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S9 EP54:
In this episode of the 2X eCommerce Podcast, host Kunle Campbell delves into marketing efficiency, a critical component of growing an eCommerce business sustainably. He introduces the “PROFIT Framework,” a strategic guide designed to help businesses maximize returns on their marketing investments by focusing on profitability. Kunle breaks down each aspect of the framework, including understanding your marketing efficiency ratio (MER) and contribution margin, retargeting and demand capture, demand generation optimization, and the effective use of email and SMS marketing.

The PROFIT Framework

P: P&L Impact and Marketing Efficiency Ratio

Understanding the marketing efficiency ratio (MER) and how contribution margin plays a key role in ensuring profitability.

R: Retargeting and Demand Capture

Strategies for retargeting to capture warm leads at a lower cost, and the types of content that work best for demand capture.

O: Optimizing Demand Generation Activities

Kunle discusses the importance of demand generation and how UGC, influencer content, and branded videos can fuel this process.

F: Frequency and Relevance in Email and SMS Marketing

The role of segmentation, frequency, and deliverability in maximizing email and SMS marketing effectiveness.

I: Integration Across Channels and Tools

How integrating data from all departments improves the efficiency and effectiveness of marketing efforts.

T: Testing and Continuous Improvement

Kunle highlights the importance of continuous testing, from creative formats to landing page optimizations, ensuring ongoing improvement.

(00:00) - Introduction to Scaling eCommerce in 2024
(00:46) - Maximizing Marketing Efficiency with the PROFIT Framework
(02:01) - Understanding the P&L Impact on Marketing Efficiency
(06:38) - Retargeting and Demand Capture Strategies
(07:56) - Optimizing Demand Generation Activities
(11:10) - Boosting Visibility with Reviews and Ratings
(13:35) - Effective Email and SMS Marketing
(17:19) - Integrating Channels and Tools for Marketing
(19:43) - Continuous Testing and Iteration for Success
(23:24) - Conclusion and Key Takeaways

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Creators & Guests

Host

Kunle Campbell

Host of the 2X eCommerce Podcast and Co-Founder at OCTILLION

What is 2X eCommerce Podcast?

Hosted by Kunle Campbell, who is an operator of a portfolio of consumer brands, 2X eCommerce is a weekly podcast for ecommerce operators by ecommerce operators. We interview remarkable ecommerce founders and leading enablers of ecommerce growth, with every episode promising to give you at least one growth hypothesis or idea you can test.

Our focus is growing your ecommerce revenues from a cross-functional perspective, be it marketing, your tech stack, operations, finance, or customer experience. We believe that by bringing together insights from a variety of experts, we can help you double the throughput of key ecommerce functions.

2X your eCommerce growth with insights from Kunle and handpicked experts.

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

[00:00:00]

Introduction to Scaling eCommerce in 2024
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Kunle Campbell: So welcome back to the 2x eCommerce podcast. I'm your host Kunle Campbell. And this episode is the third part of our ongoing series. That's all about scaling your eCommerce business in 2024 and beyond. Now, last two episodes, we covered the new playbook for scaling eCommerce brands in 2024, where we highlighted the importance of three pillars, product innovation.

Efficient marketing and streamlined operations. Last week, I touched upon how to develop your best selling SKU. Today, we're moving on to marketing efficiency. Marketing, as you know, is where the rubber really meets the road. You can have the best product and a perfectly streamlined operation, but if your marketing isn't efficient and effective, you'll be leaving money on the table pretty much.

Maximizing Marketing Efficiency with the PROFIT Framework
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Kunle Campbell: So in this episode, I'm going to take you through a breakdown on how to maximize the return on your marketing investment using what I call the PROFIT framework. It's all about ensuring that. Every dollar you spend on marketing [00:01:00] is working harder and smarter for you. I'll walk you through strategies that would improve your marketing efficiency ratio, drive profitability, and grow your business in a sustainable way.

By the end of this episode, you'd have actionable steps to implement right away to improve your marketing efficiency. And I'll also be bringing expert guest in future episodes to help you dive Deeper into the tactics we'll be covering today. So make sure you're subscribed and stay tuned for those insights.

So let's dive into this PROFIT framework.

This is the 2X eCommerce Podcast hosted by Kunle Campbell.

