The E-Comm Show
The E-Comm Show
Industry Insights: The #1 CPG Marketing Mistake | EP. #209
What’s the biggest mistake CPG brands make when selling online? Spoiler: it’s not their product…it’s their math.
In this 209th episode of The E-Comm Show, Andrew Maff breaks down the CPG marketing strategy every brand needs to scale profitably. From influencer marketing and Amazon strategy for CPG brands to balancing CAC vs LTV in eCommerce, Andrew shares what separates fast-growth CPG brands from those bleeding profit.
What You’ll Learn:
- The #1 CPG marketing mistake
- Rethinking CAC vs LTV in eCommerce
- Influencer marketing that builds trust
- Fulfillment that drives retention
- Amazon and ad spend strategies for CPG growth
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When you use influencers, you use content creators, there's still a mystique behind it. There's still a level of someone else is saying that this product is awesome.
Narrator:Welcome to the E comm show. Podcast, I'm your host. Andrew Maff, owner and founder of BlueTusker, from groundbreaking industry updates to success stories and strategies. Get to know the ins and outs of the e Commerce Industry from top leaders in the space. Let's get into it.
Andrew Maff:Hello everyone, and welcome to another episode of the E comm show as usual, I am your host, Andrew Maff, and today I am going to talk to you about something that I'm just super passionate about over the past couple of weeks, because it keeps coming up. So we're going to be talking about a lot of the marketing strategy problems that we see CPG brands make. So the reason I'm bringing this up, we talked to I'm going to fiddle with some stuff while I do this. So we talk, we work with, I don't even know, couple, close to probably a couple dozen CPG brands all over the place, different foods, protein bars, drinks, I would argue supplements are still considered CPG to a certain extent. Basically, what I'm what I'm referring to, is anything that a human being, or even potentially a dog, has to ingest, right? So this is, this is a special episode for all of our CPG brands out there. I wish I could make this like a sexy rate. Hey, this one's going out to all of our sexy CPG brands. This is what happens when I do these episodes on my own. So here's why I want to talk about this. There are so many common misconceptions about the CPG space. There are common misconceptions about how you should market CPG products, especially, especially on Amazon, and that's a lot of what I wanted to talk to you all about today, based on on my opinion and years of experience of dealing with different CPG brands and different owners who want to do owners who want to do it different ways, and what theoretically we were hoping would happen, and what actually happened, there is a common theme, right? So this is across your website, conversion rate. This is across your social media. This is on Amazon. This is everywhere. The facts are that for a majority of CPG products, I'll use a few of our brands that we worked with as an example where some of them are one of them is a protein bar. You can't buy a single protein bar. The shipping would be outrageous. So you have to send at least a 12 pack. There's a seltzer brand we work with. You're not sending a single seltzer. You're usually sending also about a 12 pack. So the shipping on a single unit is obscene, and so obviously you need to sell in bulk. So take your E commerce hat off for a second, right? Pretend that you don't know anything about the E commerce space, and you're just a regular consumer. If you went to the store and you saw, let's say, a protein bar that sounded good, are you going to buy one? Or are you going to buy 12? You're going to buy one, right? Every scenario, any food, you name it, you're going to buy the minimal amount to see if you like it. Yeah, maybe you buy a couple flavors, but then that's about it, right? So you're going to try it, and then if you like it, then you may go back to the store and you may buy more of them. Then if you really like it, now you're looking at, okay, how do I just keep these things stocked in my house, right? So the issue becomes, when you're selling CPG products online, how do you get someone to just try it right? And so where CPG brands often go wrong, I think, is a mix of their targets in terms of profitability for an initial sale. So basically, your customer acquisition costs. And then a lot of them, shockingly, a lot of them really don't factor in their LTV, which is probably the most important metric for a CPG brand. So here's a lot of the stuff that I always think about. One when you're trying to educate a consumer, you are going to come off bias if you are the one running ads, putting out emails, posting on social, putting on any messaging that says, you know, our product's great, you're going to be biased. That's where influencers work really well, right? Or even just using general content creators and using them and their creative and posting that on your platforms, I know that people are aware of this correct, like they know, chances are you paid this influencer, chances are you paid this content creator. It's possible that maybe you didn't, and maybe they're just a big fan, but it's most likely that you did actually pay an influencer to say something nice about your product line. We all know that in many scenarios, not all, but many influencers, will not work with you if they don't actually like your product, at least to a certain extent. So there is some truth behind it, but the reality of it is, when you use influencers, you use content creators, there's still a mystique behind it. There's still a level of someone else is saying that this product is awesome, and so while the consumer knows, chances are that you paid this person to say this, there is still a little bit more trust behind it, because it's not a business. It's not a really well designed, you know, expensive photo