Marketing on a Budget: How CPG Startups Can Test Paid Advertising

LearnApril 30, 20244 min read
Caroline Lu, Product Marketing Manager

Launching paid advertising campaigns can be a daunting task for early-stage CPG brands. With so many factors to consider - from pricing and packaging to content strategy, website optimization, agency selection, and success tracking - it's easy for intelligent founders to get taken advantage of by subpar agencies or waste money through poorly executed DIY efforts. In this guide from our partner Flighted, we aim to assist CPG brands in bypassing the "error" phase of "trial and error" when diving into paid advertising for the first time.

To begin, certain assumptions must be met for this guide to be applicable. It is assumed that the product is not a luxury item, does not have overly restrictive brand guidelines, has a Total Addressable Market (TAM) exceeding 20 million customers in the US, and is consumable.

Pricing and Packaging

Price-pack architecture plays a crucial role in direct-to-consumer (DTC) success. An Average Order Value (AOV) between $25 and $100 is considered ideal for offsetting shipping costs and allowing room for advertising expenses. Additionally, the logistical implications of the product, such as weight and shipping costs, must be considered to ensure a viable gross margin rate.

In packaging products for DTC customers, maintaining focus emerges as paramount. Amidst a myriad of product variations, it's advisable not to overwhelm customers with an extensive array of options. Instead, offering a simplified "starter bundle" can mitigate decision paralysis often associated with extensive options.

Additionally, historical customer data like repeat purchase rates and lifetime value can inform paid ad strategies. Metrics including the average customer's repeat purchase rate, first purchase AOV, and Lifetime Value (LTV) gleaned from these channels can help inform an effective paid ads strategy. Don't forget to take a conservative approach to projecting acquired customers through paid channels, such as Facebook, since they typically are lower quality compared to those from organic, direct, or wholesale channels.

Content Strategy

Focusing on a single SKU and a primary marketing channel, such as Meta (Facebook and Instagram ads), is recommended for scalability. Creating compelling ad creative, consistent content, and a coherent messaging strategy are essential for DTC success. Ahead of launching a paid channel, a backlog of 2-3 months' worth of organic content, ideally posted on platforms like TikTok and cross-posted to IG Reels, facilitates audience growth and provides valuable insights into messaging that resonates with the target customer base. The most useful content formats to have when launching paid advertising are:

  1. User-generated content (UGC): Influencer and founder testimonials, factory or manufacturer footage, and you can even use friends and family using your products!
  2. Polished studio footage and Product shots
  3. A consolidated asset library with logos, font files, your brand’s color pallet, and ad copy lines

Website and Landing Pages

If you have a higher-priced product (>$45), direct ad traffic to a landing page or pre-sale page. Implementing a subscription platform (like Smartrr) for consumable products can drive recurring revenue and improve customer retention.

What to look for when evaluating agencies

When evaluating potential agencies, look for those with a proven track record, up-to-date knowledge of digital advertising trends (watch for outdated strategies like talk of building the top funnel or retargeting), and a comprehensive approach to ad creative, media buying, and landing page optimization.

An agency's pricing model can also indicate their likely future performance. If they use a percentage of ad spend pricing model, ask them how they will dedicate sufficient resources to properly launch and manage your brand's campaigns in the critical first few months and how they plan to cover the upfront costs and increased time investment required to optimize the ad creative, landing pages, and account structure during the initial unprofitable period. Agencies with lower upfront costs may underinvest effort early on due to their pricing disincentivizing hard work before profitability. However, once the sales funnel is validated and performing well, their percentage of spend model essentially taxes your success without correlating to their level of ongoing work.

Tracking Ad Success

There are three key success signals to obsessively track when first testing a paid channel: cost per click (CPC), conversion rate (CR), and customer insights. CPC measures traffic efficiency - aim for under $1.25, with $1.50 baseline acceptable but over $2.50 problematic. For CR, evaluate paid CR from ad traffic (over 1.5% typically) and overall sitewide CR (over 3% typically), though CR depends on average order value. Rigorously test value propositions as "hooks" in ads and copy to gain customer insights on what resonates. Implement post-purchase surveys asking the main purchase reason and any site confusion.

About Flighted

Flighted is a performance marketing agency for growing CPG brands. Flighted specializes in best-in-class paid ads management, creative production, and high-fidelity landing page design to fill in all the gaps of your growth strategy and grow your brand profitably.

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