When experiencing a low ROAS, your first go-to solution is probably to tweak the ad creatives, the angle, the audience targeting, or even the ad placement.
You have consulted experts and they said something like ‘you need to set up a proper ad funnel’ and all. Often, these fixes do not seem to significantly improve your ROAS as you want.
This is because your ROAS isn’t just the return from your ads, it’s influenced by everything— your products, website, pricing, value proposition, testimonials, social proof, and every other conversion touchpoints on your store.
Not convinced yet? Have you ever seen a fascinating ad on Facebook that you couldn’t resist but click on it? Let’s imagine you landed on a poorly designed website where the product catalogs are so disorganized. Would you still be inclined to buy from that store? Yeah, the chances would be slim.
That’s why you could have the best-paid ads strategy and you’ll still have a poor ROAS.
So, it’s time to think differently and look at the bigger picture. This means working on your Customer Lifetime Value, which will increase your ROAS and the ROI on your store in the long term.
The Long-Term Approach: Look beyond ROAS — Think LTV
7 Strategies for Increasing your eCommerce ROAS in the Long Term
Your ROAS only tracks the returns on specific ad campaigns you’re running. Let’s break it down;
Supposing your scented candle store generates $5000 from a PPC ad you ran with $1000. Your ROAS in this case is 5x because you got 5x the amount you invested. We can say this is a good ROAS.
However, is your store making a profit?
Let’s assume the cost of the candles sold was at $3500, payroll was $1500, shipping and logistics another $1200. Technically, your eCommerce store is running at a loss. That’s because your store’s ROI isn’t doing well.
While it’s great to optimize and monitor your ROAS, it is highly important to also do the same for your ROI. Because your ROI is what keeps your store running in the long term.
ROAS calculates your profit or returns on ad investments alone. It just tells you whether your ads are working enough to generate revenue. Advertisers use this to gauge if their ads are making a profit.
On the other hand, ROI calculates your profit on the overall investment. It tells you whether the entire business is making a profit. So it takes into account the cost of ads, management, rent, production, recurring expenses, and so much more.
Now, let’s check out these strategies;
1. Up Your User Experience To Reduce Drop-offs
Have you ever considered that your website might not be entirely smooth and that’s why you may have drop-offs?
If your ads are great, they will set an expectation. However, the user experience on your website can either meet, surpass or fall below that expectation. This is why optimizing your website’s user experience is important because your website determines whether or not a potential customer goes ahead with making a purchase.
So take some time to look through specific elements of your websites. It will help you uncover your website’s usability, and discover some insights as to why your prospective customers keep dropping off.
When you optimize for conversions, it helps to improve your customer experience which in turn increases their purchasing power or lifetime value.
To make sure every element on your website is optimized for conversions, here are a few areas you should look out for:
Page Speed: 41% of your potential customers will leave your website if it takes more than 5 seconds to load. Have you analyzed your site speed lately? Do you know how many prospective customers close your website because they spend more time waiting for your product pages to load? Start by checking what your current load time is on Google Page Speed Insights. You might discover that you need to compress some images or take out some heavy plugins.
Storytelling or copy: Your website copy can either engage or bore your customers. And their responses to each of these feelings will significantly vary.
With clear, engaging, and relevant copy, your customers will be encouraged to take action on your website. Make your copy concise. Pages designed for cursory reading are most likely to be read.
PRO TIP: Pictures sell better than long text
High-resolution images and clear explainer videos, also nudge your customers to the value of your product. For example, Velasca uses a short copy and explainer video to show their customers the story behind every handmade shoe.
Mobile responsiveness: Mobile shopping is becoming increasingly popular. However, potential customers who have a negative mobile experience are 62% less likely to make a future purchase. So don’t you think your website is worth looking into? Take ample time to test your mobile experience on several screen types, devices, and browsers. If you’re testing on an iOS phone, test on different iOS versions. These tests will give you insights into several user experiences across these channels. To be on the safer side, you can use mobile responsive themes on Shopify when redesigning your store.
Reduce Form Fields: On your checkout page, consider reducing the number of form fields required to make a purchase. For example, take out irrelevant questions like their gender or age in your forms. In the signup process, add options for Facebook or Google SSO. It reduces the need to remember passwords for your customers. Make the checkout process seamless and fast. Consider adding guest checkouts on your pages for customers who may not want to go through the hassle of signing up.
Navigation: Your navigation is how your customers travel around your web store. And although each website’s navigation is different, it should remain the same in fluidity. In a survey, 94% of consumers said that easy navigation is the most useful feature of a website.
