please share your thoughts about cultivating this relationship? So maybe some tips on what creatives marketers could create, or look into, or maybe some other interesting ideas of how the brand should actually try building this relationship with the customers that leads to repeat purchases?

Duane Brown:

I think a big part of that, you see it this year, is the brands that tweaked or changed their ad copy for the moment. So i.e. during the early parts of the pandemic and even into summer people focused more on comfortability and having products, especially if you sold sweats or activewear, that realized that people are working from home or people are stressed, so let’s tweak our copy about how our product, if your product can do this, can help people just be less stressed. I think that’s a great way to help cultivate better relationships with your customers or potential customers, is acknowledging the moments that we’re in, as moments come up, and if your product can help, support people in a realistic way, then have it do that.

Then I think also just the little things, responding to people’s comments when they leave a comment on your Facebook ad or your Instagram ad; or if you’ve got advertising that people say are, say racist or homophobic or things of that nature, taking a stronger lens and start to look at your advertising and understand, is our advertising causing issues or problems? Oftentimes brands just want to be like, “We’re a brand, we’re not a person”, but you may not be a person, but you’re advertising to people and you should want to treat people with respect and things of that nature.

So a lot of time, we look at how can you just have advertising or ad copy resonate with people in the moment of what’s going on in the world and acknowledge what’s going on in the world; we don’t work or have jobs that are in a vortex. And then trying to respond to people’s comments as much as you can on Facebook and Instagram. Obviously, you can’t always just find every comment. It’s not the easiest to manage comments on Facebook ads, I’ll be the first to admit that. Even though we don’t do it for clients, we talk about it with clients because we see the ads when we just check how the ads are doing, or we see the comments when we just check how the ads are doing.

So there are two things I’d look out for if I was going to try to cultivate a relationship, write ad copy that’s in the moment, and try to get clients to respond to ads and comments on Facebook to show that they care.

Anna Shutko:

All right, awesome.

Thank you, Duane. It was really, really interesting to hear all your thoughts about ecommerce, metrics tracking, and reporting. And now, if the audience wants to learn more about you and about your business, where can they find you?

Duane Brown:

Totally. So there’s our agency website, Takesomerisk.com. There’s no S at the end of risk. And then, I spent a lot of time on Twitter, so just Duane Brown on Twitter. Those are probably the two best ways to reach out to us. I do spend time on Reddit, there’s a PPC sub-thread for Reddit so I spend some time on there. But usually, it’s Reddit or emails if people want to chat with me. And I also love video chats or just having non-text-related chats with people as well, because sometimes I can go days without chatting with anyone, and being a single male who lives alone, it’s good to have chats with people.

Anna Shutko:

All right. Thank you so much for joining me on the show today, Duane.

Duane Brown:

No, thanks for having me, Anna.

Anna Shutko:

And that’s the end of today’s episode. Thanks for tuning in. Before we go, make sure to hit the subscribe button and leave us a review or rating on Apple Podcasts, Spotify, or wherever you’re listening. If you’d like to kickstart your marketing analytics, check out the 14-day free trial at Supermetrics.com. See you in the next episode of the Marketing Analytics Show.