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Newbie to PPC is my product too cheap?
Hey All,
I run a shopify store for a coffee product and am trying to drum up some business. I’ve been studying a lot on ROAS. My product sells for $16 plus shipping with a COGS of $4.23 leaving my with a $11.77 ish profit.
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Is my product too cheap to sink a daily budget of lets say $30-75 a day in advertising just to get ramped up? Since it is coffee related and highly saturated, I wonder if it will scrape the bottom on google? Or if I will ever see a ROAS.
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Thanks!
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1 Reply
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At least with paid search, because potential revenue is tied to search volume and having only 1 product limits this volume will be limited. More products, generally helps paid search drive more volume.
Paid social is a slightly different story, being more audience-based. Assuming the product and ads work well on the platform there can be a lot of potential to scale with one product.
Obviously you need to test for your specific offer. But my gut instinct tells me with your margins, industry and only a limited number of products you will very much struggle to get scale.
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The average industry CPC is around $2 so you’d need a 12.5% conversion rate to break even on your pre-COGS price. If you did that math with your post-COGS profit you’d need about a 17% conversion rate to break even. That’s really high for shopping.
If AOV is higher than just one unit, that changes the math.
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Maybe if you advertise bundles or a subscription plan, that would make the math easier on running paid ads. If you want to be profitable on your 1st purchase.
The other way to look at is, if you can break even on your 1st purchase. If the product is miles above other coffee brands. You would have a high return rate that you can convert people for a 2nd purchase in 30 – 60 days via email. The latter is what a lot of brands do who can not always make it work with a profitable 1st purchase.
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You have to work to get repeating customers.
PPC is good to make people buy from you for the first time, but you have to put effort into making the second purchase happen without associated ad spend and as quicker as possible.
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It’ll probably be difficult to make an initial positive return unless your product is incredible and unlike anything else on the market.
That said, if you expect people to buy multiple times you can eventually build up a regular user base and make long-term profits while taking a loss on initial orders.
You might want to consider Meta Ads if this is primarily a one-time impulse buy… far less expensive clicks and conversion rates are way higher on paid social for that type of offer.
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