AMA with 2H Media: Planning your 2023 marketing budget

[SarahF_Shopify]

Marketing costs are rising, and we want to support you in creating a profitable plan for the year ahead.

Hit reply and post your question now to Shopify Partner and marketing experts, 2H Media.

Co-founders & owners, @MatthewHerchel and @AronMurch join us live on March 21 from 12-2pm EST to answer your questions on how best to reach your audience, which marketing channels to focus on, and how to plan a sustainable 2023 marketing budget. 

Matt Herchel and Aron Murch are the Owners of 2H Media, a marketing agency that specializes in helping luxury ecommerce brands increase sales by building video-driven Shopify websites that reduce confusion and increase conversions. 

As Co-Owner and CFO, Matthew plays an active role at 2H Media managing the overall operations and resources, and running the financial activities of the company. In addition to these responsibilities, Matt acts as the sales and digital marketing lead for the company, providing guidance and strategy to numerous growing businesses.

As Co-Owner and CIO, Aron plays an active role alongside Matt in managing the overall operations and resources, while implementing the information and computer technology systems, and overseeing the development and dissemination of technology for the business. Additionally, Aron’s the design and development lead, overseeing and implementing branding and ecommerce projects.

What’s in scope of this AMA:

• How best to allocate your marketing dollars for 2023 based on your industry
• Which marketing channels to focus on and why for your omni-channel business, such as email, Google, SEO, influencers, affiliates, display or programmatic advertising, SMS, influencers, YouTube, and social media such as Meta, Twitter, Pinterest, TikTok
• How to determine whether your marketing efforts are profitable and sustainable 
• North American-focused
• We can’t advise on very specific use cases because technology and integrations can get complex. Please rely on the Community after the event to help guide your use case.  

Rules of engagement: 

Our Shopify AMA hosts can’t claim to know everything. So if there’s something we can’t answer live that’s within the scope of this AMA, we’ll get back to you shortly after the event with an answer.  As always please adhere to our community guidelines and code of conduct.

Post your question now & RSVP for the live event here (so you can get email reminders). 

[Peggy8]

Im interested in this, but will be away that week, will this be recorded? I really need help in this area and I would really love live support with someone who can help me figure out the best way to ship my products, that's very complex.

[Peggy8]

Thank you, Im in PA. 

[SarahF_Shopify]

Hi @Peggy8 , this event will happen right here on the AMA discussion board, so you can read up on the Q&A after. There's no video component, and will be fully text-based. Keep in mind this event will be focused on marketing and not shipping. 

[Wingspan]

Hi,

I sell my own work on shirts, caps, and mugs. I've tried fb ads. 

How much should I be spending on my marketing?

What's my yearly budget supposed to be?

Say if I currently don't have a marketing budget. Where should I start?

[MatthewHerchel]

Hey Wingspan,

How much you should be spending on marketing is a tough question. It depends on a few factors: 

• Your industry
• How much competition there is
• Your margins
• Your marketing/growth strategy. (if you want to grow faster, you'll need more budget)

Here's where you can start.

Typically we start at the desired end result and work backwards. So you need to have a revenue/sales goal in mind.

Let's say your sales goal is $100,000 for the year.

We usually recommend a marketing budget between 10% - 15% of total revenue. This includes costs associated with your website, email marketing, paid ads (including ad spend) and anything else that falls within the realm of marketing.

So, if your marketing budget is $10,000 - $15,000 you should be able to prioritize the most important opportunities. This means you need to spread your budget out across multiple initiatives. You wouldn't spend the whole amount on one marketing activity.

As the year progresses you should be able to get a better sense of your revenue and adjust your budgeting accordingly.

[TRB28]

Going to work off of this since I can not figure out how to make a "new" post. Matthew, I currently have being utilizing a 3rd party analytic company called North Beam to help me determine where my ad dollars are best being spent. It has helped me to see more truth into our data rather than solely relying on the reports Meta / Pinterest have to offer.

I own a subscription based business and I am constantly battling to determine if my CPA should be based on initial purchase or LTV? For example our ad manager will generally have us between a CPA of $25-$42 give or take, if I see us creeping over $30 I feel like I am spending too much because a single order cost only $38 + shipping. Our ad manager tells me that I shouldn't be focused on that though because generally our customers stay with us for at least 4 months which gives us an LTV of at least $152 + shipping. What do you think about this?

