10 key areas to strengthen your profit in difficult times

Is my ecommerce business lean enough to successfully manage an economic downturn?

In our opinion, this should be the primary question of any business owner in these uncertain times. 

Below, we list a number of specific areas to look into; advice on what to look for and examples of how this impacts the overall profitability and performance of your business. 

The truth is - small changes in the right places can make a huge impact on your bottom line. We see this every day with our customers.

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1. Stop paid ads that do not meet profit targets

If you’re blissfully unaware or simply skeptical of the fact that using a ROAS target in your paid ads will lose your money, we suggest that you read this article.

Otherwise, the advice is simple - make sure that you are not paying for ads that are not hitting their target from a profit perspective. 

Now, you might feel the urge to add: “How about the conversions that are important to the customer LTV (Lifetime value)?”

And you’re right. 

Not all conversions need to be profitable. They simply need to hit their target from a profit perspective, as this is the only way to make sure you’re running according to plan. Revenue metrics will inevitably hide crucial details from you, unless you have a very simple business and cost structure.  

Things to consider: 

  • Ads do not need to be profitable. For example, it can be a viable strategy to run unprofitable top funnel campaigns. Nevertheless, the increased transparency of profit targets always makes it more effective than to run your ads based on revenue targets.
  • Keep a high hygiene on your ad spend - do not succumb to a “all exposure creates an indirect effect”. Only spend money on ads, when you know what you intend to get out of it. 
  • Watch out for overspending in retargeting ads, where customers are likely to make the purchase regardless of the ads. Don’t use bottom funnel view-through conversion in retargeting.

2. Scale profitable ads

Once your unprofitable ads have been closed down, you’ll have the opportunity to allocate the saved ad spend to the highest performing ads and increase their reach. That’s a given and highly recommendable. 

However, getting the most of your highest performing ads requires more than simply increasing their ad spend. 

Counter-intuitively, you need to make sure that your POAS metric is not too high. 


Because this is a strong indication that you can increase the number of conversions by lowering your POAS target. 

A high POAS does not always equal an increased overall gross profit. It only shows the balance between gross profit and ad spend, i.e. how much does each conversion contribute to the business profitability. What you want to see is a stable POAS level, while increasing your volume - i.e. number of conversions. Only when you know that there is no more volume to be won with a profitable ad spend, should you focus on increasing your POAS. 

So, make sure that your performing ads get the most budget and set your POAS target to ensure maximum realization of the market potential.

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Things to consider: 

  • Is your POAS® level above the minimum profit target and/or do the campaign max out the budget every day. If yes, consider lowering the POAS target to increase your conversion volume.

3. Switch to server-side tracking

Ecommerce businesses rely on data and server-side tracking is the method to ensure data-: 

  • Consistency
  • Reliability
  • Security

A server-side integration works through API’s and ensures that 100% of the available conversion data gets sent to the required platforms. 

As basic as this might sound, this is far from the reality for most of the ecommerce businesses still running client-side tracking - a technology best known for its inconsistency and non-security. A client-side “rule of thumb” is that you will lose 15% conversion data on average. Primarily, this loss of data is caused by ad blockers, people closing down the confirmation page before script fires, slow load time and payment gateways redirecting to slow or not at all.

This is important because the “client-side data gap” is more than likely to cost you money.

Why and how?

When conversion data is missing, you are at risk of closing down campaigns that are actually profitable - because the profitability is not visible to you or your marketing specialist, who are working to hit specific targets. Also, the Google AI is no better than the data it gets to work from. Missing conversion will inevitably lead to poor performance.

So - before you go about making a lot of decisions, make sure to close any data gaps and create the strongest foundation to make the right/profitable decisions on. 

Server-side integration is the way to go.

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Things to consider:

  • Do you often see conversions missing in Google Analytics compared to your Ecommerce CMS?
  • Facebook Ads has lost a lot of data integrity post-ios14.5 and server-side tracking is an absolute must-have if you’re running Facebook ads.

4. Focus on  conversion rate optimization (CRO)

Once a potential customer enters your online business, you want to make sure that your user experience facilitates an intuitive and unobtrusive path to the purchase. 

This is a science in itself and great amounts of research has gone into human online behavior.This article [https://www.benjamin-gundgaard.com/conversion-rate-optimization-in-187-steps/] alone lists 187 actions to take to optimize your conversation rate. 

In general, we recommend that you differentiate between hard and soft conversions. A hard conversion being the actual purchase and a soft conversion being e.g. a newsletter signup. 

If a visitor does not convert, you want to get the necessary information to allow you to reach the person again in a personalized and timely manner to increase the chances of future conversions.

Make it easy and desirable for your visitors to either make a purchase or indicate interest at a later point in time. 

Exit intent is a great strategy for soft conversions. As it only shows if the visitor shows intend of leaving your site, it will not disrupt the journey towards a purchase and still prompt the visitor to a soft conversion.

Things to consider: 

  • Read this article - it’s really good https://www.benjamin-gundgaard.com/conversion-rate-optimization-in-187-steps/

5. Increase the average order size

The only thing better than selling one pair of shoes is to sell two pairs of shoes… and a pair of socks… and maybe you want some shoe polish to go with that? 

