Fix je Iphone: Margin maximization

In the Shopping campaign structure set up through Adchieve, campaigns were managed based on a turnover and ROAS target. However, FixjeiPhone needed more insight, more control and the ability to focus campaigns on maximizing net margin. Net margin, in this case, means the amount that remains after deduction of the advertising costs.

After consultation, we concluded that Adchieve’s Supreme Shopping solution is the best solution for this need of FixjeiPhone. Supreme Shopping is our solution for providing insight into campaign data. This can be used for both regular Shopping campaigns and Smart Shopping campaigns.

Data from various sources are collected and combined. The insights we create are then used as input to create an algorithm that drives campaigns towards company-specific objectives. In this case, it is maximizing the net margin.

The project consisted of 2 parts:

• Gain insight into the margin per order and the net margin per campaign
• Developing an algorithm based on the insights

Margins per order and net margins per campaign

An important starting point for managing the net margin is obtaining insight into the margins per order. A conversion in Google Ads, is an order. But one order can contain several products. Also, it is not always the case that someone who clicked on an advertisement for product A actually bought product A. This can also be other products.

We wanted to find out what the margin is of the products in the corresponding order. This makes it possible to calculate the gross margin per order. We can then link this to the associated advertisement so that we can calculate the actual net margin of that advertisement.

To gain insight into the margin per order, we have built a link with the ERP system of FixjeiPhone. With the help of this link, the orders of FixjeiPhone can be consulted and loaded into our software. This data is also supplemented with relevant information to calculate the margin per order. Think of the products in the order, purchase costs, shipping costs, returns, etc.

Furthermore, a link with the ERP system is not necessary to set this up. There are other possibilities for this, such as loading the required data via Google Analytics.

Next, we were able to link the collected order data to associated advertisements via data from Google Analytics. This allowed us to create an overview, which provides insight into the net margin per campaign, ad group, keyword or product. If desired, multiple aggregation levels are even possible.

Algorithm

To maximise the net margin, our data scientists created an algorithm based on the insights gained in step 1.

The insights herein provide input for the algorithm. This algorithm predicts with what bid the advertisement in question can achieve the highest possible net margin. We then implement this algorithm in FixjeiPhone’s shopping campaigns.

Revenue component

An element of the margin algorithm is the revenue component. The main objective is to maximise the net margin. However, we do not want this to be at the expense of the revenue. For this reason, the algorithm takes into account, through the revenue component, whether you can still achieve the defined revenue targets.
If the algorithm detects that this is not the case, it is time to take action, adjusting some bids so that the revenue increases, but the margin is affected as little as possible.

This element, therefore, ensures that the revenue is guaranteed and, at the same time, is managed based on maximum margin.

Insight and control

Because we place the data that has been made transparent in the software, it is also directly and clearly accessible to our customer, via their own user account in the software. Thanks to these additional insights, FixjeiPhone has more control over the Shopping campaigns. Also, with the help of these extensive insights, they can perform better analyses.

The bid management of the Shopping campaigns runs from January 2020 via the net margin algorithm. The tables below show the percentage of changes compared to different periods:

Q1 2020 net margin grows by 29% compared to Q4 2019. In Q2 2020 we will continue to grow by 26% in net margin compared to Q1 2020.

If we compare the same period with last year, the net margin is growing by almost 3000%! In general, FixjeIphone has grown considerably compared to the previous year. To put the comparison a bit more in context, we also give a comparison with the second half-year of 2019, with still a fantastic result!

”Google shopping is an important sales channel for us, one where many companies only focus on a ROAS objective.

Our need was to gain more insight and control over the campaigns and to direct more towards a net margin per article group. In cooperation with Adchieve, we tackled this in a targeted way and we are very satisfied with the result.

We now have more insight into the data that is important to us. This not only allows us to optimise our campaigns more efficiently, but it also gives us new input to make business strategic choices.”

Ramon – FixjeiPhone

Do you want to know how Adchieve can help you maximize your margins? Please contact us.