I have been questioning if I should start moving some of my ad spend off of Meta and onto TikTok even though we don't have a large following on Tik Tok yet. I just feel like Meta is never giving me growth and only giving me consistency but at a higher cost then I would like. What are your thoughts?

Lastly in regards to budgeting I know they say to aim for 10-15% of your Revenue, Do you review your percentage each month and then tweek your marketing from there? I have been trying to focus on that this year but every-time I want to make changes to our ads / budgets our ad manager says it will hurt its performance

[MatthewHerchel]

Hi TRB28,

In my opinion CPA (Cost per Acquisition) should be based on CLV (or Life Time Value) as you are acquiring a customer and their buying power over a specific length of time. This is especially true for a subscription based businesses.

This really comes down to cash flow. If you can stomach spending ~$40 upfront to acquire a customer that will spend ~$150 over time, and if your margins are okay, then you can make the decision on how profitable each new customer is.

We all want lower CPAs which is sometimes out of your control. What you can control more of is Churn (Preventing customers from stopping their subscription). If you can increase the buying frequency by even 1 extra purchase the profit per customer goes up a ton.

Facebook vs Tiktok

I don't know what kind of subscriptions you are selling but FB and Tiktok are very different markets. Where do your customers spend the most time? How proficient are you at creating video? 
Aron mentioned this in another post but we aren't super fans of Tiktok as it's super trendy at takes a ton of effort to stay current. 

Tiktok requires way more video and a better knowledge of social media to be profitable.

Budgeting

Yes, you should be reviewing your ad budget every month, but decreasing the budget shouldn't hurt your performance.

If you are converting 7% of clicks into customers, a decrease in budget shouldn't decrease the 7% but it will limit your reach which means less sales, but not a drop in the campaign metrics.

Specifically on Google Ads - They always try to get you to raise your budgets so your optimization score will decrease if you don't, but I wouldn't worry about this. It's kind of a shady tactic.

There are a ton of reasons why your ad budget should be flexible. Depending on what your selling you budget should be flexible to capture more customers during peak season and less in the off season.

[TRB28]

Thank you so much! Very insightful! I'll be reaching out via Linkedin.

[PhilTulz]

Glad I found this! I'm new to this topic and interested in finding out more.  

If I don't have a budget, what should I DIY? And I assume that budgets should contain time and money. How should I prioritize my time?

[AronMurch]

Hi PhilTulz,

Great question and good assumptions. We always recommend budgeting both time and money. If your money budget is small or nonexistent right now, your time budget has to be a lot bigger to make up for it.

As a new merchant, you're likely being pulled in a lot of different directions so deciding what to DIY and how to prioritize your time can be a challenge. To start out, keep it simple: Get the platform working consistently for you. Don't focus on any complicated customizations or extra features unless absolutely necessary to your business.

Right now, your time is a limiting factor on your business growth and you don't have money to offset that so you need to prioritize revenue generating activities - sales and partnerships are the best place to start.

Put a plan in place and make sure you tick off measurable deliverables every day in terms of capturing images for marketing, posting on social media, and connecting directly with potential customers and partners through direct outreach and whatever industry events you can afford to attend. 

To avoid being overwhelmed, I recommend completing an Eisenhower Matrix to really prioritize your goals and cut down on all the noise.

I hope that helps!

[Jac_Dan_McL]

Very excited for this! I have a couple questions. 

1. What should I be spending the most on?

2. Are there any trends right now that I should be focused on?

3. Where should I be advertising? Google TikTok Meta? Does it matter what my product is for the marketing platform I focus on?

[MatthewHerchel]

Hi Jac,

This is a really tough question as I don't know a ton about your business.
As a rule of thumb you want to spend the most on the channel and activities that generate the most.

I would start by analyzing where you are making the most sales. I would run the following reports:

• Sessions by referrer
• Sessions attributed to marketing

From these reports you can determine how your efforts are bringing in traffic to your website. If you are running paid ads you will need to look at those reporting tools as well.

We always want to pour gas onto the fire so if you are getting a ton of sales through Instagram you will want to focus more of your time and money on this sales channel.

When it comes to marketing it's very rarely "set it and forget it" so you will need to refer back to these reports often and adjust your spending. There's a ton of factors that can shift whether a channel is performing or not so please remain vigilant.

Trends

Most small business owners can suffer from "Shiny object syndrome" which is basically chasing a trend without a strategy or game plan in place. My advice is to avoid seeking out trends and focus on the core business activities that earn you the most. 