Your customers should be able to land on your homepage, browse categories, add products to cart, and checkout seamlessly. If your site’s structure is confusing or a little unstructured, it can affect their shopping experience causing them to abandon their purchase. So watch some shopping sessions or undergo a usability test to see how an average customer would navigate through your website.
Optimizing your website doesn’t just end with a better user experience. It extends to making shopping easier on your store and higher conversions. You’ll get returns on investment in the long run because these customers you acquire will end up being loyal to your brand.
2. Use the Decoy Effect and Reciprocity to Increase Sales
At the end of the day, your potential customers are human and there’s so much more you can do to increase their customer lifetime value. One effective way is to leverage marketing psychology to subtly attract, persuade or influence prospective customers into taking an action.
We know you use pricing wisely but you can make your pricing into an effective conversion tool by implementing proven marketing psychology principles. One of these psychological principles is the decoy effect.
The decoy effect is advertising your expensive items or packages to nudge potential customers into purchasing these items first. While basic economics implies that this strategy will drive lower demand, many successful eCommerce stores use this to increase customer lifetime value.
An example of this decoy effect is using a magazine subscription plan. When you offer a Web subscription for $40 and then a combo Web and print subscription for $110. People might want to go for the cheaper subscription which is the web. However, if you include a print-only plan which equally costs $125, you’ve changed the game.
As a customer, you’ll start seeing value in the combo deal and be more inclined to go for the combination package which costs $125. And that’s the entire strategy because the print only your decoy in this case
Another example is how nutribullet strategically used the 12-piece set as their decoy. As you can see, shoppers will be more inclined to get value from the 9-piece and it seems like a cheaper option.
Keep in mind that when you’re creating your decoy, it shouldn’t be more appealing than the other available options. It’s okay to make it seem a little like an absolute steal for the customer but don’t overshoot it. Just ensure that its price is a little higher than your expensive package but the value should be just a little more than the cheapest.
Also, shoppers tend to be more attracted to the middle package option because it is perceived to be the most important compared to the average. So you might want to consider putting the package you want to sell out in the middle option.
There’s also the psychology of Reciprocity. The psychology of reciprocity increases your customer lifetime value because it makes your customers feel valued and appreciated. This, in turn, increases the referrals you’ll get and customer loyalty.
FUN FACT: Customers love discounts.
29% of online shoppers say they will complete a purchase they didn’t intend to if it has a discount and 79% of US customers are more likely to shop online when there’s free shipping.
Although it might seem like you’ll run at a loss, Shopping psychology like this one leads to a high return on investment. Because your customers will feel the need to give back by shopping more. So consider opening the floor by giving discount codes, offering free shipping, trials, or eBooks. Find something you think your customers will appreciate. See how Package Free offered free shipping for orders higher than $35.
With the decoy effect, you increase the amount a shopper is willing to spend on a single purchase. Reciprocity gives a sense of community which encourages customers to give back by shopping more. In the long run, increasing the average order value becomes a long-term strategy for increasing your ROI. And that’s all thanks to applying a little psychology in your sales approach.
3. Be Very Deliberate with Upsells— Make Them Super Relevant
The amount each customer spends at the checkout page determines whether you’re going to make a high ROAS or a low one. So how do you bump up this amount? By upselling only relevant products to each customer.
COMMON PROBLEM: Many eCommerce stores focus on only upselling more expensive items.
However, your customers are only interested in how that upsell is beneficial to them.
When a customer adds a Knife to their cart and proceeds to checkout, your upsells should be centered around the knife they just added to that cart. That means offering a sharper knife or a set that contains different sizes of that particular knife.
Upselling offers a 10-30% increase in your revenue. But to get this profit, you have to be deliberate in offering value to each customer. So why not offer a complimentary product to your customer? A product that will make them enjoy their purchase even better. Don’t upsell just for upselling sake.
In our example below, Verve Coffee Roasters offer similar coffee blends and cream that complement the purchase at the checkout page. As you can see the recommended upsells are slightly higher in price but very similar to the product in the cart.
You can also offer a minimum amount for free shipping. 9 out of 10 customers find free shipping as the greatest incentive to shop online. Adding a minimum amount so customers can qualify for this, encourages them to spend up to that amount. So consider implementing this in your store to increase the order value at your checkout page.
Making relevant Upsells not only increases the experience you offer your customers but it helps you recover your investment spent on ads. Your loyal customers will look forward to your upsells as long as they are personalized recommendations in the long run.
4. Boost Sales and Retention with the Power of Behavioral Email Sequence
Most eCommerce stores understand the power of email marketing but fail to utilize the power of behavioral emails. With behavioral emails, prospective customers who may abandon their carts, or take many other drop-off actions on your website can get engaging content that’ll persuade them to complete a purchase.
