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You don’t earn 220,889 Facebook fans overnight.
You especially don’t get a full 62.48% of your fan base talking about you on the platform.
Average Facebook engagement for brands as a percentage of their fan base (how many people like your brand page) is about 1%. And that’s when you have a good engagement rate.
All online businesses know the Facebook engagement story well. Facebook’s algorithm has continued to promote brand pages in the newsfeed less and less. Organic reach is near impossible. Facebook has become pay-to-play. And it’s still rather unclear on if those clicks and likes turn into dollars down the road.
It isn’t unclear for Spearmint Love, though.
Founder Shari Lott spent three years as a mommy blogger, building a devoted audience on Instagram and Facebook –– where pictures rule. Her content was like that you might find on the Land of Nod’s blog. But note even Crate and Barrel’s baby subsidiary could compete with Shari.
We opened up shop with BigCommerce in September 2013. That was just the beginning.
There was a certain quality to her images that won her almost half a million followers across the two social platforms.
She had tapped into something no other baby clothes and goods retailers had uncovered before: she was teaching new mothers how to shop for their children.
“I’ve spent years working to understand my customer, to know her on an emotional level. It didn’t happen overnight,” says Shari. “I sell a feeling in a photo –– and make it easy for every customer to make that photo her family reality.”
Shari’s talking about her retail business now. Spearmint Love has been an online store for nearly as long as Spearmint Baby was a blog (3 years for each). In blogging, Shari made the right connections with wholesalers and distributors. And, she built an audience sitting on the edge of their seats for her next curated goods photo.
“I put up a photo of not just a shirt or shoes, but of an entire outfit. And moms will come back to the site and buy everything in that picture.”
This is a stark differentiation from what competitors have been doing, though go to some of their sites and you’ll see them trying to mimic Shari’s merchandising eye. Previously, baby brands would post images of single products, or combine goods within the same category.
There’s a reason, though, that Shari’s version of branding –– a heavy focus on detail and curation that appeals to a particular emotion or sentiment –– hasn’t always been so popular by larger brands on social platforms.
The ROI was difficult to track.
Sure, Facebook Ads reports on reach, frequency, impressions, post and page engagement, and on-site checkout or add to cart metrics, but that type of segmented view doesn’t give a retailer the full picture.
What every retailer needs to know in a pay-to-play marketplace is cost of customer acquisition. And with 62.48% of Spearmint Love’s audience talking about them, you can bet Shari and husband John don’t just measure individual ad to conversion effectiveness.
The Success is in the Data
Shari’s the brains behind the Spearmint Love operation –– the trained eye that continues to build a dedicated following of new parents. Her husband John is the founder of an equity firm. He has years of online business experience behind him. In January 2016, he started helping Shari scale the business in the spare moments between his work as a principal in an investment firm based in New York City.
I ask what he’s been focused on, what his number one metric of success is for the company.
“Cost of acquisition,” says Lott. “That’s easy.”
When asked what the number one metric of success is for the company: Cost of acquisition, says Lott. That’s easy.
John talks obsessively about data. He’s been inundated in it his entire 25 year career, after all.
Cost of customer acquisition is the one metric he looks at every single day.
It is the tip of the spear in understanding business success.
The lower the cost of customer acquisition, notoriously the most expensive and difficult aspect of running a successful online business, the more you can focus on customer lifetime value through upsells and cross-sells.
He aims for less than $10 per customer in acquisition costs. If he lands in the $5 range, he considers it a home run.
“We decided very early on that we weren’t going to raise any outside money at all,” says John. “I pay very close attention to what the self-funding growth rate of the company is. If I get customer acquisition costs right, then I’m making sure I’m doing the right thing from a cash perspective.”
In this regard, Facebook advertising is his testing ground –– his home run derby. He’s managed to get cost of customer acquisition down to $5 through the platform.
It’s an impressive feat that has even the Facebook team taken aback. He and Shari are getting calls left and right to participate in case studies and beta programs.
“How did you do it,” is the most common question. I’ve heard it asked again and again in the BigCommerce offices and on calls with Facebook copywriters.
John’s answer matches Shari’s: “Certainly not overnight.”
