#7 The Low CPM Myth

Today, I'm revealing how chasing low CPMs is sabotaging your eCommerce brand's profitability—by attracting low-quality audiences that diminish customer lifetime value.

Low CPMs are nothing to be proud of

You might just be burning money 🔥 💵 ...

That's a huge waste of time (and money)....

How it really works

Basically, every ad has a price based on who it is delivered to.

The price for this impression has nothing to do with the expected conversion rate of the recipient. THEIR currency is impressions! No matter what conversion goal YOU have.

But none of your account managers will tell you this ...

So what do low CPMs mean?

Usually nothing other than that you are serving ads to a demographic where there is little competition. In most cases, these are low quality audiences that do not drive purchases from other advertisers.

The more polarizing and broadly interesting your ad is, the more of these users you will reach at low CPMs.

Low CPM campaigns have significantly:

• Lower AOV

• Lower repeat purchase rates

• Lower LTV

• Higher abandonment, cancels & fraud

Many advertisers make the mistake of thinking that the first step is to create a polarizing ad with a high click-through rate at a low CPM, and then fix conversion and customer quality on the way.

But the flaw is that this becomes impossible if the ad is too far away from the brand value you want to sell or the action you want to drive.

For example, many proudly show how many thousands of leads & email signups they get from such campaigns – but the sad truth is that the quality of those leads is disastrous.

The lower the bar, the worse of audience Meta will target.

Another common attempt is to tailor the offer to this audience by creating an loss leader offer and then hoping to educate customers over time.

This approach combined with scaling leads to brands burning millions only to wake up with a bunch of poor quality customers whose costs will never be recovered.

How to fix it

By throwing out all your assumptions and doing a new calculation:

• What is my ICP (ideal customer profile) that resonates with my brand?

• What is the cost of acquiring an ICP customer?

• Will my business model still work with these new assumptions?

• Do I have to make adjustments?

Temu of course can go after that low CPM audience that nobody else wants to target because their barrier to purchase is minimal. They don't care about returns and stuff like that.

Would you rather spend $100 on a customer that brings you $200 in profit, or $50 on a customer that brings you $50 in profit?

Too many brands still act like the latter because they think that's how you scale fast.

But the truth is, scaling comes from repeat business. You need consistently increasing monthly revenue from your existing customer base for customer acquisition to lead to growth, otherwise you are just exchanging money.

So rethink your customer acquisition.

That’s it for this week!