True marketing is getting the right message to the right person at the right time.
If a customer abandoned a cart, send them an email about the contents of their cart and not your regular referral email campaigns. Rather than going for the conventional eCommerce emails, consider creating automated behavioral email sequences that align with specific customer journeys.
Behavioral-triggered transactional emails have 8x higher open rates when compared to regular promotional emails. Wondering how to implement this? Check this out;
For shoppers who just signed up or had a walkthrough of your store, start with a welcome email that tells the story of your business and helps them settle in. It’s your chance to give a good impression or encourage them to go ahead with a purchase.
For shoppers who added items to their cart but couldn’t check out, create an abandoned cart email sequence. Since this is the highest drop-off point for most eCommerce stores, create witty, simplistic emails that show items they left in their carts and add a compelling reason to come back. It could be a discount, a testimonial, or a similar product in stock. Here’s one of our favorite examples.
You should also create a re-engagement email sequence to build connections with your existing customers. It could be asking them to join a helpful community or joining a referral program. This will help them remember your brand and increase their purchasing power.
One of the most important email sequences to have is a post-purchase follow-up. Share details about the delivery days before it gets to the customer. After the purchase has been successfully delivered, you can ask for a review. Days after, you can cross-sell items that will go well with their purchase. And after that, you can advertise similar items or ask them to restock the product if there’s a need to buy more.
When creating your email sequence, create clear subject lines that convey the email’s content. A welcome email can read “Welcome to [store name], [customer name]”. It’s direct, simple, and clear.
Now, though using their first name is a great step towards personalization, go beyond that.
You can use their activity report, purchases they’ve made to tailor recommendations for subsequent email campaigns. Just ensure that whatever email goes out, is in sync with their behavior across your store.
Customer life cycle email marketing is important in generating a good return on investment. When you send out an engaging email that takes prospective customers through the awareness, consideration, engagement, purchase, and retention stages of their journey with your eCommerce store, they are likely to trust your brand. This means an increase in their average order value.
The right email sequence helps keep your customers in the loop of things and makes their customer journey more enjoyable. A satisfied customer will likely come back to your store and increase their purchasing value. In the long run, the consistent increase in average order value will aggregate to a high ROI.
5. Only 20% of Your VIP Customers Bring in 80% of Your Revenue. Find Them!
There’s a special segment of high-paying customers you have in your store. They are those who make the highest amount of bulk purchases and are likely to spend more. You might refer to them as your VIP shoppers or loyal customers. They include the customer segments that refer to their network, have high-value orders, and sign up for your premium packages.
The Pareto principle implies that these customers are 20% of your actual customer base and that they bring in 80% of your revenue.
Identifying these customers can help you tailor more upsell and customer loyalty programs to them.
You can find who these customers are using the RFM model. This stands for recency, frequency, and monetary.
Recency connotes how recently a customer purchased from you. The more recent it is, the higher their chances of returning are. For your recent customers, you can;
- Channel retargeting ads to them
- Share similar products and recommendations via email
- Offer them a coupon for their next purchase
Frequency connotes how frequently a customer purchases from your store. The more frequent a customer is, the more they become loyal to your brand. For your frequent customers, you can
- Introduce them to your community or loyalty program
- Nudge them to refer their network
- Offer periodic thank you discounts or free shipping
Monetary means how much a customer spends during a purchase. The more a customer spends, the higher your ROAS will be. For your high paying customers you can;
- Upsell your pricey stock as recommendations
- Introduce them to a subscription-based shopping system or other high-value options like express delivery
- Offer periodic thank you gift cards
So, identify who these customers are and then make them the focus of your loyalty campaigns. They are the most likely to increase your overall ROI.
6. Focus on Building Long Lasting Communities
Build loyalty programs that go beyond just rewards. Online customers go ahead with a purchase based on the recommendations of friends and strangers. Which doesn’t include celebrities. So this goes to show that customers don’t want just another referral program with rewards.
The present-day consumers want a loyalty program that is centered around belonging to a closely knitted community. This means centering it around your beliefs, shared values, and interests of your customer base.
Some customers want to be a part of something bigger. You can use this to drive customer loyalty.
A lot of eCommerce brands are starting to invest in community programs. For example, Yellow leaf uses its community program to create jobs for the underprivileged. So when you purchase a hammock, you are indirectly helping a business and empowering underprivileged members of society.
When creating a community, identify what your customers genuinely care about. You can conduct a survey if you’re unsure about what they might be passionate about.
