March 13, 2022

The Executive’s Guide to Ecommerce Paid Marketing

We’ve talked previously about the importance of growth marketing for ecommerce brands and what ecommerce executives need to know about it. Today we’ll be drilling down into one important category of growth marketing, and that is paid marketing (which we’ll also refer to as paid advertising).

Just to clarify the word “paid” here, it’s important to note that all marketing costs money. But when we talk about paid marketing, we’re talking about marketing efforts that require you to pay specifically for the placement of your ads. The most common examples would be social media ads and Google search ads.

Other marketing initiatives, often referred to as organic marketing, still require investment. But it’s an investment of time and resources to produce the materials, rather than paying for ad placements. This includes email marketing, social media, SEO work, and much more.

In this post, we’ll discuss what paid advertising for ecommerce really is, where it fits into the overall marketing strategy, various forms of paid marketing, and 5 steps for implementing a proper paid strategy as a part of a healthy marketing plan.

Start with the Customer Journey in Mind

It can be tempting to compartmentalize each of your paid marketing channels into buckets and zero in one channel at a time. However, we don’t recommend thinking about each channel in isolation. Each channel does require its own strategy based on its purpose and capabilities, but they still need to fit inside the bigger picture of the customer journey.

We often see ecommerce executives and even marketing teams get caught up in attribution for each specific channel and hung up on whether they’re hitting a target ROAS for each. If that’s you, it’s important to understand that it’s not every channel’s job to win conversions or even clicks. They all work together to promote awareness of your brand and product, to educate customers about it, to drive them to your site (multiple times!), and eventually convert the customer. It typically takes several touchpoints before that purchase happens. So if you judge the success of all paid channels solely on ROAS and how quickly you see purchases rolling in, your marketing strategy will likely fail.

Where Does Paid Marketing Fit in the Overall Marketing Plan?

At a high level, paid marketing should be used to bring new customers into your ecosystem. The idea is to bring people into your world in a way that you can control. You are in charge of targeting the type of person you want to bring in, you set the ads’ creative and messaging, and you direct the traffic to a designated landing page. But if you want to build a healthy ecommerce business, those efforts should be coupled with ongoing organic marketing efforts, which we’ll explain below.

The Balance of Paid and Organic Marketing Efforts

The benefit of paid direct-response marketing (any ads with the goal of getting the customer to take immediate action) is that you can control new customer acquisition efforts directly. The more traffic you can pay for, ideally, the more traffic you’ll get. But the downside is that if you stop paying for ads (or if an ad account gets shut down, or if an algorithm changes), you’ll stop getting customers. For that reason, it’s extremely important to turn the customers you acquire into lifetime fans that buy again and again. This helps your marketing dollars go further and also helps protect against potential disruptions.

Meanwhile, you must also be investing in organic marketing efforts such as content on your site, organic social media, relationships with affiliates and influencers, referral programs, and more. These can really make an impact on your business, but they take longer to take effect.

Think of this dual-sided strategy like a 2-stage rocket. When you get started in the early stages of marketing, your paid marketing will likely make up 90% of the overall strategy. It’s expensive, but it’s what gets you customers. As you grow, the goal is to dial that paid marketing back to 50% or less of your overall marketing plan. But the only way to do that is if you’re investing into your non-paid marketing efforts that will serve as your second stage rocket. With this approach, you will eventually get to the place where most of your new customers come from referrals, word of mouth, and general brand awareness rather than solely relying on paid ads.

The Different Types of Paid Marketing

So you may be wondering, what exactly does paid marketing include? Let’s walk through the different types of paid marketing and how they contribute to the overall strategy.

We like to break down the types of paid marketing into three categories based on how they reach potential customers:

1. Interruption-Based Marketing

Social media advertising: Ads on Facebook, Instagram, and TikTok, which are usually images or short videos with corresponding captions and CTAs. They interrupt users as they are exploring the platform, but if they’re done well, they will attract attention rather than look like a typical ad.
Video advertising: Or as we all used to call it, “commercials”. These days, longer-form video ads can be placed on YouTube, streaming services, and of course traditional TV.
Other placements for driving awareness (and sometimes traffic) include billboards, magazines, radio, podcasts, or display ads on search networks.

