Here is a quick fact-check: Research suggests that up to 60% of marketing budgets are wasted, and this happens due to a lack of effective strategies, optimizations, and poor targeting, leading to a potential loss for e-commerce companies.

In this competitive e-commerce world, many businesses still pay close attention to maximize their return on advertising spend (ROAS), they may miss out on a more refined approach – Profit on Ad Spend (POAS). Since ROAS solely focuses on revenue, hidden costs are often missed which leads to vagueness in actual profitability. POAS can give a much clearer picture of every dollar spent on ads.

As the best digital marketing company in Delhi, MMBO shares the breakdown on how to maximize Profit on Ad Spend (POAS) focusing on product-level and category-level strategies.

Through POAS, we’ll also ensure whether your ad spend is truly leading to profits.

Let’s dig deeper –

What is POAS?

First, let's have a clear idea about Profit on Ad Spend (POAS) which measures the actual profit generated by advertisement after calculating all related costs. Here, associated costs include product costs, operational expenses and shipping.

POAS =Gross Profit / Ad Spend

While ROAS calculates the revenue gained through a campaign, not the profit, POAS metrics allow businesses to get the real sight of their profit margins.

SO, POAS is essential for e-commerce sellers to evaluate the performance of campaigns and allocate budgets. Overall, POAS helps businesses maximize their ability to measure success.

Strategies to Maximize POAS

As the best digital marketing agency in Delhi, MMBO empowers businesses to build strategic plans and ensure each level of strategy aligns with others to maximize profit levels.

Product-Level Strategies

1.     Focus on High-Margin Products

Identify products with high-profit margins. Then prioritize ads on those high-margin products to optimize the ad returns. It will help you scale profitability and maximize the potential returns from ad spend.

How to Do It?

·         Create a catalogue on Meta to group all these high-margin products and assign a higher budget for them.

·         Categorize high-margin, high-demand products by using a product profitability matrix and cut unprofitable items.

2.     Group Low-Margin Products with High-Margin Ones

By pairing low-margin products with higher-margin ones while balancing their values, you can influence your customers for more shopping.

How to Do It?

·         When you have a high-margin product like a flagship gadget, consider bundling it with low-margin accessories that have higher demand but lower profit.

·         This strategic approach helps clear off the inventory of low-margin products while still making a profit in the group.

3.     Upsell and Cross-Sell

If you want to grow your average revenue per customer, try promoting complementary products or upgrades – use upselling and cross-selling strategies.

How to Do It?

·         Upselling: Motivate your customers to buy an upgraded or premium version of the product they are planning to buy.

·         Cross-selling: Display complementary products related to the products they are already browsing.

4.     Dynamic Pricing Adjustments

While deciding the pricing, consider points such as demand and product seasonality. It will help you maintain a competitive edge when you can check the ad costs align with profitability.

How to Do It?

• Mark popular, on-demand products during peak seasons like holidays or festivals and tag them with dynamic pricing.

• Identify slow-moving or seasonal inventory and apply strategic discounts to clear stocks without hampering your gross profit.

Category-Level Strategies

1.     Categorize by Profitability

You cannot allocate your ad spend equally on all product categories as it will hamper your profitability. After all, all product categories are not the same.

How to Do It?

To maximize POAS, create different levels of categories –

• Tier I Categories: Keep high-margin, high-demand categories in this group to focus your ad spend.

• Tier II Categories: Segregate medium-margin, high-potential categories for testing and scaling based on their performance.

• Tier III Categories: This category is for low-margin products to target customer acquisition. However, set a limit on unnecessary ad spending for this category.

Our PPC services in Delhi NCR always prioritize higher ad spends on high-margin categories and restrict on low-margin ones to ensure that your ad budget allocations can lead your business towards optimal profitability.

2.    Seasonal and Event-Driven Campaigns

While strategizing your ad campaigns, time plays an important role. Certain product categories are meant for specific seasons, events or holidays to perform better.

Create event-driven and seasonal campaigns to optimize your ad spending. Make sure to align these product categories with periods of high consumer interest and higher margins.

How to Do It?

·         Schedule ad campaigns for seasonal products like winter jackets that accord with the start of cold seasons.

·         Track major occasions like festivals, and holidays to promote special promotions for high seasonal demand categories.

Put Data-Driven Insights to Maximize POAS

·         You have tools like Google Analytics and Shopify to track profits. Once you calculate POAS, analyze data by each product and category. Then adjust the campaigns accordingly.

·         Run A/B testing for different price points, creatives and value propositions to understand the highest profitability drivers.

Final Thoughts

Once you implement these product-level and category-level marketing strategies, you can evaluate and maximize higher profitability. As one of the best PPC agencies and social media marketing companies in Delhi NCR, MMBO can tailor your ad spending, allocate pricing and run promotional offers based on the unique features of each product and category.

The sole purpose of our advertising effect is to see your e-commerce profits soar high!