Paid traffic is becoming more expensive every year….
…and that trend is likely to continue….
Year after year, the world’s largest companies spend more and more of their advertising budget on digital channels.
It is clear that digital ad spend is increasing by the billions each year but some of the major ad networks may not be able to increase their supply of available ad units to meet the growing demand.
It is well documented that Facebook is running out of advertising space.
When demand grows and supply stays the same, prices go up.
You Have to Combat Rising Ad Cost By Increasing The Revenue Your Ad Spend Returns To You
If left alone, $1,000 lying under a mattress will lose value each year due to inflation.
If left alone, your ads will bring a worse ROI each year due to increasing ad costs.
While the costs are increasing, the ad platforms are also becoming more powerful. They continue creating new methods of reaching their audience and improving the accuracy of their targeting.
If you pay for traffic in any way, shape, or form then this article can help you increase the ROI you earn on your advertising spend.
The Key To Staying Ahead of Increasing Paid Traffic Costs for your Shopify Ecommerce Store
If we can be overly simplistic for a moment, paid traffic success boils down to two questions:
- How much does it cost your company to buy a click?and
- How much revenue does that click earn for your company?
When your Earnings Per Click (EPC) are higher than your Costs Per Click (CPC), you are running positive ROI paid traffic ads.
We’ve established, clicks are becoming more expensive and not only does that trend appear to not be changing…
…it in fact is accelerating in the direction of more expensive clicks.
Even with skilled people managing your paid traffic, there are forces beyond our control that will continue to drive the CPCs higher and higher.
The key to overcoming this is surrendering away that which you can’t control (AKA the amount clicks costs your business)…..
….and taking extreme ownership of that which you can control (AKA the total earnings a click returns back to your business).
The Virtuous Upward Cycle of Increasing Your Earnings Per Click (EPC)
Before we get into how to take full ownership over your Earnings Per Click, let’s take a look at the rewards available to those who make the decision to do so.
My first (virtual) business mentor was a man named Dan Kennedy. A common teaching of Dan’s was that:
“The business in the marketplace who could afford to spend the most to acquire a customer will win”
That doesn’t mean that you have to spend the most, it simply means that you can afford to if needed.
From the perspective of paid traffic, it means the higher your EPC is, the more you can afford to spend for each click.
As you are likely aware, there is some advertising that is currently “too expensive”….
….but expensive is a purely relative term.
Let’s imagine there was traffic that was really expensive. In fact, you have to pay $1,000 per click to get this traffic.
If you were able to earn $1,500 per click, then you wouldn’t consider the $1,000 too expensive of a price to pay.
What Happens As You Improve Your Earnings Per Click (EPC)
While the main benefit of an EPC increase is more revenue (and a better return on your advertising spend)…
…there are also several powerful secondary benefits too.
You are probably familiar that any individual click’s cost can vary greatly.
The cost per click can vary greatly depending on the ad’s:
- the keywords or
- the audience targeting or
- the platform or
- the location + size + placement
Right now there are two broad categories:
- Paid traffic that is currently profitable for you to buy(meaning that your EPC on that traffic is greater than the CPC)
- Paid traffic that is currently not profitable for you to buy(meaning the CPC > the EPC)
A powerful secondary benefit of increasing your ECP is that the higher it goes, the more ‘levels’ of paid traffic you can unlock.
There are ‘levels’ of traffic that were not profitable with an EPC of $1.00 that become profitable when the EPC grows to $1.50.
And it is possible for you to get sizeable improvements to your EPC in a fairly short period of time.
You can do this by fixing up the most glaring “conversion killers” on your Shopify store to increase your site’s conversion rate….
The Simple Equation To Unlock Higher Earnings Per Click (EPC)
Knowing your Cost Per Click (CPC) is fairly straightforward. That is one of the core pieces of data that show up in your ad account’ dashboards.
Getting to your Earnings Per Click (EPC) takes one easy equation:
EPC = Your Conversion Rate x Your Average Order Value (AOV)
So let’s say that your Shopify store’s current conversion rate on paid traffic is 3% and your average order value is $80.
That makes your EPC $2.40
An easy way to think about this is to visualize what would happen if 100 visitors came through paid traffic given that conversion rate and AOV:
You buy 100 clicks through your paid traffic ads. Because your conversion rate is 3%, 3 of those 100 visitors buy and on average they spend $80 each.