Make sure that your cross selling and upselling features are nudging your customers to spend a little more than first intended on your website.

It’s often the complimentary products that make you the money. The HDMI cord for the new PC monitor, the casing for your new ipad, and so on. 

Pair your products in complementary sets and make sure your purchasing customers get informed that these products go very well together.  

Also, free shipping is a classic tool to increase the average order size. Just remember to make sure the extra shipping costs are actually covered in the increased order size. 

Things to consider: 

  • Do you have an overview of how your products compliment each other
  • Would it make sense to create product bundles and sell them with a small discount
  • Do you have product recommendations in place on your website
  • Could you benefit from a AI powered recommendation engine

6. Get your retention rate up

It’s easier and less expensive to keep a customer than to win one. 

Perceive your existing customers as your extended network, with whom you always want to stay connected and top of mind. Like a friend who hasn’t heard from you in a long time, your customers will find “new friends” if you do not make sure to stay connected.

Send an email once in a while, showing that you care. Invite them to some nice offers here and there. And make sure they are reminded of you once in a while on social platforms.

Remember the soft conversions we mentioned in step 4? It’s important to work with potential customers i.e. the sign-ups you’ve received from a retention perspective as well. Once you’ve gotten the interest of a new friend, make sure to stay in touch and let them know how awesome it would be to be your friend. 

Build a relationship with your potential and existing customers and make sure that they come to you when they need something you have to offer.

Things to consider: 

  • Do you have automated email/sms flows set up for:
  1. Exit intent flows
  2. Lead warm-up
  3. Post-purchase
  4. Browsed abandonment
  5. Abandon cart
  6. Back in stock
  7. Winback/Re-activation i.e. when you have not had a purchase from a customer in X weeks
  • Can you send personalized offers?
  • Do you have remarketing running on Google Ads and Facebook Ads?
  • Do you use your lead and customer data to create highly targeted audiences in the marketing channels?

7. Negotiate better shipping and payment contracts 

The variable order costs of your business can be the “silent killers” of your profitability. This is something we see over and over again. The small percentages that trick you to be indifferent. Is it really worth the hassle to get 0.5% less payment fee?

Short answer - Absolutely!

Remember - it’s 0.5% of your entire revenue including VAT. It can sum up to a lot.

As a business owner, you always want to make sure that you have the cheapest contracts with your shipping- and payment providers.

Things to consider: 

  • Routinely look for new alternatives and collect quotes from alternative suppliers, pitching them against each other. As your business grows, you will obtain more negotiational power. 
  • Using a promise to have their option as default or “free shipping” increases your negotiational power.
  • Consider which option is your default. Is it the most advantageous for you and popular enough for the customers to choose it?
  • Make sure you are only offering payment and/or shipping options that are actually viable for your business. It’s not fun to win a customer with an advantageous short-term loan option, if your profit gets lost in the process.

8. Negotiate product cost discounts

In economic downturns you might consider it less plausible that you’ll be able to negotiate discounts on your product purchases. 

However, it’s still important to make sure that you ask and do your best negotiations. Always look for alternative suppliers and keep an on-going dialogue with your current suppliers. Ask directly what discounts they can offer based on different quantities.

Keep in mind that an economic recession also affects your suppliers and they might be willing to offer some favorable terms on specific products that they need to keep moving.

Everything saved is won.

Things to consider:

  • How much more would you have to buy to get a considerable discount? 
  • Would it be realistic for you to move this stock? 
  • Do you have the liquidity to buy a larger bulk? 

9. Be calculated in your pricing strategy

Online business has historically been primarily about lowering prices to be competitive, rendering some lines of business extremely almost non-profitable. Technology being the standard example.

However, it’s important to always keep in mind that you also have products that would probably sell the same if you increased the price. 

Take a look at your best selling products.

What is the competitive situation? Are you only winning based on price or could you increase the price a bit and still win?

Remember, these price increases will add to your bottom line directly. 

It’s worth the effort.

Things to consider: 

  • The cheapest price does not always win - it is a matter of several factors and underlines the importance of superior conversion rate optimisation.
  • Test if you can raise the price on your top performing products.

10. Close the resource gap

In an economic downturn, you’re likely to have an over-capacity in your stock- and order-handling personnel. 

A natural thought is to lay off the excess resources, and that might be the best way to go. 

However, it might actually be more profitable to increase your competitiveness and fill the gap of your excess resources. The cost alone of hiring new employees once you need them again makes it worth considering this option.

We’ve seen several cases where the latter option turned out to be the most profitable solution.

Things to consider: 

  • What is the maximum capacity of your order-handling team i.e. orders shipped per day?
  • Does you POAS level indicate a potential to increase orderflow by 
  1. increasing ad spend and CPC in paid marketing channels
  2. Lowering your price on select products
  3. Setting a lower free shipping threshold

We’ve reached the end of our non-exhaustive list of recommendations of how to increase chances that your business will thrive during an economic downturn. 

Keep in mind that it’s all a matter of balance and an understanding of your unique marketing situation. 

Creating a successful business takes skill, experience and some luck. 

However, luck comes easier to those who prepare. 

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