Kunle Campbell: I've created a very simple, but powerful framework to guide us through this topic and I call it profit. Now, this isn't just an acronym, it's the essence of what every eCommerce business should be driving towards profitable, sustainable growth. So what does [00:02:00] profit stand for?

Understanding the P&L Impact on Marketing Efficiency
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Kunle Campbell: The P stands for the P& L impact on your marketing efficiency ratio. The R stands for your retargeting and demand capture. Your O stands for the optimization of your demand generation activities. Your F is the frequency and relevancy through email and SMS communication. I stands for integrating your marketing with other channels and tools.

In your eCommerce ecosystem, and T stands for testing and continuous improvement. Now, each one of these elements is crucial and together, they form a complete picture of how to run things efficiently and more importantly, profitably from a marketing campaign standpoint to essentially drive long term success.

Now, throughout this episode, I want you to keep two big things in mind. First, we're not just talking about growth for the sake of growth, because as an eCommerce operator, every dollar you spend on marketing has to contribute to [00:03:00] both the top line and the bottom line. So we're going to get real about profitability today.

Secondly, we're not here for fluff. Every tactic I discussed today has a clear financial impact. It's not about marketing gimmicks or chasing trends. This is about building a marketing engine that keeps turning out profitable results month after month. So, all right, let's dive right into the first part of this PROFIT framework.

Kunle Campbell: Okay. So we're starting with. The P which stands for the P and L impact, because this is where everything begins. So if you're a CMO or an eCommerce operator, you're constantly making decisions, right? And those decisions impact your company's profits and loss statements. One of the most important metrics you should be tracking is your marketing efficiency ratio.

It is your go to metric for understanding how effective your marketing [00:04:00] spend is translating into revenue. It's a simple ratio. Which is total revenue divided by total marketing spend. So if you're spending 100K on marketing and it's generating 500K in revenue, that's a 5 to 1 MER or a MER of 5.

Essentially, you're generating 5 for every 1 spent on marketing, which is great. The higher the MER, the more efficient your marketing is working for you. A baseline MER is about 3. Now you might be thinking, great, if I've got a solid MER, I'm golden, right? Well, that's just part of the story. It doesn't really tell you if that revenue is profitable.

And that's where contribution margin comes in. The role of contribution margin. is to tell you how much revenue is left after covering all variable costs, things like your cost of goods sold, your shipping transaction fees. [00:05:00] But let me tell you ~a bit, ~a little story about 11 years ago, Andy Dunn, the founder of Bonobos wrote an essay, which was called eCommerce is a bear and introduced the concept of True contribution margin, which is now a DTC metric in of itself.

And in that famous essay, ~eCommerce is a bear, a bear, rather not bear, a bear. ~He essentially laid it out. This way. So you start out with your gross revenue, which is your total sales, take out returns to get your net revenue. You subtract your cost of goods sold to get your product margin. And then you subtract your free shipping costs to get your gross margin.

And then you subtract variable expenses like customer service and fulfillment costs. And then you finally, which has never really been included in many financial sort of analysis, your marketing and promotions to get your true contribution margin. Why is this important? Because in eCommerce, unlike other business models, your operational and marketing [00:06:00] costs can eat up a huge portion of your revenue.

So while you might have a great marketing efficiency ratio, your actual profits could be razor thin if you're not keeping an eye ~on it ~on your contribution margin. So let me give you a quick example. 100 in revenue from a sale, but your variable costs like shipping, transaction fees, Cost you about 60 on top of that, you're spending 30 on marketing to acquire, ~you know, ~that sale ~that ~just leaves you with 10 percent contribution margin, or just 10 to cover your fixed cost, which you need to invest in the business.

You need to use to pay salaries and hopefully turn a profit.

Retargeting and Demand Capture Strategies
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Kunle Campbell: So the R in the PROFIT framework stands for retargeting and demand capture. This is one of the easiest ways to maximize the return on your marketing spend. Remember the hardest sale to make is the first one. Once someone has visited your website or added a product to their cart or clicked on your ad, remember they're already showing [00:07:00] some interest.

So retargeting lets you ~bring, ~bring these warm leads to your site at a fraction of the cost it took to acquire them. Percent of your marketing budget should be allocated to demand capture ~and the remaining 80 percent should be ~And the remaining 80 percent should be allocated to demand generation, which will be covering next.

