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How Much Should You Spend on Paid Ads to Bring Traffic to Your New Ecommerce Store? Optimizing Your

Launching a new ecommerce business? Congrats, that's so exciting! Now it's time to get visitors flowing to your shiny new online store.

Paid advertising is one of the fastest ways to start driving targeted traffic and sales. But how much budget should you allocate when just getting started?

In this post, I'll share data-backed approaches to optimize your initial ad spend for an ecommerce startup. We'll look at setting monthly budgets, tracking ROI, managing multiple campaigns, and scaling spend profitably.

Let's dive in!


Define Your Business Goals and KPIs

First, clarify your key objectives and metrics for paid advertising. This focuses your budget strategy.

As a new ecommerce site, you likely aim to:

  • Drive brand awareness and site traffic

  • Acquire new customers and build your audience

  • Generate sales revenue and first purchases

  • Achieve positive return on ad spend

With these goals in mind, focus your budget KPIs on:

  • Return on ad spend (ROAS)

  • Cost per acquisition

  • Number of sales conversions

  • Traffic and impression volume

  • New customer signup rate

ROAS should be the ultimate north star, with other metrics feeding into that. Let's discuss ROAS targets next.


Set ROAS Targets to Anchor Budget

ROAS or return on ad spend measures the revenue generated per dollar of spend:

ROAS = Revenue / Ad Spend

Example: $5,000 revenue from $1,000 spend = 5x ROAS

This directly correlates spend to profit results. Use ROAS to optimize budgets for positive returns.

Recommended starting ROAS targets by channel:

  • Search - 300-400%+ ROAS

  • Social media - 150-300%+ ROAS

  • Display - 150-250%+ ROAS

With search ads, target keywords directly related to products and conversions, which should deliver higher ROAS.

For social and display, cast a wider targeting net to also raise awareness among new audiences.

Review weekly ROAS trends and adjust budgets to try maintaining targets. We'll cover optimization

tactics shortly.

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Set Initial Monthly Budget Limits

Next, establish an overall monthly budget for each channel based on your means and revenue potential.

At launch, consider initial budgets like:

  • Search - $5,000 per month

  • Display - $2,000 to $5,000 per month

  • Social media - $2,000 to $5,000 per month

With ROAS targeting, even starting budgets of a few thousand dollars can generate solid returns if spent strategically.

Allocate these monthly pools across your priority campaigns and ad sets, which we'll discuss next.

Divide Budgets Into Campaigns and Ad Sets

Once you have monthly channel budgets, break them down further:

  • Assign portion of the budgets to each campaign (brand awareness, lead gen, promotions)

  • Then allocate campaign budgets into tightly themed ad sets focused on specific products, offers, audiences

For example monthly search budget could be structured like:

Search Budget: $5,000

Campaign - Women's Shoes

  • Ad Set 1 - Running shoes: $500

  • Ad Set 2 - Heels: $500

  • Ad Set 3 - Sandals: $500

Campaign - Men's Watches

  • Ad Set 1 - Leather bands: $1,000

  • Ad Set 2 - Digital faces: $1,000

  • Ad Set 3 - Luxury: $1,000

This level of granularity helps you optimize profitable segments and cull underperformers.

Set Frequency Caps to Control Burn

Here's an easy mistake for new advertisers - serving the same users your ads over and over via retargeting. This wastes spend.

Set frequency caps in your account to limit each user to seeing your ads a certain number of times. Start conservatively, like:

  • 2 ad impressions daily

  • 6 ad impressions weekly

  • 10 ad impressions monthly

This prevents oversaturation and inefficient budget burn. Dial these caps in based on performance data over time.


Build an Optimization Mindset from Day 1

The key to paid advertising success is relentless testing and optimization. Even with limited seed budgets, you can optimize effectively.

Split test ad creative, copy, placements, keywords, landing pages, and more to improve ROAS.

Kill off the low performers based on data, not guesses. Scale up assets generating the highest returns.

Carve out 10-20% of monthly budgets exclusively for testing new strategies. This innovation ensures long-term success.

Refine targeting over time by analyzing your highest converting audiences and messaging. Study analytics to inform optimization.

With an ROI-focused testing mindset, you maximize learnings from every dollar spent. Compounding small wins is the path to scale.


Review Monthly Trends and Fluctuate Spending

Don't just set a monthly budget once and leave it. Analyze performance data and trends to adjust budgets up or down accordingly.

If ROAS is exceeding targets, increase budgets 10-20% to drive more volume.

If ROAS is underperforming, reduce budgets temporarily while you diagnose issues and optimize.

Be prepared to allocate more budget to hot traffic and conversion sources when found. But also cut inefficient spend that's not working.

Strike an optimization balance between riding winners and uncovering new opportunities. Both require budget flexibility.


Factor in Seasonality

As an ecommerce site, be sure to account for seasonal spikes in sales and traffic when planning budgets.

In general, increase paid advertising budgets 15-25% above baseline targets during peak holiday quarters like Q4.

For seasonal lulls, reduce budgets by 10-20% below normal until demand picks back up.

Review your projected sales cycles and set monthly budgets accordingly. Match spend to periods of higher commercial intent and conversion potential.

Consider Lifetime Value

This is an advanced concept, but consider lifetime value (LTV) when setting paid advertising budgets.

LTV is the total revenue generated from a customer over their entire relationship with you.

Knowing this number lets you scale budgets confidently above break even CPA, because you'll still profit long-term from high LTV users.

If LTV is $500 over 2 years per customer, you can bid aggressively up to $250+ per acquisition and still come out ahead.

High LTV products give you more budget leeway, but track closely to stay profitable.

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Avoid Campaign Cannibalization

Here's an important warning - beware intra-channel budget cannibalization tanking your ROI.

What does this mean?

If you launch multiple overlapping social campaigns targeting the same audience, they will start competing with each other. More spend stops meaning more results.

Guard against this by researching target audiences thoroughly before launching new campaigns. Look for incremental value.

Use audience exclusions, targeted creatives, and tighter technical setups. Don't just create campaigns for the sake of spending budget.

Plan New Campaign Launches Carefully

When ready to expand into new channels, platforms, or campaign types, do so incrementally. Test in small doses before large outlays.

For example, you may run search ads initially. Once profitable, try a small $500 budget social media campaign targeted narrowly.

See if the new channel shows enough promise to justify more spend. Don't rush into large new budgets before confidence.

Patience and validations prevent huge budget dumps into untested channels. Safeguard your ad spend through disciplined allocations.

Master Profitable Ad Management

Getting paid advertising right as a new ecommerce site takes work. Start with a conservative plan focused on depth over breadth in your targeting and creative.

Keep budgets in check with ROAS benchmarks. Tweak spending monthly to match the momentum (up or down).

Channel complexity comes later once you validate strong directional signals. Nail the basics first.

Optimization trumps budget size or vanity metrics. A $500 budget that's highly dialed in on profitable customers will outperform a blank $5,000 check.

Target audience precision, creative relevance, and conversion tracking are the cornerstones to amplify. Pour budget into what works.

Feel free to reach out as you scale up your ecommerce advertising. We're always happy to offer budget planning tips or optimization advice!

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