A Stroke of Facebook Advertising Genius
In early spring of 2016, the data coming through Facebook advertising platform was dumbfounding.
There was a stark ROI dropoff John just couldn’t explain.
His initial inclination was that the ad was just going stale. It no longer resonated with the audience and, as a result, Facebook’s algorithm was showing it less and less. The ROI just disappeared. After months of monitoring individual ads and updating copy and photos –– the dropoff wasn’t improving.
“I was wrong,” says John. “It took me six months to figure it out.”
He was on a walk when the answer just came to him. It hit him out of the blue. It was so obvious. He’d been looking at the wrong thing for months.
The ads weren’t stale. Not at all.
The audience cohort had simply moved on.
Solutions come to you when you’re not actually working on what you’re supposed to be working on.
The ROI dropoff was a function of Spearmint Love’s industry. It was a clear indicator that John wasn’t fully understanding his target audience.
His work to change the superficial variables had failed. His copywriting wasn’t off. His understanding of human growth and progression during the child-rearing stage was.
“What was happening was the people were changing,” says Lott. “The mom who was buying that product was no longer in the same life stage. I had to adjust my custom audiences to be attentive. That took me six months to figure out. Insights are funny that way. They come to you when you’re not actually working on what you’re supposed to be working on.”
There are multiple stages a new mom and her friends and family go through from pregnancy announcement to 1st birthday.
Today, Spearmint Love begins advertising to new parents the moment they announce their pregnancy. That’s when parents and loved ones begin buying decorations.
A few months before the birth, shopping habits change again. Things have become more real –– and now Spearmint can begin advertising products that solve both baby and mom’s pain points.
A few months after baby is born, shopping habits change once again. Now, the baby is bigger. The parents not as new. Life is beginning to hit a new normal.
Spearmint has ads for that, too.
Every Single Facebook Ad Targeting Option You Have
Use this chart to plan out your next Facebook ad target audience. And remember, your audience can –– and will –– change over time.
How to Measure Facebook Advertising Success
Today, Spearmint Love’s Facebook advertising runs like clockwork, syncing with audience changes based on a full year of testing. The brand grows with a young family, providing always relevant product solutions at every stage of life.
With the ROI dropoff solved, John’s attention focused back on customer acquisition costs.
For him, it isn’t just ad effectiveness he measures. There are two benefits to Facebook advertising, and John wants his ads to accomplish both:
- Return on investment: “This is more discreet economics. Are we getting a good return on ad spend through this on a revenue basis or is my cost of acquisition from a customer’s perspective good?”
- Grow the audience: “If a given ad is giving me followers to my Facebook page or followers to my Instagram page or an email address, that’s a consideration factor for overall ROI.”
Get a Holistic View with BigCommerce Analytics
For individual channel ROI, Spearmint Love uses a channel’s own advertising platform data (i.e. Facebook Insights).
Brands can use BigCommerce’s Marketing report for a more holistic view on how everything is playing together and which channels are producing the largest ROI overtime.
How to Measure Directional Business Growth
John tracks every ad for conversion rate. He even tracks different ad sets and types. For the most part, he uses the Facebook advertising platform itself for reporting. He also looks to Google Analytics.
This is because beyond Facebook, Google AdWords provides another low customer acquisition channel for Spearmint Love.
Measuring all of this takes serious know-how and the manipulation of various dashboards. To get a more holistic view of customer acquisitions costs across the company, John also uses Excel.
He will export files from Facebook and Google’s platforms, and feed them into an Excel sheet he created. The formulas he’s added in populate once the data is updated.
We’re looking at ad spends where we’re getting at least $5 of revenue or more, preferably closer to the $10 mark for every dollar of ads spent.
Beyond customer acquisition, he uses these sheets to measure revenue generated per dollar of ad spend.
“This one will vary by the type of person or the type of business,” John explains. “Depending on what your margins are, if you’re a cosmetic company and you have 65% margins, you can be more aggressive. If you’re selling things at 25% margins, you’re going to need a higher return to make that make sense. For us, we’re looking at ad spends where we’re getting at least $5 of revenue or more, preferably closer to the $10 mark for every dollar of ads spent.”