So let's talk about kinds of content you need for demand capture. You need user generated content from customer reviews and loyalty programs, influencer generated content from platforms like Insense, TikTok shop affiliates, or the TikTok creator, marketplace. You need branded videos that showcase your products, ~um, ~your founder, or you need founder videos or in house videos.

That will bring some authenticity. You need image ads, which really work well, ~um, ~for retargeting, particularly, ~especially ~during peak ~sales, ~sales periods like black Friday, cyber Monday, ~or, ~or even Q4, this is where your return on ad spent really skyrockets. If it's done correctly.

Optimizing Demand Generation Activities
---

Kunle Campbell: So the O in the PROFIT framework stands for [00:08:00] Optimization of Demand Generation Activities. Demand generation is about building awareness and interest in your brand, and it should make up for around 80 percent of your marketing budgets and efforts. At its core, demand generation is about creating content at scale, and it requires two things. ~First, a reliable, consistent source of content. ~First, reliable, consistent sources of content. And second, a systematized approach to distributing it. Once you generate that content, you can repurpose it into social ads to fuel your campaigns. So here are the main sources you want to focus on for demand generation. First is user generated content or UGC. You'd source UGC primarily from two key places. One, your customer reviews platform. And then your loyalty program, if you're using the right tools, this becomes a set it and forget it system loyalty programs in particular can incentivize your [00:09:00] customers to share their experience in exchange for discounts and rewards.

It also provides a steady stream of authentic content that you can turn to ads. UGC is powerful because it's relatable, highly engaging, and helps optimize demand generation naturally. The second source is influencer generated content or IGC for platforms like Insense, TikTok creator marketplace, and even TikTok shops affiliates.

A great source for finding influencers to create content for your brand. When you leverage IGC, focus on micro and nano influencers who align with your customer avatar. These influencers would typically have smaller, more engaged audiences, making their content feel more authentic and effective at driving demand.

Use this type of content to fuel your paid social ads, especially on platforms where native and authentic content, , performs best. The third is branded content. Branded content, especially video is crucial for scaling paid social [00:10:00] campaigns. While UGC and IGC are essential, branded content ~is produced, ~is content produced by your founder or internal team members. Founder led content. For instance, often performs well because it feels genuine and creates direct connections with your audience.

A simple Tik TOK video from a founder explaining your brand's mission or showcasing your products benefits can humanize your brand and build trust. To generate content at scale.

You need an efficient system for producing and testing multiple pieces of content across UGC, IGC and branded videos by setting up a content machine, you ensure you never reliance on a single ad type or platform. It allows you to continuously optimize demand generation by keeping the top of your funnel full and fresh with relevant content.

My final point here is always ensure your content is designed to feed directly into demand capture efforts. For example, take your best performing videos and use them in retargeting campaigns to [00:11:00] convert the leads you've generated from UGC and branded content, this seamless flow from demand generation to demand capture is what leads to high converting campaigns that drive growth.

Boosting Visibility with Reviews and Ratings
---

Kunle Campbell: Remember our chat in May earlier this year, episode 33, to be specific with Sam Piliaro about scaling from 1 million to 10 million with Google ads. We touched on something crucial, trust signals in your Google search results. Let's dig a little deeper. You've seen those stars next to some websites on Google, right?

Those are seller ratings and they're game changers for e commerce. Let me explain these aggregated ratings come from your customers reviews about their shopping experience on your website. They can seriously boost your visibility and credibility with potential first time customers on Google search results.

Research carried out by Reviews. io found that seller ratings can increase click through rates on Google Ads [00:12:00] by up to 17%. That's a lot of extra traffic. But it doesn't stop there. There are also product reviews that show up on Google Shopping search results which are equally powerful. Unlike seller ratings, These reviews focus specifically on individual products, and they can bump up conversions by as much as 26 percent while improving click through rates by 5%.

Higher click through rates mean lower ads. Which is pretty impressive, right? Now, you might be wondering, how do I get this reviews working for me on Google? That's where reviews. io comes in. They've automated the whole process for e commerce operators like you, from collecting reviews to displaying them where they matter most on Google.

