🟣 Issue No. 12: Understanding the Efficiency of your Marketing

Hey friends! How’s everything going? Ready to take your eCommerce marketing efficiency to the next level?

I’ve got a few key tips that can help you maximize growth profitably. The secret?
It’s all about boosting marketing efficiency with my PROFIT Framework. Whether you’re hitting $1M or $10M in revenue, this method will ensure that every marketing dollar you spend works smarter.

I just released a new podcast episode breaking it all down. Listen to it here or catch it on YouTube to dive deeper into actionable strategies you can start applying right now.

Let’s get into it…!

On the Pod 🎧

Lastest episodes:

• How to Win this Q4 → Kunle Campbell
  

• How to Maximize Your eCommerce Marketing Efficiency with the PROFIT Framework → Kunle Campbell

• S9 EP54: Product Innovation Deep Dive: How to Develop a Best-Selling SKU → Kunle Campbell

• S9 EP53: The New Playbook for Scaling Health & Wellness eCommerce Brands in 2024 → Kunle Campbell

• S9 E52: From $10M → $20M: How Tiege Hanley Doubled Revenue While Staying Profitable → Kelley Thornton, CEO

• S9:E51: Ex-PepsiCo Strategist Unveils Brand Positioning Frameworks that Transform DTC Brands → Kathy Guzman

• Cutout 8: Building a Barbecue Brand that Keeps Customers Coming Back → Kosmo Khosravi

COMMERCE TIPS

Maximize Your eCommerce Marketing Efficiency with the PROFIT Framework ⚙️

I hope everything’s going strong on your end!

Last week, we talked about how to win Q4 🏆, especially with the early holiday deals already rolling out. Today, I want to dive a bit deeper into how you can make sure your marketing spend is working as hard as possible.

The key?
Boosting marketing efficiency to drive not just growth, but profitable growth.

I actually just recorded a podcast episode on this exact topic, where I break down the PROFIT Framework in even more detail. You can listen to it here on my podcast or watch it on YouTube for a full walkthrough of how you can start applying these strategies today.

To help you tighten things up, I’ve developed the PROFIT Framework → a straightforward approach designed to make every marketing dollar you spend work smarter for you. Whether you're hitting $1M or $10M in revenue, this framework can help you squeeze more out of your ad spend, improve your margins, and build sustainable growth.

Here’s a quick breakdown of the PROFIT Framework, which focuses on six key areas:

• P: Understanding the P&L impact on marketing efficiency

• R: Optimizing retargeting and demand capture

• O: Enhancing optimization of demand generation activities

• F: Improving frequency and relevance in email/SMS marketing

• I: Integrating marketing with all your eCommerce tools

• T: Fostering continuous testing and iteration

Let’s break this down step by step and get straight into what you can start implementing today to maximize your marketing efficiency.

1. P&L Impact on Marketing Efficiency

When it comes to marketing efficiency, most eCommerce brands focus on marketing efficiency ratio (MER), which is total revenue divided by marketing spend. So, if you’re spending $100K and bringing in $500K, that gives you a MER of 5. While a high MER looks great on paper, it doesn’t tell you the full story of profitability. Here’s why.

MER only tells you how much revenue your marketing generates relative to spend, but revenue doesn’t equal profit. The real profit insight comes from understanding your contribution margin, the profit left after covering all variable costs like COGS, shipping, and transaction fees.

Debunking the Old Way of Calculating Contribution Margin

In traditional business models, contribution margin was typically calculated like this:

1. Start with gross revenue.

2. Subtract returns to get net revenue.

3. Subtract cost of goods sold (COGS) to get your product margin.

4. Then, subtract variable expenses like shipping and transaction fees.

But here's the catch—for eCommerce, this model doesn’t account for the full picture, especially when marketing and operational costs are so intertwined with your sales. Andy Dunn, founder of Bonobos, wrote about this in his famous essay, eCommerce is a Bear, where he introduced the idea of true contribution margin. This concept adds an extra layer of analysis that’s critical for eCommerce brands.

True Contribution Margin includes the usual product and operational costs, but also subtracts marketing and promotional expenses, which play a massive role in direct-to-consumer (DTC) businesses. Many brands overlook this, but you have to factor in your customer acquisition cost (CAC) and any discounting or promotions you run. Without these, you're only seeing part of the profitability picture.

