Ad Paid Loops: Secrets Hacks to get more 💸💸💸

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In the last post, you learned about Ad Paid Loops. They focus on buying ads on platforms like Instagram, TV, Google, radio, and even big billboards you see on your way to work.

Today, you are going to learn about the execution factors of these paid loops... that is, the juicy hacks that will help you run paid ad campaigns the right way.

Just to make a quick recap about Ad Paid Loops, these might be annoying sometimes but there's no denying that they're effective for many companies looking to grow quickly—especially if they have the capital to invest.

Above, you can see the example of Temu, this giant e-commerce company from China that managed to dethrone AliExpress and represents a significant portion of Meta's advertising revenue!

In this type of loop, when a new customer makes a purchase, the profit generated is reinvested to buy more advertising, fueling that growth fire. 🔥

Now… let’s jump to the different execution factors

1) Don't Rely Only on Ad Paid Loops…

Here's a crucial lesson I've learned from my years in the marketing trenches: Paid Loops shouldn't be your only growth strategy.

They're addictive, I get it. Who doesn't love a strategy that lets you grow quickly without much initial effort?

But the best approach is to think of Paid Loops like rocket boosters – they can launch your business into orbit, but eventually, they burn out. You need a more sustainable approach to keep that growth soaring over the long haul.

Why? Because relying solely on Paid Loops is like playing marketing roulette. You might get lucky in the short term, but eventually, your costs will catch up to you, your competitors will steal your playbook, and your growth will flatline faster than you can say "customer churn."

Think of Paid Loops as an accelerant to boost other Growth Loops, like Content Loops or Viral Loops.

For example, in various companies I've worked with, Ad Paid Loops was our main customer acquisition channel. But after a customer made a purchase, we unleashed a combo of Content and Viral Loops to increase their lifetime value (CLV) and turn them into a sales force!

Here's how we did it:

• Packaging Power: We included a card in the packaging offering a prize if the customer posted a story on Instagram showing or reviewing the product —> User Generated Content

• Influencer Magic: During photoshoots, we gave models garments available in our marketplace and an affiliate link so they could earn a commission for each sale generated through their social media posts. —> Partners Paid Loop

• Referral Rocket: We also had an incentivized referral program to encourage even more sharing and growth. —> Financial Paid Loop

2) Payback Period and CLV:CAC Ratio

• CLV:CAC Ratio: This ratio is like your Growth Loop's report card. You want a CLV (Customer Lifetime Value) that's significantly higher than your CAC (Customer Acquisition Cost). Think of it like this: You want your customers to bring in way more money than it costs to get them in the door! A healthy ratio means you’re building a profitable, sustainable business.

• Payback Period: This is a crucial concept if you don’t have an unlimited budget (which is the case for most of us, right?). If your payback period is too long, it can become a big problem.

Think of Payback Period as your marketing ROI's speed run! 🏃💨 It’s how fast you’re earning back the money you invested in acquiring a customer.

Imagine you're running two different ad campaigns:

• Campaign A: Has a payback period of 10 days.

• Campaign B: Has a payback period of 5 days.

Which campaign do you think will reach those growth goals faster?

Yep, you guessed it—Campaign B!

Why? Because with a shorter payback period, you can reinvest those profits twice as fast. It's like hitting the turbo button on your Growth Loop. 🚀

But here's where things get really interesting: What if you have a ton of capital to invest? Does the Payback Period still matter as much?

Well, it’s a bit like having an unlimited supply of rocket fuel. You don’t have to wait for the tank to completely refill before launching your next campaign. You can keep those rockets blasting off (and those customers pouring in)!

But even with a massive budget, Payback Period is still important. Why? Because it helps you evaluate the efficiency of your campaigns.

Here’s where another crucial metric comes in: the CLV:CAC ratio (Customer Lifetime Value to Customer Acquisition Cost). It tells you how much value you're getting from your customer acquisition efforts.

Think of it like this:

• High CLTV:CPA Ratio: You’re attracting customers who stick around for the long haul and spend lots of money over time.

• Low CLV:CPA Ratio: You're burning through cash to acquire customers who disappear faster than a free slice of pizza at a marketing conference.

The bottom line? You want a high CLV:CAC ratio, even if you have a big budget! It ensures that you’re not just acquiring customers but building a profitable and sustainable business.

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3) Diversify Your Channels: Don’t Put All Your Eggs in One Basket

When running campaigns on ad networks, imagine you are in an auction. Initially, few people might be bidding, so it's easy to get high returns—your payback and CLV:CAC ratio might even be covered immediately.

However, as more competitors show up or you want to increase your investment, those returns will be affected. That is because the audience that you are targeting in an ad network is limited, so you have to expand your target audience and reach people that may cost a little bit more to convert.

Here are two keys:

1. Diversify your advertising channels. Experiment with Google Ads, Facebook Ads, influencer marketing, content promotion—the possibilities are endless!

2. Do a diminishing returns analysis. Understand how much budget you can invest in each channel or even campaign. This helps you understand how your CAC will be affected by each additional dollar invested. You can get this by applying a Marketing Mix Modelling.

However, sometimes you need to grow, and simply following diminishing returns becomes difficult. That’s why it's to run a Optimal Execution Range analysis. The Optimal Execution Range is a recommended range of spend for our client to invest when it comes to a particular channel.

The minimum boundary of the range is the maximum marginal ROI and the upper boundary of the range is the maximum ROI. 

Final Thoughts:

Paid Loops are a powerful tool for accelerating growth, but they require a strategic approach. Don't just throw money at ads and hope for the best!

By understanding these key metrics—Loop Return, Loop Investment, Loop Scope, Payback Period, and the CLV:CAC ratio—you can create a sustainable, data-driven strategy that turns your marketing budget into a growth-generating machine!

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That is all for today friends.

Keep measuring, keep optimizing, and keep growing!

Jojo