Reviews. io Doesn't just do text reviews either. They're big on video reviews, which are fantastic for creating engaging user generated content. This [00:13:00] stuff is gold for boosting trust and conversions in your Google results. Want you take your Google presence to the next level, right now, you can get 10 percent off your first year with reviews.

Just reach out to the team by a chat or email and mention 2x e commerce. The offer is for new customers only. Terms and conditions apply. It could be just the thing to supercharge your e commerce store and dominate Google search results.

Okay.

Effective Email and SMS Marketing
---

Kunle Campbell: So the next is the F in the PROFIT framework, which is really frequency and relevant in your email and SMS marketing strategy. Now, email and SMS aren't just add ons. They're critical components that when used correctly can drive significant revenue growth. On average, 30 percent [00:14:00] of all sales in your store will be triggered by email or SMS based on last click attribution.

I've personally seen this number climb up to as high as 60 percent for some businesses. Email and SMS are channels you can't afford to ignore, especially if you're serious about maximizing your marketing efficiency. Now let's talk about frequency. How often you're communicating with your customers is very critical.

It's not just about sending more emails or more texts. It's more about maintaining a consistent and strategic cadence. Finding the right frequency is key to staying top of mind without annoying your audience. You don't want to spam your customers, but if you're too quiet, you miss out on opportunities.

Most brands hit the sweet spot with two or three emails per week and a few well timed SMS messages per month. It's important to test and find what [00:15:00] works for your specific audience. The first golden rule is never silo email and SMS. They should both compliment each other. Remember SMS ~has a 90 ~still has a 98 percent open rates, making it highly effective for more immediate ~times, ~time sensitive communications, while email serves as a broader channel for longer form content and promotions.

When combined, they provide a 360 engagement strategy. Next, I want to talk about how to review and optimize your campaigns. My suggestion is to stay relevant and effective. You need to regularly review and optimize your email and SMS campaigns. You could, you have quarterly every six months at a minimum should be the goal.

Why? Because customers or consumer behavior changes trends involve and your marketing needs to keep pace. [00:16:00] So with ongoing optimization, you have to ensure that your messages are hitting the right notes with your audience. The other point I want to make, or the next point I want to make is segmentation.

Segmentation, in my opinion, is king. Segmentation is where the magic actually happens, particularly with your campaigns, your campaigns must always be targeted to specific customer segments. If you're still sending generic emails or text messages to your entire list, you're leaving money on the table.

Essentially, you need to review your segmentation strategy once or twice a year to ensure your list are up to date and optimized for engagement. The other points around email and SMS is deliverability because it really matters. It's often overlooked and if your emails aren't landing in inboxes, everything else you do is [00:17:00] wasted.

So what we've done is work with a deliverability expert to make sure our emails are getting through to our audience. With tougher email filters, and more competition in inboxes. Deliverability is a make or break factor for ROI.

Integrating Channels and Tools for Marketing
---

Kunle Campbell: I'm going to simply move into the I in the PROFIT framework, which stands for integration of channels and tools ~for your marketing, marketing to be more effective for your marketing, to be more effective ~for your marketing, to be more ~efficient and ~effective.

It needs to feed off relevant data from other internal systems and where possible external sources to. Integration ensures that all aspects of your business, whether it's marketing, customer service, product development, or logistics are perfectly aligned, working from the same data sets. What this does is it maximizes the impact of your marketing efforts, ensuring that they're [00:18:00] always grounded in actionable insights.

I always say this, never work in silos. Every department in your business generates data that can make your marketing smarter, for instance, customer feedback gathered via your reviews or returns apps ~should be, ~should directly influence your marketing copy, and even briefs you send influencers. Similarly, your loyalty program data can inform which segments of customers are most likely going to respond to specific offers, improving the targeting of your email and SMS campaigns.

So remember to feed your marketing with real data because marketing efficiency depends on leveraging real data, not just assumptions. That means pulling insights from areas like customer service, complaints, returns, and even shipping feedback to refine your message and products. [00:19:00] Additionally, external data from third party platforms like Amazon or marketplaces can offer insights into broader trends and help you optimize your direct to consumer efforts.

