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How To Optimize Ad Campaigns for Profitability With William Harris of Elumynt

William Harris

William Harris is the Founder and CEO of Elumynt, an ecommerce growth agency focused on profit via hyper scaling. Elumynt has been featured in Inc. and is an Inc. 5000 Winner and Best Workplace Winner. William has helped acquire 13 companies, including one that sold to GoDaddy. He’s also published over 200 articles about the ecommerce space in Entrepreneur, Fast Company, Shopify, and more.

Here’s a glimpse of what you’ll learn:

  • [1:58] William Harris explains how he optimizes clients’ ads for profitability
  • [8:28] William’s process for managing clients’ advertising budgets
  • [13:48] How to identify and analyze advertising data
  • [17:10] Common misconceptions about ad spend metrics
  • [20:30] Strategies for testing ad creatives — and how to select an ideal campaign
  • [29:48] Key considerations for customer LTV returns
  • [33:57] How William balances passion with entrepreneurship

In this episode…

With so many advertising methods and factors impacting campaign performance, brands often become overwhelmed with the idea of ad testing. Consequently, brands launch hundreds of campaigns simultaneously, lacking consideration for budget spending and customer acquisition costs. How can you structure your ads around profitability?

Before testing any creative campaign, leading ad spend expert William Harris says to allocate your budget to equalize returns. This allows you to experiment with a target performance goal, mitigating profit loss by aligning your budget with the objectives. For instance, you can prioritize the cart or click optimization when conducting ad testing. By conducting phased ad testing with a structured budget, you can observe incremental revenue increases.

On this episode of the eCommerce Profits Podcast, Joshua Chin welcomes William Harris, the Founder and CEO of Elumynt, to talk about ad budget optimization. William shares strategies for testing ad creatives, the common misconceptions about advertising metrics, and how to select a high-performing campaign.

Resources mentioned in this episode

Sponsor for this episode

This episode is brought to you by Chronos Agency.

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Our team of passionate email marketing experts has helped hundreds of brands generate over $70 million in return from email alone, and our clients receive an average of 3500% ROI from our efforts.

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If you want to take your revenue to the next level using email marketing, be sure to email our team at sales@chronos.agency or visit chronos.agency to learn more.

Episode Transcript

Intro 0:04

Welcome to the eCommerce Profits Podcast where we feature top founders and experts in the ecommerce Industry and take an in depth look at the struggles and successes in growing ecommerce brands profitably.

Joshua Chin 0:21

What’s with folks, here we have with us William Harris, CEO of Elumynt, spelled Elumynt. Interesting, and an advertising agency for ecommerce events, some incredible stuff in the space. Working on some incredible projects that are currently still behind the scenes, we talked a little bit about it before hit record. And I’m super excited for you, William. But thank you for coming on the show and sharing with us your insights and your experiences around growing businesses, not just for growth sake, but profitably, which is super interesting. Seems pretty straightforward and pretty common sense. But I suppose it’s not as common as we think. Let’s start there, you have a really different approach to optimizing for profitability as an advertising agency. And that’s often difficult just for some context, we run an advertising agency as well, primarily focused on email and SMS. But when you’re a specialist, greater what you do in your specific channels, it’s really difficult for you to have a relationship with clients in a way where it allows you to optimize for profitability, and understand what your clients are going through behind the scenes. And you have a different approach to that I understand. Tell us more about what that looks like. And how do you exactly optimize ads around profits for clients?