Also, think about what you care about. For example, why did you start your business? What problems were you hoping to tackle or solve?
Today what problems do you think your products can solve? If you’re a paper store, for example, you may want to focus on planting more trees to balance the climate or teaching about recycling.
After this, decide on the movement you want to champion and then create a community for it. It could be a social media hashtag or a new landing page for your customers. Then implement a loyalty program around this. When your loyal customers refer new ones to you or where they can donate for your cause.
Try to always receive feedback to help you improve your community programs. Feedback will help with optimization areas, new strategies, and how to keep fostering active customer participation.
When your community programs align with your customer interests, you are bound to increase their customer lifetime value. And they will be willing to spend more on a purchase.
7. Reduce Ad Costs with SEO (Organic Traffic)
Another great way to increase your ROAS is by spending less on Ads. I know you’re probably worried about ranking for those keywords and that’s why you should invest in SEO. If you’re ranking organically for a keyword that costs $3 per click, at the end of the month, you’ve saved at least $300 on that ad.
The two tenets of SEO you should focus on are building the right content strategy and working on technical SEO
The right content strategy: Your content should be what your customers will find engaging and interesting. For example, if you sell home decor, do you have helpful tips on decorating or arranging a space?
Posting helpful content on mediums like your blog, social media or Pinterest will make your customers turn to you. Over time, you’ll become a well-known brand name just from your content. So do some research and find what your audience is interested in. From there, map out a content strategy for your team.
Technical SEO: Your technical SEO is how well you adhere to SEO guidelines. Do you use the right tags? Do you have a meta description, properly sized images, and helpful anchor links? Are all your pages loading fast enough? Take time to analyze all areas of your website just to be sure.
SEO and PPC go hand in hand. It’s the best way to acquire traffic on your website while minimizing your Ads budget.
We know you’re also looking for a Quick ROAS boost :-)
Short-Term Hacks to boost ROAS
We understand that the long-term strategy takes time. And you might need strategies that can yield results immediately. So, here are some short term hacks that’ll help you increase your ROAS
1. Make your Ad copy more human: While you might want to focus on the features of your service or products, try to ensure that you personalize your ad to suit your prospective customer base. Offer value and make it engaging. Use a lot of “You” in your copy because you’re speaking to humans.
In our example, Bluebottle offers the value proposition of fresh coffee and getting perfection in the comfort of your kitchen. It’s direct, simple, appealing, and catchy.
2. Ditch those stock images already: When running your ads, don’t you think your prospective users want to see an item from your store? So why are you still using those stock images that make your ads look tacky? Showcase your products so it conveys the message you’re trying to pass. See how happy socks showed off their collection in this ad below;
3. Be consistent in your messaging: What is the point of your ad? Are you advertising a sale, giving a discount, asking them to try out your product? Keep the tone of the message consistent. You don’t want to confuse your customers. Let all elements of your ad be in sync with each other.
4. Use Mobile-Friendly themes: Nearly 50% of your shoppers use mobile to navigate through your store. You must ensure your store is responsive to each screen, page, and browser. You can also get mobile responsive themes on Shopify that are optimized for every screen and resolution type. Remember, the better your website, the more seamless it is for your customers to purchase on your store. It’ll also be easy for them to refer you and return to purchase more products.
5. Strike off those negative keywords: Negative keywords in your ads are also referred to as negative matches. They are the keywords that are blocking your ads from showing because no one is searching for them. Let’s say you sell sunglasses. Negative keywords like drinking glasses can affect your ads because, although they are similar, the products are completely different. So search carefully for queries that might look similar to yours but will not necessarily get you quality clicks. Exclude these irrelevant keywords that are eating deep into your budget and enjoy a high ROAS.
6. Improve Ad Quality Score: Your ad quality score is how Google rates your campaign PPC keywords and Ads. It helps determine your CPC and your Ad rank on search engines. When your ads are relevant and engaging to users, they click on them. Google then sees it as useful and then increases your AD quality score. A good score means potential customers see your ads more. The biggest perk of having a high score is that you pay less and rank higher.
You can work on improving your ad quality score by doing proper keyword research and adding relevant keywords to your ad campaigns. You can also continue testing variations of ad copy. The higher CTR gives you higher conversions and in turn higher ROAS.
Finally, work on your landing page. Create a holistic experience for your prospective users that’ll make them want to shop more. While these are great fixes, remember that you'll need to implement long-term strategies to drive an increase in your profit and return on investment.
Start increasing your ROAS and ROI by improving your customer experience, conversion rates, and customer lifetime value today.