Cross channel insights, ~uh, Would, ~would ensure that data from your email campaign should influence your social media ads and vice versa. Your Amazon feedback should be looped into your DTC strategy. which would give more insight for optimization across the board. So what you're looking for is the ability to pull data from multiple sources to allow for real time adjustments.

Continuous Testing and Iteration for Success
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Kunle Campbell: So the T in the iteration to maximize marketing efficiency, constant testing and iteration are key. The best eCommerce CMOs I know don't just set campaigns in motion and hope for the best. [00:20:00] They test everything from messaging, to creatives, to landing pages, and continuously optimize based on what's working

This is not just a one time exercise, but a continuous process that refines and improves your marketing performance. Tests don't guess every aspect of your marketing, whether it's the copy, the creative, the audience segmentation, or even the timing of your ad should be tested the AB testing approach allows you to experiment with different variations of your campaigns to determine which performs best. For example, you might test one email headline against another or try different ad creatives in a Facebook campaign to see what drives more clicks or conversions.

Iterate based on data because once you have the results from your test, it's crucial to iterate again. Did one email campaign significantly outperform another? [00:21:00] Use that insight to tweak future, campaigns. Did a certain type of UGC video outperform professionally branded content? Double down on what's working.

Iteration is about using real time data to guide your future decisions, ensuring that your marketing efforts are consistently evolving and improving. Then there's creative testing. A lot of marketers think that testing is limited to headlines and landing pages, but creative testing is essential too. The types of images, videos, or graphics you use can make a massive difference in your campaigns performance.

Testing different creative formats, like static images, videos. Jifs carousels allows you to see what resonates the most with your audience. Finally, landing page testing your ads might be amazing, but if you're landing page or your website doesn't convert, you're wasting valuable traffic.[00:22:00]

Always be testing different landing page layouts, , call to action buttons, product images, and even product descriptions to optimize conversion rates. ~Sometimes small tweaks like. ~Even a color in your CTA or placement of a product image can lead to significant conversion improvements. With regards to the time frame for testing, you don't need to wait months ~for, for, for, ~for results.

Quick iterations can yield valuable insights fast, depending on the size of your audience and the amount of traffic you generate, you can Often gather meaningful data within days or weeks. The key is to act quickly on that data and continuously improve. There's something I call the continuous optimization loop, which is testing and iterating being an ongoing feedback loop.

~You, ~you're never, ever done optimizing. The more you test, the more you learn about what resonates with your audience. And this continuous loop ensures that your marketing strategies stay Relevant [00:23:00] and ahead of the curve. The T in this PROFIT framework ensures that your marketing efforts are not only proactive, but also data driven and adaptable when you consistently test and refine all of these strategies that you're learning, you're staying competitive and spend on your marketing dollars becomes more efficient to maximize ROI.

And.

Conclusion and Key Takeaways
---

Kunle Campbell: That's a wrap on today's episode on marketing efficiency unleashed. It was a really long one, but remember the key point from our PROFIT framework is P profit driven marketing starts with understanding both your MER and contribution margin. ~Are. Retargeting is essential, especially for demand capture and should form should are ~retargeting is essential, especially for demand capture and should focus on converting those already familiar with your brand ~or.~

It's optimization of your demand generation activities, which requires systems for producing and scaling content from UGC to in house production. And then [00:24:00] F, which is frequency and relevance, are critical in your email and SMS strategies. So you need to be consistent and focused on, segmentation.

The I, which stands for integration of data from different systems ensures that your marketing efforts are holistic and informed. And then T is testing an iteration, which keeps your campaigns fresh, data driven and continuously improving. If you can nail down these six pillars, your marketing efforts would not only be more efficient, but they'll also drive sustainable growth and profitability.

So thanks for tuning into this episode. And I hope you found this PROFIT framework valuable and Excited to apply to your strategies, to your own marketing efforts, as always, we'll be diving deeper into specific tactics in the future episodes. So make sure to subscribe to the podcast. I'll also be bringing on some incredible experts to discuss the tools and tactics we touched on today.

And if you enjoyed this episode, [00:25:00] I'd love you to leave us a review on whatever platform you listen to it on. It helps others find the show and spreads a word about what we're doing here. And don't forget to share it with anyone you think will benefit from today's insights. Until next time, keep optimizing, keep testing and keep driving profitable growth in your business.

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