William Harris 1:58

I love that you call it COVID stands, because you would think that it would be. But I always appreciated the idea that it’s like if if something was common, the very nature of what makes it common is is why it’s not good to a point, right? Like, if you think about the bell curve, it’s like that just means average. And it’s not going to be exceptional. And so while it would seem like it makes sense, it’s not something that most people are doing. And I think that there’s a couple of reasons why. One of the biggest reasons why I don’t think a lot of advertising agencies have begun optimizing around profit, for the most part is because they are not exposed to it, they don’t have any access to those numbers. And for one reason, I think that’s because it requires trust, you have to trust that you’re sharing some pretty, you know, let’s say deeper personal metrics. With your your agency, there’s, there’s got to be a level of trust there. And so we’re you know, for a lot of our customers, we’re getting into their actual p&l, or at least some type of analog of what that p&l looks like. And then the other part of that is, I think that it’s not even so much that it’s from the agency perspective, a lot of customers were working with their marketing team. And the marketing team has no clue what the p&l is. And that’s pretty common. If you get into a lot of bigger businesses, it’s not like the typical marketing director, or ecommerce director has access to the full p&l. And so they don’t even know what that is to share with us. And so I think a big part has just been that lack of access to data and the lack of maybe trust to go that deep. But once we once we establish that rapport with people, we can show how that makes a big difference. It makes a lot more effective at hitting a target. And so let’s just imagine that you were, let’s just say that you were learning how to play basketball for the first time. And you You told me you’re like, So your goal is you have to get the basketball from this side of the court over to this side of the court. And then you have to, you know, and then you can make points when you get it down on this side of the court. And I keep doing this repeatedly, I keep getting it to my side of the court, I’m pretty excited. And I’m happy about it. Or let’s say soccer, like I don’t know, soccer balls, yeah, didn’t play that. So maybe the field or the pitch or whatever it’s called in soccer. But you get there, you just keep doing it. You’re just like, boy, we’re crushing it, like I keep getting it to our side, we’re doing really well. And you’re like, okay, but my actual target is not just to get it to the side, but you actually have to get it in this hoop, or in this net, or whatever that might be. And you go well, I didn’t know that I didn’t know that there was this other target that was hidden that I was not aware of that I had to hit. And so I think that’s what makes it difficult sometimes is that sometimes agencies will pat themselves on the back and say we did a really great job. We kept getting it over to the side of the court. And the business is saying the finance team at least is saying yeah, but we didn’t actually hit the real goal that we really had that we didn’t tell you about and gave you no metrics or numbers or whatsoever to hit. And so I think that’s one of the first pieces there’s like, we need to be on the same page with what the real goal is.

Joshua Chin 4:52

I presume that like just top of mind, this may not work for every single client that you work with. Not just on a trust level, but just from a, from just a feasibility level, it may be difficult to understand the p&l of a private, but really, really large company, when there are multiple business units involved in cross pollination of, of finances, and most importantly, may not be in the either the purview or the interest of your stakeholders, your key stakeholders within marketing, because they might be looking at different set of metrics. In those instances what? Well, hold on first, let’s take a step back. First question. What type of businesses would this apply to? And do you have like, in the back of your mind? Do you go like, alright, above a certain level of sophistication or, or revenue level, you go, Alright, I gotta take a completely different approach. And in the mid market, this is what I would do small as well to do.

William Harris 6:06

Yeah, um, so, you know, mid market is where we consider ourselves to be, you know, really prime in the way that we at least define it, at least in generalities is gonna be about 10 million, 200 million, that’s like our sweet spot of who we service. When we get into companies above that, there’s not that many, the largest company that we helped get acquired sold for 100 million, just to put that in perspective, right. So not quite unicorn stage. So we’re, once you get above that, but within like that, that segment of customers, you know, the $10 million customers are probably much more likely to that we’re working with the founder still in some ways, and we have access to them and able to get those kinds of numbers in the maybe you start getting to like the, you know, 50 million to 100 million, and that starts to kind of change a little bit. So I’d say that you’re right about being able to get access to that data and whether or not that’s in, even capable from their their data capabilities to be able to put something like that together to send us in those situations, what we’ve tried to do then is some type of an analog to whatever that p&l is, and like, the most basic way that I would like frame this is, can we have a rough idea of what your cost of goods sold are as a percentage of your sales? So if I know that you sell $2 million worth of stuff today, you know, what were the cost of goods sold? 40% 20% 90%? Like that makes a big difference for us, right? Like, can we at least get there? And then, you know, I can even figure this out usually typically in the backend of Shopify. Oh, Ron, about what’s the shipping cost as a percentage of total sales? What’s the returns costs to the number of people that returned product? What’s that as a percentage of sales? And then and then ideally, like, we get, like a round number of about what we think the overhead would be. And if we don’t have that from that company, then you know, just using our best judgment, based on what we’ve seen for other companies around that size, can we kind of put together a number of about where that might be? And that’s what I would say is like, that’s an analog, it’s not gonna be the p&l, but it’s gonna get really close to understanding the profitability of what we’re doing.