While both cost of customer acquisition and revenue generated per dollar of ad spend both point to overall business success, you need a view across all company activity to truly determine trajectory.
You need something that accounts for ads as well as organic and direct traffic.
To get this view, John does two things monthly:
- Measures net new customers acquired through aggregate ad spend
- Measures total net new customers
“We do this because if I’m building an audience and getting a high number of likes from a given organic post, that’s really an opportunity for that person to convert then and there or downstream. Total new customers is obviously always higher than the ones that I acquired through ads directly. We actually measure both of those as a holistic check to make sure what we’re doing is working across the entire platform.”
How Spearmint Forecasts Customer Lifetime Value
John’s focus on customer acquisition costs serves a larger purpose than an immediate sale and return on investment.
He and wife Shari have set up a real-life customer lifetime value flowchart as mechanical in its accuracy as their Facebook ads.
Coming from a financial background, John transferred his Vintage Report skills to the ecommerce world. A vintage analysis is a tool that allows for performance comparisons across portfolio segments. This type of analysis can help you to identify trends and forecast success of future additions to a portfolio (or in ecommerce, a new product line).
Example of vintage reports from CapitalSVSC.
In ecommerce, this function is known as cohort analysis.
How to perform an ecommerce cohort analysis
- Build a custom table on every customer by pulling the customer order ID from BigCommerce, or your ecommerce platform.
- From there, cohort customers based on the month of their first purchase. A customer that was acquired in the month of January 2016, for instance, is forever associated with the January 2016 cohort.
- Tracks how various cohorts behave overtime, looking for patterns between acquisition time frame and next purchase.
“We know on average our typical customer will convert again in X months,” says John. “We can predict when that next order might be and we can time our marketing based upon those types of insights.”
How to implement insights from a cohort analysis to increase LTV
Beyond prediction, deep knowledge of various customer cohorts should change the way you present your site to that cohort.
For instance, John also uses a proprietary cohort to personalize the on-site shopping experience similar to how the company’s Facebook ads work.
He calls these “custom windows.” The windows align to a change in behavior and mindset for new parents, particularly mothers.
John’s goal is to capture the new mom when she finds out she is pregnant, or about three months into her pregnancy.
“The window of time from six months before the baby is born and six months after the baby is born is the exact time we want to capture them. Ideally, we capture them as early in that window as possible. That’s window one.”
The second window is six months to 18 months after the baby is born. In this window, John says there is still a lot of spending, but no where near as much as during window one.
The third window goes from 18 months to 30 months, and the fourth captures everyone else past that.
Each cohort receives different nurture streams, advertisements, up-sells and cross sells that align with their interests.
The Perfect Measuring Frequency
John is working with a lot of data, and we didn’t even dive into the UX, UI and SEO research he does.
But exactly how often does he do this?
The answer varies, John says. He has reports he looks at daily, others weekly and others still on a monthly basis.
- Daily analytics check in: Cost of acquisition on active campaigns
- Weekly analytics check in: Weekly audience growth across owned channels (i.e. Facebook, Instagram, emails, etc.)
- Monthly analytics check in: The aggregate return rate on customer acquisitions
Once he does these check ins, he asks himself this:
Is our growth rate accelerating or decelerating? If so, why? What’s driving that?
It’s a question he asks himself multiple times a day. The answer is his day’s testing ground. Which levers can he pull? What’s not working? How can it be optimized?
The measuring is what allows him to identify success, but it’s the questioning that ultimately grew Spearmint Love’s revenue by 1,100% in 2016.
“We opened up shop with BigCommerce in September 2013,” says Shari. “That was just the beginning. We still have that standard template you guys gave away for free, which in a lot of ways I’m proud of. We’ve been able to grow that big with something you guys gave us for free! It’s kind of cool to say that September 2013 was our launch date and we’ve just been plugging away ever since.”
Spearmint Love is a tried-and-true success story of the “If you can’t measure it, you can’t improve it” mantra. One expert pair of eyes, an equity fund manager and analytics that make this baby clothing company one of the most sophisticated online operations in business.
And it all started with quality content the bigger brands just didn’t have the eye to do.
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