- Project description
- Product Basic Information
- Niche: Sports and outdoor
- Market: Germany
- Main Keyword SV at that time: 1.3Million (Top 10 KWs SV 2 Million+)
- Price at that time: €47
- Profit margin: 60%+
The client came to us and asked us to increase her sales. They Launched the product in February 2021 with 5000 units. Everything went extremely well, and they had earned $100k+ revenue in 1.5 months with less than 4% TACOS and secured 60%+ profit margins but then they went out of stock for 2 months and when they came back from OOS then they were not doing well as they were doing earlier. The client asked us to do an audit, identify the reason(s) for low sales, and increase the sales
Our Strategy BREAK-EVEN SCIENCE
We identified the Break-Even Units per day. Means we identified that after selling how many units we will start making a profit? Here is what most people do? They follow their competitor’s sales velocity. Like a competitor is selling 100 units a day, then we also target 100 units a day. The important thing is not sales velocity, the important thing is profit. Identify, after how many units you will start making a profit. We identified that our break-even selling units are 20/day, and we were selling around 45units per day. It means we didn’t need to sell the extra 25 units if we are not making a profit from there while considering our 70%+ orders are sponsored. We focused more on Total ACos instead of ACos. We started selling 20 units and first time within a week we achieved break-even. Now we have achieved 15% TACos and around 40% ACos.
CONVERSION VS PRICE WAR
Due to new sellers in the niche and the Downtrend of SV, everyone was selling cheap due to which the Price war started in the niche. If we also choose to go into the war, then we had to decrease prices even below the break-even. So, there were two ways: 1st to decrease the price and go into the price war and sell inventory on loss. 2nd to identify cheap sources and traffic which can give us sales on even poor conversion. We have chosen the second option and determined to sell at the same price. We have found cheap sources of traffic, and identify opportunities, and gap KWs. Understand the concept here, our conversion ratio to clicks is 16 and our CPC is $2 for competing KWs. Now I can bid on competing KWs and will get an order after 16 clicks ( $2 x 16 = $32) OR I should find sources where I can get an order for the same clicks (16) but at a low cost like $0.8. ( 0.8 x 16 = $12.8). Our current CPC is between $0.4 to $0.8 while the conversion is still bad due to the highest price in the market. But due to low CPC, we are getting orders in profit or in break even.