Joshua Chin 8:08

How does it change your behavior? And how how you optimize for for ads? Because you’re, you’re obviously looking at multiple channels, not just meta, not just to Google? How do you how do you piece that together, especially when there are other channels that are involved, that may be outside of your control?

William Harris 8:28

Yep. So in a couple of examples of that, you know, there’s there’s one company where we manage all of their digital, but we don’t manage their TV and radio budgets and their TV and radio budgets are several million a month. So it’s a substantial budget, there’s another one where we don’t do their influence or management, we do influence management, we don’t do theirs. And that’s again, like another couple of million dollars a month for them. And so that has a pretty substantial impact to the overall business. And so there’s, there’s two parts of what we’re looking at with this, which is, your right, we might not have influence over all of the other things that are going into the puzzle pieces, right? But we want to say, overall, when you when you level set everything, are you at least more profitable holistically, based on what we’re doing, then what you aren’t doing. And so there’s two ways we’re looking at this one is gonna be the aggregate look of profitability, which is that aspect of things we’re, you know, ner is a good analog to get a rough idea for that. Media efficiency rate, total revenue divided by total ad spend. And so if we say, you know, if we do looping, you know, the ad spend that you had on TV and radio, and we loop in, you know, the influencers and all of that stuff. Can we at least say that you’re at least maintaining where you need to be, even though we didn’t influence those things, we at least can say, you know, you’re maintaining a 10 to one or a four to one or whatever that is, that’s your sweet spot. Then we can look at this and say, you’re likely still in a good spot as we continue to scale on what we’re doing here as well with everything else. That’s the aggregate level look that’s really worthwhile. Now for the ones that We are managing everything, it becomes very easy because we can get that now, just not from an MDR perspective, we can get it down to the dollar amount and say, We, you know, we were able to scale you $200,000 More in ad spend, you made $800 and more in, let’s say, top line revenue, and you made $300,000 More in profit after everything’s said and done. And so, you know, that was a really good thing minus the ad spend and everything else so, so that’s really nice when you get there. The other aspect of this, though, is gonna be on the unit level. And so a big part of that we’re looking at for this would be, let’s say you have a product that costs $200. And let’s say that on that $200 product, you know, your cost of goods sold is higher. And so let’s say that you’re the actual amount that you’re going to make profit off of that sale, it would be $50. Now, let’s say you have $100 product, and the actual profit that you’d make from that $100 product being sold is $75. If you have less margin or less cogs on that one. Let’s say that we acquire customers, we spent $50, to acquire a customer for you, well, that $50 for a $200 purchase is a four to one row as right. And so if you were just looking in the back end of Google or Facebook or something, you might be more excited about that four to one instead of the two to one row as of the $100 purchase with a $50 to acquire that purchase. But in reality, from a profitability standpoint, that $100 item, you made $25 more profit. And so you had a lower row as two to one, let’s say a lower MVR from that as well, if you’re going to include that, but the profitability of the bottom line is better. And so what we like to do is let’s get at least the cost of goods sold for the items within your catalog. So we can optimize the campaigns around which items are more profitable for you as well. And then we can actually send that data into Google into Facebook. And we can use allow their machine learning to also get more intelligent about sending the the getting sales of the more profitable products, versus just the ones that have the higher top line return on adspend.

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