That means your earnings are $240 on those 100 clicks so each click delivered an EPC of $2.40
The key takeaway is that you increase your EPC by improving your conversion rate and/or by growing your average order value.
Note that if you have data on your average Lifetime Customer Value (LCV), you will likely want to use that number in your EPC equation in place of Average Order Value (AOV).
Having High Earnings Per Click Makes Everything Easier
Another secondary benefit of high EPCs is that they provide greater margin for error. They also provide more room to test + experiment new things.
With higher EPCs, you can more confidently test new ads, platforms, audiences, etc. This is because you know your core high performing campaigns can buoy a few failed campaigns while searching for more winners.
If you’ve ever heard of having an ‘abundance mindset’ vs a ‘scarcity mindset’….
….having higher EPCs encourages more thoughts + actions in line with ‘abundance’.
This is for two reasons. One being that higher current profitability allows you to focus on discovering more future growth opportunities…
….and the other being that the more profitable paid traffic is for your business, the more you can grow, empower, and better equip your team with resources for success.
Investments made into improving your EPC can very quickly pay for themselves and produce a highly positive ROI.
Improving your EPC will make every visitor who comes to your site more valuable to you.
The more valuable a visitor is to you, the easier it becomes to profitably attract more visitors to your site.
The more valuable a visitor is, the easier it becomes for your growth investments in new traffic sources to be profitable.
This includes sources well beyond paid traffic i.e. increasing your efforts in content marketing, organic social, or SEO for organic search traffic.
While it is harder to directly measure your ‘cost per click’ with these types of traffic sources, you can come up with ways to track your revenue from these sources compared to your costs involved in generating that traffic.
Suffice to say, regardless of whether the traffic is paid or organic:
Higher EPCs are the key to profitability now and to fueling your ongoing growth.
The Fastest Way To Increase Your Earnings Per Click (EPC)
The fastest way to increase your EPC is to increase your conversion rate.
Traffic and Conversion are two sides of the same coin. They are both needed for a sale to be made.
The main difference between the two though is that Traffic is a “commodity” while Conversion is an “asset”.
Meaning that if you buy a click for $2, the click is “consumed” and it is gone.
Conversion, on the other hand is something that can be reasonably relied on to deliver a consistent, valuable result.
Meaning that if your site converts about 3% of your visitors this month, all other things being equal, the site will convert about 3% of visitors next month.
It also means that if you make positive changes to your site that increase its conversion rate to grow to 3.5%, then your site will continue to convert about 3.5% of visitors next month.
You can significantly grow your profits and your EPC by having a ‘Traffic & Conversion Budget’ instead of just having a monthly “Traffic Budget”
Let’s show an example to show what we mean:
You have a $10,000 “Traffic Budget” per month. And in Month 1, you have two options.
Option 1 is to spend all $10,000 on traffic. The clicks cost $2 per and they return an earnings of $3 per click.
Option 2 is to spend $2,000 on conversion improvements for your site with the remaining $8,000 spent on traffic. Clicks still cost $2, but the conversion improvements have pushed the earnings per click to $3.50 up from $3
While Option 2 results in less total revenue for Month 1, it the exciting stuff is what happens in Month 2….and 3….and 4….and so on:
As mentioned above, Conversion is an ‘asset’.
With Option 2, we chose just for Month 1 to take a bit from Traffic and invest it into Conversion. Now in Month 2 we return to spending the full $10,000 into Traffic.
Because we improved our ‘conversion asset’ in Month 1 to grow the EPC to $3.50, our earnings are now $2,500 higher than if we put the full $10k into Traffic both months.
The one time investment into improving EPC via improving conversion rates gets paid for (and then some) each month in perpetuity.
Power The People (and in this case, you are the people)
When you have a more fluid “Traffic & Conversion” budget, you have the power & flexibility to find the right investment balance that produces the best results.
Depending on immediate and longer term business goals, you can shift between maximizing this month’s revenue and setting yourself up for increased future success.
There is no “right” or “wrong” investment balance, only what you feel is going to bring the greatest results for your business.
In our experience, increased investment on the Conversion side of the ledger tends to quickly provide a positive ROI….
….and the ROI of these investments continue to grow month after month after month.
You can spend money once to permanently improve your conversion rate…and therefore your EPC…and therefore your profits.
How to Take “Extreme Ownership” of Your Earnings Per Click (EPC)
Taking ownership of something means being committed to delivering the best results as efficiently as possible.