If you do have budget to explore new ideas, start small to avoid any unneeded risk.

Advertising

Each platform has its pros and cons. You need to be on the platform that makes the most sense for your desired audience. We start with this question:

"Where are your customers?"

That's the platform you need to focus on. 

Don't spread yourself too thin. Each platform takes time, energy and money to become profitable. We would rather you have 1 successful channel working for you than 4 that aren't.

[FleuRias]

Aktualnie dopiero zaczynam powiedz jeśli nie posiadam budżetu na czym powinienem się skupić 

**Translation by Moderation**: Currently I'm just starting tell me if I don't have a budget what should I focus on?

[FleuRias]

I have a shop still in the making and I thought and first want to start with dropshipping 

[FleuRias]

I don't have it yet, I've been trying to make a shop for 2 weeks but I'm having big problems

[AronMurch]

Hi FleuRias,

Dropshipping is really tough. Since you don't control the product, you need to find other ways to set your company apart from the competition. The main things you can do to stand out in this space are to build a long-term brand that looks and feels like a legitimate company, provide outstanding customer service, and put serious budget into ads. Social channels are some of your best bets for gaining ad traction (facebook, instagram, tiktok). If it's feasible for you, figure out how to produce consistently great video content about your products. You'll want to land some product that you can use to create your own promo content and push it out into all your channels. In addition to organic posting, paid ads are key. I'd recommend spending at least $1000/mo on ads if you want to make any real headway.

For more on dropshipping success, there is a great Shopify blog post you should read.

[Taxdoo]

Hi, as App developers in the Shopify App store, we would like to see more resources for our Growth. 
How could we increase conversions ?
What are the steps to becoming a featured app?
What are the steps to be featured in a Shopify blog article?

Will there be technical developments or integrations that would allow us to directly transfer the app user data into our CRM?

Thank you!

[Jasonh]

Hello @Taxdoo ,

Thanks for taking time to let us know your plan. Those are all great questions! I would like to share some resources to help you out as possible as I could.

Q1: How could we increase conversions ?

Here are some great resources to help make your app shine:

• The Built for Shopify program offers great visibility and growth for apps that meet the high-quality standards Shopify has for commerce experiences. Get guidance on building great apps and improved performance reporting, then apply to join the program for special treatment in the Shopify App Store.
• Get your app in front of the right brands with self-categorization and a redesigned app listing that’s optimized to convert.
• Easily access key information about your apps, including revenue, API health, and progress toward earning app highlights in the improved app overview page in the Partner Dashboard.

Q2: What are the steps to becoming a featured app?

Great question! Please follow this dev document on App quality and promotion for more information.

Q3: What are the steps to be featured in a Shopify blog article?

Thanks for your interest in this. I can pass along and highlight your interest to our content team for consideration. Please note that there's no guarantee on response or a timeline.

Q4: Will there be technical developments or integrations that would allow us to directly transfer the app user data into our CRM?

This is a very creative question! I can see the potential opportunities this integration can bring. As it requires some technical customizations, I would suggest creating a net post in our Shopify APIs and SDKs board, providing as much detail as possible. There's no guaranteed response, but our API support team do monitor the board and offer assistance as best they can.

Hope this helps!

[Wingspan]

Forwarding my question there, is there a why to determine how much my competitors are spending on advertising? Print on demand can be a bit of crowded market. 

I came cross the idea of customer lifetime value here: https://www.shopify.com/ca/blog/what-is-customer-lifetime-value#:~:text=now%20with%20Shopify-,What%2...

Can you guys speak to that from your experience, please?  Basically, how do I determine customer life time value, CLV?

[MatthewHerchel]

Hey Wingspan,

There's no great way you can determine how much your competitors are spending on advertising. It would be a pretty unfair advantage if we could look into someone else's business and get that information.

We can make a few assumptions. If you see one of your competitors advertising on very broad keyword or on keywords with a ton of competition you can assume they are spending a ton on a per click basis.

There are tools like Google Keyword Planner that allow you to look at how often a specific keyword is searched for, the amount of competition on the keyword and how much you can expect to spend per click. This is where we normally start with determining what keywords to buy. Google Keyword Planner is a free tool, but you will need a Google Ads Account to access it.