shoot, expensive video shoot. It's just some guy sitting in a chair saying this thing's awesome. So that's where you can connect with that user a lot more, and where you can kind of get the word of mouth going a little bit more. There's still some other areas that you have to factor in, though. So when you look at the results, right? Okay, from a messaging perspective, maybe now we understand that I need someone else, at least in the beginning, to help me start to spread the word about how awesome our product is and how it tastes and what it does for you and things like that. But now I've got to think about the results, right? And so this is where, from a marketing perspective, it becomes a big challenge, at least it has been for us, for almost every CPG brand that we work with, because our concept tends to be, you've got to look at LTV. Like to us, you just have to there are some products where maybe that's not the case, right? Like, if you're selling, like, really cool, differentiated, I don't know, Thanksgiving Day turkeys, yeah, it's a one time purchase a year. Maybe I'm factoring in your LTV over five years, but it's such an infrequent purchase that I'm not really factoring in and I'm thinking more of CPG brands, where, in a perfect world, they're buying from you, like on a monthly basis, at least. So you're going to have to spend the money to acquire that new customer. And the issue always becomes a lot of CPG brands, especially if they're bootstrapping, look at what was their return on that first order. And yes, in a very perfect world, we want to see a return on the very first order. But the reality is, if your product is good, chances are and obviously you have your retention things in place, and you know different email marketing flows and retention programs and things like reward programs. Ideally, they're going to come back and purchase more and more. But, ideally they're coming back on a monthly basis. So you're factoring in your LTV. So think about a I'm going to do really basic math. Let's say the product's $10 and you are running ads, and you make your your ROAS is landing at a one, right? So it's traditionally not great. Usually, you know you want to be in like a three to four range, but you are. Not only are you probably not breaking even, you're probably losing money because you got to, like, you have COGs and shipping and things like that, right? So let's say we're going to go again, super easy math. Let's say your cogs and shipping are five bucks, you have a 50% margin. So while you spent $10 to make $10 in revenue, it actually cost you $5 in COG. So overall, you're looking at a $15 cost. But what if you've got a product like a protein bar or like a snack or a supplement or a drink like something that is purchased, that if they really like it, they're going to come back over and over and over again. There's no need to continue to run ads to them. I personally believe for CPG brands, if you're in a wildly competitive space, like for protein bars, is a good example here. I still think that you've got to run ads on your brand name, but extremely lightly. When you run ads on a competitor's name, that user had the intent to shop with that competitor, so chances of you actually acquiring them away from that competitor, especially on a platform like Amazon, where like educating them as a nightmare. It's really difficult that user wants a quick, happy, easy shopping experience. So if they're searching for X brand name, and they find x brand name, they're going to purchase it. If they search for X brand name, but they find your product, they might look at it, but they're like, I don't know if I want to buy a 12 pack of this right now. I'm going to stick to what I know I like, and so then they go to purchase so getting new customers through competitor campaigns is very difficult. However, it's doable. And what happens is, especially for a lot of more SMBs, where you're going up against these massive conglomerates, especially in like the drink space, or in the protein bar space, or really just any snacks, you start to make some noise. They start to run ads on your brand name, and they do not give a shit if they are going to lose some money on those sales, because they just want to crush you. And so you've got to make sure that your customer can still find you if they're looking for you. However, I don't think you need to go crazy. I think that there's a very minimal 1020, at the very most, 30% of your budget, where you're focused on just making sure that people can find you if they're looking for you, but everything else should be focused on completely net new customers. Now, when you're focusing on net new, especially on the Amazon space, you've got to stay focused on broad terms, right? Like if you're if they're searching your brand name, we just talked about that. If they're searching for competitor names, chances are they already want to shop with them, so you've got to go after the people that haven't made up their mind, right? So just like in politics, you get the people that are clearly voting one way, people that are clearly voting the other, and no one really talks to them. Everyone wants to talk to the undecided voter. It is the same thing in marketing, who is the undecided purchaser? That's who we want to go after. And so that's what you're focusing on, from a CPG perspective, to try to acquire this person who maybe was looking for peanuts, and they were like, I don't know what type of peanuts I want, so I'm just going to search this type of peanut. And then, great, I found this brand awesome. Did you educate them well enough? And then once they purchase, can you stay on top of them so that they continue to come back? So that's where you start to build the brand loyalty, CPG, especially on Amazon, because LTV is always a nightmare to figure out, but it is very difficult, because you have to figure out exactly how frequently are these people going to come back.