2. Intent-Based Marketing

Search engine marketing: Also called “paid search ads”, these are ads that appear in Google, Bing, or other search engines. These are intent-based because they appear in response to a user searching with the intention to find a solution to a question or problem.

3. Relationship-Based Marketing

Affiliates and influencers: With this type of marketing, you are leveraging and paying for a relationship, rather than the direct placement of the ad. Whether your affiliates are retail stores or popular bloggers, these are great ways to get exposure and increase traffic. And with the rise of social selling, influencer relationships are becoming increasingly helpful as well.

5 Steps Toward a Healthy Ecommerce Marketing Strategy

Now that we have a foundational understanding of paid marketing, let’s map out how paid marketing fits inside a healthy ecommerce marketing strategy.

1. Pay for Advertising

In the beginning, we recommend investing about 80% of your marketing budget in paid digital marketing to drive traffic and acquire customers. This would mainly include paid social media ads (Facebook and Instagram, and possibly TikTok if your audience is there) and paid search.

While doing so, it is extremely important to have a system in place for growing the lifetime value of the new customers you’re capturing. Use email marketing campaigns and automations to nurture visitors and customers, educate them about your brand and products, help them be successful with their purchase, and follow up with other products they might be interested in. This along with having a great warranty or guarantee, helpful content, and outstanding customer service will be what helps turn these customers into fans of your brand.

2. Invest in Content & Relationships

Invest the other 20% of your budget in non-paid, long-term marketing. This includes content on your site and in emails, SEO work, non-product pages that build your brand, and affiliate relationships. To do this well, you’ll need to have your brand story dialed in and likely specialists in each of these areas. And remember, you might not see a return on these investments right away. Be consistent and committed to playing the long game.

3. Measure Spending and Results

Measure the balance of paid marketing and organic marketing monthly, quarterly, and yearly. Make sure this split is moving in the right direction and not relying too heavily on paid efforts for too long.

Of course, you’ll also need to monitor campaign results. The specialist in charge of each channel can be responsible for detailed reporting of campaigns. But while doing so, it’s helpful for you, the ecommerce executive, to have a high-level understanding of how much is being spent on marketing and what kind of revenue it’s bringing in. In fact, paying attention to this big picture ratio of total spend to total revenue is often more efficient and effective than getting deep into the weeds about attribution and ROAS.

4. Make Adjustments

As you see the organic marketing gain traction and there is movement on that side, increase the budget you have to invest in these efforts. This does not mean you should decrease your paid marketing spend just yet. This initial momentum should supply more to spend on the organic side while you maintain your paid marketing spend too.

5. Work Toward a 60/40 Split

As you continue to invest in organic marketing and refine your efforts on the paid side, the goal is to get to at least a split of 60% organic marketing to 40% paid marketing. Not many businesses are in this position, so if your business can get there you will be in a very strong place. As we’ve discussed before, there is vulnerability in relying heavily on paid marketing. Shifting your weight towards organic marketing doesn’t eliminate risk entirely — for instance, there is still some risk that comes with PR or with SEO algorithms changing— but it does help provide stability.

Additionally, you always have the option to ramp up paid marketing spending as needed. If you have product launches, promotional periods, or holidays you want to really drive traffic for, you can increase spend with strategic campaigns. Think of paid marketing as your nitro boost. You can use it to gain ground, but you can’t let it fuel everything for the entire race or you’ll burn out.

Goals and Metrics to Pay Attention to in Ecommerce Marketing

Overall, ecommerce brands should make it a goal to achieve a healthy ratio between paid marketing and organic while using a smart strategy to get there. As you measure your paid marketing campaigns’ results, make sure you’re not solely looking at ROAS. Watch the lifetime value and average order value for your customers and work on increasing it. Keep in mind the journey of the customer and how each channel works together to increase awareness, drive traffic to your site and assist in closing the sale.

If you need help…