It means committing to something you know is important & not letting excuses get in the way of the goal.
No doubt, there are plenty of excuses available that gets in the way of people actually making conversion boosting improvements to their site.
Some of them being that:
- You may now know what part(s) of your site are hurting your conversion rate and your EPC
- You may not trust you can accurately measure whether changes you make hurt or help your conversion rate
- You may have found A/B testing tools to be prohibitively expensive or overly difficult to use
- You do not have the time or financial bandwith to support conversion improving operations
And the result of allowing these (and other) excuses to get in the way of deciding to take complete ownership of the conversion, EPC, and profit results of your Shopify store.
When excuses get in the way, important things fall by the wayside…
….and before you know it, months or even years have passed without any real progress towards your goal.
Because Paid Traffic Costs Are Continually Increasing…..Time Is Of The Essence
Paid traffic is getting more expensive each year. As cost increases erode profitability, your best defense is a concentrated effort to bolster your EPC.
The larger your EPC, the more protected you are from outside forces that you do not control….
The larger your EPC, the easier it becomes to successfully develop new traffic sources….
The larger your EPC grows, the more profitable every visitor to your site becomes (regardless of the traffic source).
We know the EPC formula is:
EPC = Your Conversion Rate x Your Average Order Value (AOV)
And we also know that we have two options to increase EPC:
We can increase our Conversion Rate and/or we can increase our Average Order Value.
How to Increase Average Order Value
There are entire books written about pricing strategy and I plan on doing a full article about this at some point.
Seeing as this article is already fairly lengthy, we’ll just give a few possibilities to explore here:
Try Offering Incentives (like Free Shipping) At Higher Order Value Totals
If you already offer Free Shipping for orders that are over $50, see what happens when you change it so you begin offering free shipping at $60.
Or see what happens when you offer Free Shipping at $50 and Free Two Day Shipping at $80.
And it doesn’t have to be shipping. It could be coupons or vouchers for future purchases, it could be a bonus gift (maybe a good way to rid yourself of some inventory that never moved), or anything else your imagination comes up with.
Test Increasing Your Prices
Your prices may be more elastic than you think.
It is possible that you can increase both your Average Order Value and your Conversion Rate at the same time by testing a price increase.
There are 3 main ways to go about testing your pricing:
(1) Making “cosmetic” changes to your pricing
This would be things like ending your prices in a “7” or a “9” or charging flat dollar amounts instead of amounts than have a decimal point + cents.
(2) Making “material” changes to your pricing without changing anything else
This would be raising your prices by say 10% without changing the products, benefits, or bonuses offered for the price asked.
(3) Making a “material” price change and improving the value of your offer
This would be raising your prices by say 10% but now you’re also giving them some sort of additional value in exchange for paying a higher price.
Ideally, your added cost to provide more value is less than the amount you’re increasing your prices by.
Alright, speaking of testing things – – let’s now discuss:
How to Increase Your Conversion Rate
There are many ways to go about increasing your conversion rate.
Some are difficult to execute. Some are nearly impossible to directly measure their impact.
Fortunately, one of the main methods of increasing your conversion rate is built to be able to be easily measured. That is A/B testing.
While many Shopify Stores have courted massive headaches into their lives by trying to run A/B tests…
….it is possible for A/B testing to be incredibly simple on your store.
But before we try to break down this entirety of this complicated process, let’s start at the beginning….
You Need to Know What To Test!
There are few things more frustrating than organizing all the tools, resources, and people together needed to begin running tests…..
….only to have your tests fail to increase your site’s conversion rate.
There are no shortage of “list posts” with titles like ’57 Things To Test On Your Shopify Store’, and they certainly have some value.
But nowhere close to the value of having custom recommendations specifically for your site created by an expert who has worked on + consulted with untold dozens of Shopify stores.
And if you are reading this right now, that is exactly what we are offering you – – for free!!
Take 30 seconds to fill out this short Google Form telling us your store’s URL and the best email address to send the custom recommendations to.
One of our experts will spend about half an hour dissecting your site and sending you some recommendations for tests to run and ways to increase your conversion rate.
There are no strings here nor any obligation on your part other than getting us started by filling out the Google Form.
These recommendations can help improve your conversion rate…..
…..which grows your EPC….
….which makes all your advertising more profitable.
We look forward to learning about your site and sharing a few ways to help you grow!