Customer Lifetime Value (CLV)
CLV is a very important metric for brands that have a ton of repeat purchases.
Let's say you sell a consumable product like shampoo, soap, food, makeup or even shoes. At some point your customer will run out and if they liked your product they will want to buy more.

This means we advertised to the customer once, but we can generate multiple sales over and over again from the same person.

This usually increases the cost of acquisition because the full value of the customer isn't realized until they have purchased multiple times.

Unless your clientele is mostly b2b, you probably have a lower CLV as a print on demand business. Most people will order print on demand for a specific occasion but aren't going through print on demand products on a regular basis. If you are focused on b2b some of your recurring accounts could be very lucrative making your CLV much higher.

The article you linked has a great breakdown.

So a marathon runner who regularly buys shoes from your shoe store might be worth:

$100 (per pair of shoes) x 4 (pairs per year) x 8 (years) = $3,200

And the mom of a toddler might be worth:

$20 (per pair) x 5 (pairs per year) x 3 (years) = $300

So who should you be paying more attention to? Using CLV, the marathon runner should be your focus!

Shopify has a great article on calculating and increasing your CLV
https://www.shopify.com/ca/blog/customer-lifetime-value


 

[Jac_Dan_McL]

I thought of some more questions!

1. What reports can I run in shopify for the most important sales data? It seems like there are so many reports, I'm not suee what's most valuable. 

2. When should I start planning or creating a budget? Does it need to happen before I even start or should I test a few things and see what gets me the best results for the least money?

Thanks again for putting on this great event 🙂

[MatthewHerchel]

Hi Jac,

I assume you are on Shopify Basic (the $51 Canadian plan).
You get basic reports included with this plan but the most important for sales are as follows:

• Sessions attributed to marketing
• Sessions by referrer
• Sessions by location (very important if you have geo focused campaigns)

These reports are a starting point to start looking at where your customers are coming from.

Creating a Budget

Most companies start planning for the year in advance to make sure they have resources allocated correctly. It's never too late to start but you will want to find a rhythm for your business.

You don't want to be planning during your busy season.

In a perfect world, yes you should have a plan in place before you start spending money on ideas. Part of your plan should include time for testing and exploring new opportunities. You will want to include a time budget as well for things that are new.

[Sportitfirst]

How do I join?

[SarahF_Shopify]

Hi @Sportitfirst , everything will happen right here, so you're already in the right place to watch along and engage directly on this thread.

[TIMECAPSULES]

Hi - There is no obvious weblink that has been presented to enable me to watch this event. I just spent 15 minutes going in circles trying to find how to watch!

This isn't what I expect from Shopify.

[CandTel88]

same, driving me nuts. blocked two hours of my day for this. wix had a presentation with google employees and ad agency. I thought I was signing up for something similar. we use both platforms 

[Jacqui]

Hey @CandTel88, 

This event is here in this thread, there is no video to accompany it. However, I will be sure to pass along your feedback to our team.

Feel free to post any marketing questions you have, and Aron and Matt will be happy to answer them. Thanks for making the time to join us today!

[TRB28]

How can I make a post? I only see the option to reply or like other posts?

[Jacqui]

Thanks for the question! 

You can participate by replying to the original topic from @SarahF_Shopify. The reply button is just under her message at the top of the page. Exactly what you would have done to post this question. Matt and Aron will be replying in this thread.

[CandTel88]

Next event that involves this format, make it very clear in the "marketing" component. So, people do not waste half an hour looking for the link. 

- This is what you posted -

Don't miss the chance to attend live and engage with the founders of 2H Media, as well as your fellow Shopify community members.

Especially for the disabled community (visually impaired) hard to navigate this type of format 

[Jacqui]

Thanks for your feedback on this @CandTel88! I have made sure to pass it along to our team. 

We will work to improve our accessibility based on this feedback, for future events and do our best to include video whenever possible. We do hope to do more events like this in the future.

Thanks again for joining us today!

[Jacqui]

Hey @TIMECAPSULES, 

The event is right here in this thread, there is no video to accompany it. You're already in the right place!

Feel free to post any marketing questions you have, and Aron and Matt will be happy to answer them. 

[TRB28]

I'm not seeing any responses though, only questions being asked? Am I missing something?

[Jacqui]

Hey @TRB28, 

Thanks for joining us today! 

Matt and Aron have started answering questions. If you scroll up you can see some of the answers to already submitted questions above. 

Please feel welcome to post any marketing question you have for Matt and Aron to answer.