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Andrew Maff:Let's go back to the math problem, right? $10 Like, I buy stuff and I stick to it and on like, a monthly basis product, $10 customer acquisition cost, $5 COGs and shipping, right? So you lost $5 on that first sale. But if you know, over the next year, they're going to come back and shop with you on a monthly basis. This is big for supplements, right? Supplements? It's like this is a no brainer. Let's say that they have to they come back and they shop with you on a monthly basis. That means you're going to make another$110 in revenue with no additional advertising, because you acquired them that one time. So your actual return is an 11x ROAS because you spent $10 to acquire that one customer, and you actually made $110 on it. Cut it in half because you got$5 cogs here at $55 right? So that's factoring in your net profit on it. But now you've acquired this new customer that obviously, in a perfect world, staying with you, surpassing a year. Now, here's the other thing about LTV that a lot of CPG brands don't think about. LTV does not actually mean, in my opinion, the lifetime of the lifetime value. It's it is more about a certain period value, right? Because, let's be honest, if I personally have used the same supplement company for I for like, don't even know at this point five, six years, I've eaten. I'm very much a creature of habit. I find something I like, I'm like, But I can guarantee you a lot of times those don't work as well why change it? So I stick to it for a really long time. And so that's just me. I know not everyone's like that. I know there's a big conversation about like, Gen Z is not very brand loyal, and that's a different podcast for a different time, but this is one of the things where you have to factor in, how long do you want to define lifetime, right? as maybe they once did, because now people are are just they're like, anyone can make this type of stuff. I want to know that when I eat it, I'm not going to die. And so that's where a lot of CPG brands need to focus. I know this was kind of like Andrew's venting from having a lot of conversations with multiple CPG brands in the past couple of weeks, but it's, it's the same story across the board. I don't know. We only work with, like, maybe a handful of CPG brands that are like, yeah, no, this makes a lot of sense. And like, we're good. A lot of them are like, no, we want X ROAS on the first order, which the other thing too, the competition, like, unless you're inventing a totally new food or something like, have it, have at it, in which case you know something like Amazon's probably not good for you, because you got to educate. But a lot of brands have this issue where the they're in such a competitive space that even though their product is differentiated, these massive companies that have been around for generations are spending an arm and a leg for certain keywords, and so you get into a situation where you can't sell a single, a single unit, right? You got to sell like a 12 pack or something, and so, but you also can't make it wildly expensive, because then no one's going to buy it. So let's say, you know, you've got it in that sweet spot of, like a 25-$30 cost. Your issue then becomes a lot of these massive companies have got CPCs, especially in the CPG space, and especially on Amazon, sitting around like three, four or $5 so unless you've got an amazing conversion rate, which is possible, it's it's really difficult to make that initial purchase very profitable. So you've got a position that we're A: How can I kind of weasel my way around and get really low CPCs, I personally for CPG brands, but we've found what works really well, by the way, running product based targeting, running ads directly on your competitors, ASINs or running ads. Sometimes there's certain competitors you don't want to do that to because they will start to see you and they will come after you. So usually you have to do what they're doing and go after some of the smaller guys that are newer to the space, that are spending the money on the advertising driving the traffic from that broad keyword or whatever it is, just sit on their product, on their on their product listing, and see what you can do to get them to turn over. That's great for Amazon. Obviously that doesn't work on others websites, but I digress. That's where you've got to focus. Right? How can I keep these CPCs as low as possible? Because my cost per my conversion rate is going to have to be high in order to get these people to convert at a tolerable rate. But even then, I still have to factor in, how many times can I anticipate them to come back and shop with me over and over again, where I can actually see my completely net new customer list growing significantly higher, and the brand awareness of the people that are purchasing my product start to really grow, so that I can get that snowball effect going, so that more people are searching for my brand name, and I'm not so reliant on these broad terms, and thus I don't have to spend as much money on advertising. So then that's where you start looking at, okay, how do I just keep word of mouth going? And that's where you start looking at more top of funnel and just pouring gas on that. I know this was a venting session, but sometimes they're necessary, right? So CBG brands, if you were listening, I hope you enjoyed it. Feel free to reach out if you have any questions. I'm more than happy to debate it with you. I think sometimes it's fun. Thank you all for joining as usual. Please make sure you do the usual thing, rate review, subscribe all that fun stuff on whichever podcast platform you prefer, or head over to the Ecomm show.com to check out all of our previous episodes. But as usual, thank you all for joining. See you next time. Have a good one!
Narrator:Thank you for tuning in to the E comm show. Head over to Ecommshow.com to subscribe on your favorite podcast platform or on the BlueTuskr YouTube channel. The E comm show is brought to you by BlueTusker, a full service digital marketing company specifically for E commerce sellers looking to accelerate their growth. Go to bluetuskr.com now for more information, make sure to tune in next week for another amazing episode of the E comm show!