Here’s the correct way to calculate true contribution margin for eCommerce:

1. Start with gross revenue.

2. Subtract returns to get your net revenue.

3. Subtract COGS to get your product margin.

4. Subtract shipping, transaction fees, and other variable operational costs to get your gross margin.

5. Finally—and this is the key for eCommerce—subtract your marketing expenses (including promotional discounts, ad spend, etc.) to get your true contribution margin.

Why This Matters for eCommerce

Here’s an example: let’s say you generate $100 in revenue from a sale. After you account for shipping, transaction fees, and COGS, you’re left with $60. But you also spent $30 on marketing to acquire that sale. So, your true contribution margin is only $30—meaning only 30% of that revenue contributes to covering fixed costs and generating profit.

This is why it’s critical to track both MER and true contribution margin. A high MER might make your marketing look efficient, but if your contribution margin is razor-thin after factoring in the real costs (especially acquisition costs), your business might not be as profitable as you think.

What I’d suggest doing:

1. Track true contribution margin, not just MER. Tools like Triple Whale or Peel Insights can help you get a clear view of your real profitability by factoring in marketing spend alongside COGS and operational costs.

2. Optimize your CAC by improving your retargeting and segmentation strategies (more on that below). If you can lower your cost per acquisition, your contribution margin immediately improves—without needing to boost revenue.

3. Bundle high-margin products with low-margin ones to improve your overall profitability. If you know which products contribute the most to your margin, bundle them with others to increase the average order value (AOV) without slashing prices across the board.

Focusing on true contribution margin ensures you’re not just growing your revenue, but doing it profitably. In eCommerce, that’s the real difference-maker.

2. Retargeting & Demand Capture

Retargeting is one of the most efficient ways to get more bang for your marketing buck. Once someone has shown interest—by browsing your site or abandoning their cart—they’re already warm leads. Now, your job is to bring them back and convert them.

What I’d suggest doing:

1. Dedicate 20% of your budget to retargeting. These are your high-intent visitors, and retargeting costs less than acquiring fresh traffic. Set up dynamic product ads that feature the exact products they interacted with.

2. Leverage user-generated content (UGC). People trust real customers more than they trust branded ads. Use UGC in your retargeting ads—it’s relatable and converts well because it feels authentic.

3. Use urgency to drive conversions. Offer time-sensitive deals (e.g., 24-hour flash sales or low stock alerts) to create FOMO and nudge people to buy. Retargeting with urgency is a great way to bring those visitors back over the finish line.

Retargeting is a no-brainer, but the key is segmenting and using creative that truly resonates with your audience—this is how you capture the demand efficiently.

3. Optimizing Demand Generation

Demand generation is all about filling the top of your funnel with potential buyers, but doing this efficiently is critical. Ads that just throw money at traffic without a clear content strategy will eat up your budget.

What I’d suggest doing:

1. Scale your content creation—especially UGC and influencer-generated content (IGC). Authentic content performs better and costs less to create. Platforms like Insense or TikTok Creator Marketplace can help you find influencers at scale.

2. Test multiple content types and formats. Run small-budget tests on various content types—static images, carousels, short-form videos—to see what performs best. Once you know what works, double down on that.

3. Focus on platforms that offer the best return. If your TikTok ads are outperforming Facebook, don’t hesitate to shift more budget there. Your demand generation strategy should always be dynamic and based on real-time performance.

Building awareness is crucial, but the trick is making sure your demand generation efforts are scalable, cost-effective, and primed for retargeting.

4. Frequency and Relevance in Email & SMS

Email and SMS are your power channels, especially during Q4. But getting the cadence and personalization right is where the real value lies. You want to stay in touch with your customers, but you don’t want to bombard them with generic messages.

What I’d suggest doing:

1. Increase frequency during peak periods. Don’t be afraid to send 2–3 emails a week and a couple of well-timed SMS campaigns, especially to VIPs or high-intent segments. Stay top of mind without overwhelming your audience.

2. Segment, segment, segment. Use your customer data to create tailored messages—VIPs get early access to sales, new customers get welcome offers, and churned customers get enticing win-back offers.

3. Personalize your abandoned cart flows. Shorten the time between abandoned cart messages, and test what works—be it free shipping or exclusive discounts. Don’t let those potential sales slip through the cracks.

Email and SMS done right should feel personal and relevant to each customer. The more you can customize and target, the better your conversions will be.

