![From quantitative and narrow, to broad and subjective
The ‘messy middle’ [is] a
space of abundant
information and unlimited
choice that shoppers have
learned to manage using a
range of cognitive shortcuts.
“](https://image.slidesharecdn.com/demystify-shoppingbuying-patterns-and-profit-210908135233/85/Demystifying-Shopping-Uncover-buying-patterns-optimize-for-profit-16-320.jpg)
![PMAX Product structures with BigQuery [GERMAN]](https://cdn.slidesharecdn.com/ss_thumbnails/ppc-camp-2023pmaxstrukturenbigquery-231019093156-a7261a58-thumbnail.jpg?width=560&fit=bounds)
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Demystifying Shopping: Uncover buying patterns & optimize for profit
- 1. Demystifying Google Shopping: Uncover buying patterns & optimize for profit
- 2. About me [email protected] | +43 699 14111 309 | /in/mike-retail-insights @mikeryanretail Mike Ryan Head of Retail Insights, smec ● Deep background in retail operations ● Leadership roles in product & innovation ● Passionate about storytelling with data ● Sold everything and moved to Austria for love /in/mikeppc #SMX smarter-ecommerce.com
- 3. Agenda 1. The ROAS Pathology 2. The Messy Middle 3. Two Birds, One Stone 4. The Holy Grail
- 5. ROAS = conv. val / cost A broadly-applicable proxy for profit ● Easily and universally calculable ● Works across all campaign entities ● Reportable from hourly up to yearly ● Google formula is open-ended and why is it so popular? What is ROAS
- 6. Proxy Metrics A proxy metric is an indirect measurement of a desired outcome, typically used when the desired outcome cannot be directly measured or observed. The proxy has value because of its correlation to the goal – and the higher the correlation, the higher the value or effectiveness of the proxy will be.
- 7. ROAS is a channel-siloed metric ● How accurately is ROAS modelled to profit? ● What steps can we take to improve that modelling?
- 8. Measurement pains increase as incremental returns flatten ● How accurately is ROAS modelled to profit? ● What steps can we take to improve that modelling? ● What steps can/should we take to replace ROAS?
- 9. What’s in a name? A ROAS by any other name would smell as sweet
- 10. Look to ACoS for more rational conversations ● Calculated with the same elements as ROAS: cost and conversion value ● Name clearly describes what it is – a campaign efficiency metric ● Harder to confuse with profitability Advertising Cost of Sale cost / conv. val = ACoS conv. val / cost = ROAS RANGE CONSUMPTION
- 11. Here’s the kicker: It’s not even necessary to use a proxy metric for profit
- 12. Conclusions so far ● ROAS is insufficiently correlated to profit ● The use of ROAS is overextended ● The whole situation is avoidable
- 13. The Messy Middle
- 14. Your attribution model is wrong
- 16. From quantitative and narrow, to broad and subjective The ‘messy middle’ [is] a space of abundant information and unlimited choice that shoppers have learned to manage using a range of cognitive shortcuts. “
- 17. Browsing and consumption are primal behaviors ● Consumers cycle through exploration and evaluation phases – repeatedly gathering and reducing options ● For merchants, there are opportunities arising from deep-seated biases manifested while shopping Category heuristics Social proof Authority bias Power of Now Scarcity bias Power of Free
- 18. Two Birds, One Stone
- 19. The Clicked vs. Bought Dilemma € 699,- Entry product Order value Customer A Buying behavior € 699,- Entry product Order value Customer B Buying behavior €99.00 €1,090.00 € 899,- € 699,- Shopping ad ?
- 20. The Clicked vs. Bought Dilemma Click-basket correlations | What will online shoppers actually buy? € 699,- Basket #1 € 899,- € 699,- Shopping ad € 798,- Basket #2 € 99,- Basket #3 Wrong assortment prioritization Wrong entry products Undersized Shopping order Missing upsell opportunities Wrong assumptions Unattractive sales bundles Expected gross profit € 120 Actual gross profit € 20 Expected gross profit € 100
- 21. The Clicked vs. Bought Dilemma € 699,- Entry product Order value Customer A Buying behavior € 699,- Entry product Order value Customer B Buying behavior €99.00 €1,090.00 € 899,- € 699,- Shopping ad ?
- 22. The Clicked vs. Bought Dilemma Click-basket correlations | What will online shoppers actually buy? € 699,- Basket #1 € 899,- € 699,- Shopping ad € 1,090.00,- Basket #2 Right assortment prioritization Right entry products Upsell opportunity achieved Attractive sales bundles Expected gross profit € 300 Expected gross profit € 100
- 23. A few questions along the way ● What is the real profitability of my Shopping Ads? ● In which quantity are products sold and at which price? ● Which products drive revenue, which products drive order profit? ● Which items often act as replacement products? ● Which products are often bought together?
- 24. Connect the data Web Analytics Information about the transaction and its components. Understand the true value of your Shopping campaigns What is necessary? Click ID report Connecting an adclick to a transaction. Visualizations Basket Margin Product data Product information to be connected to the transaction
- 25. Profitability per brand COGS gross profit brand 1 brand 2 brand 3 brand 4 brand 5 70,000.00 EUR 60,000.00 EUR 50,000.00 EUR 40,000.00 EUR 30,000.00 EUR 20,000.00 EUR 10,000.00 EUR 0.00 EUR
- 26. Profitability per item COGS gross profit Item 1 Item 2 Item 3 Item 4 Item 5 Item 6 Item 7 Item 8 Item 9 Item 10 0.00 EUR 5,000.00 EUR 10,000.00 EUR 15,000.00 EUR 20,000.00 EUR
- 27. Clicked vs bought items Shop overview Revenue Category of bought item Category of clicked item ● Filter: transactions where exactly one item was clicked and exactly one item was bought
- 28. Clicked vs bought items ● 22% of this top category’s click-attributed revenue actually converts in a different category Single category Category of clicked item Category of bought item Revenue
- 29. Basket Margin calculation Offline Conversion Import Goal Adjustment Gross profit calculation ● Calculate the order profit regularly for every transaction ● Gross profit = Revenue - COGS ( - Transactional costs, optionally) ● Connect the conversion with an adclick (Click-ID) Offline conversion Import Unlock order profit for optimization ● Regular upload of offline conversion feed to Google Ads ● The feed features: Click-ID, conversion time, conversion value, currency Goal Adjustment ● Rethink and adjust your goal setting, your current ROAS goal won’t fit ● Ensure that all stakeholders are on board, optimization based on profit ≠ optimization based on revenue
- 30. Challenges while planning and performing this task ● Large data volumes ● Data availability, timeliness, and fallbacks ● Intra-day price changes ● Conversion lag ● Returns and refunds
- 32. God Metric Order Data Demand Price Stock A perfect conversion model
- 33. Mike Ryan [email protected] /in/mike-retail-insights Thank You Reach out any time