5. Integrating Channels & Tools

Your marketing can’t operate in a silo. The best marketing teams are the ones that integrate data from all areas of the business—whether it’s customer feedback, fulfillment data, or customer service insights.

What I’d suggest doing:

1. Pull customer service insights into your marketing. If certain products are generating a lot of positive feedback (or complaints), adjust your marketing to reflect that. Highlight products that customers love and address issues proactively in your messaging.

2. Integrate reviews into your ad and email campaigns. Showcase your best reviews, whether it’s through Google Shopping, social ads, or even email. Reviews build trust and push conversions, so don’t keep them siloed on your website.

3. Automate your post-purchase and review requests. Set up automated flows to ask for reviews after a purchase. Not only do reviews help with trust, but they also fuel future marketing strategies and give you direct customer insights.

Integrating these tools ensures that your marketing efforts are always grounded in what your customers actually care about—and that’s what drives efficiency.

6. Testing & Continuous Iteration

Here’s the thing: no matter how great your marketing is, it can always get better. Testing and iterating is a continuous process—if you’re not constantly optimizing, you’re leaving money on the table.

What I’d suggest doing:

1. Test everything. Whether it’s email subject lines, ad creatives, or landing pages: run A/B tests on everything. Small changes (like tweaking a headline or CTA) can have a huge impact on conversions.

2. Use data to drive decisions. When a test works, implement it quickly. If a certain type of creative outperforms others, reallocate your budget accordingly. The faster you act on data, the more efficient your marketing will be.

3. Iterate fast and often. Don’t wait months to make changes. Use quick, real-time insights from tools like Google Analytics or Facebook’s Ads Manager to adjust your strategy on the fly. The faster you iterate, the faster you improve your marketing efficiency.

Testing is how you stay competitive, and it ensures that your marketing dollars are working as hard as possible.

Final Thoughts

The PROFIT Framework is about making every dollar work for you. If you can focus on these six pillars: P&L, retargeting, demand generation, email/SMS, integration, and testing, your marketing efforts will not only be more efficient, but they’ll also be far more profitable.

If you want to dive deeper, I recorded a whole episode on this framework. You can listen to it here on my podcast or watch it on YouTube. I cover each of these strategies in more depth, with real-world examples and tactics you can start using immediately.

Let me know if you need help implementing any of this—I’m always happy to chat about what’s working and where you might need a tweak!

Presented by ShipAccel

🚀 Ship Smarter, Deliver Better with ShipAccel

Your customers expect speed and transparency. ShipAccel provides seamless integrations with Shopify, Amazon, eBay, and more, allowing you to automate your entire shipping workflow. With real-time tracking and branded shipping notifications to your customers, ShipAccel enhances efficiency, reduces errors, and ensures customers stay informed and satisfied.

Outperform Your Current Shipping Solution. Brands using ShipAccel report 20% faster shipping, improved accuracy, and 10% lower costs. By optimizing carrier rates and offering branded experiences, you’ll increase customer retention and lifetime value.

Upgrade Today. Make the switch to ShipAccel and transform your shipping and customer satisfaction.

Commerce headlines

🟣 Tobias Lütke plans to sell up to 2.56 million Shopify shares by December 2025 through an Automatic Securities Disposition Plan (ASDP), adhering to pre-arranged rules and securities laws.

🟣 California becomes the first state to ban "sell by" dates on food products, aiming to reduce food waste by replacing these labels with clearer expiration indicators for consumers.

🟣 Kim Kardashian’s Skims brand is now valued at $4 billion, having transformed from a shapewear brand to a full apparel empire. With collaborations, inclusivity, and constant innovation, Skims continues to dominate the bodywear category, leveraging Kardashian’s influence and tapping into cultural trends

🟣 Nike's digital sales continue to rise as the company increases its focus on eCommerce, mobile apps, and customer personalization, driving significant revenue growth in 2024.

🟣 Retail media ad spend is expected to reach $150 billion in 2024, as more brands turn to digital advertising through eCommerce platforms and retail sites to capture customer attention.

🟣 AI is transforming the eCommerce space by enabling brands to enhance customer experiences, increase loyalty, and optimize operations through data-driven personalization.

🟣 TikTok has launched its Search Ads Campaign, allowing brands to target ads based on user search queries within the platform. This new feature builds on TikTok's efforts to provide more personalized ad experiences and boost conversions, with early tests showing a 20% increase in conversions when used alongside in-feed ads.