Solved: Ad Cost Reality Check for New Product

Hi there,

Thanks for reaching out!

That's a really smart question to be asking before you dive in and start spending money. So many people just jump in head first and wonder why they're not making any profit. Your thinking is definitely in the right place, but I think your maths and your starting strategy might be a bit off. Happy to give you some initial thoughts and guidance on this, as it's a super common problem we see.

We'll need to look at your maths...

Okay, let's start with the numbers you've put together. You've estimated a $3 cost per click (CPC) and a 1% conversion rate (CVR), leading you to a $300 cost per acquisition (CPA). It's good you're planning for a bad scenario, but this is probably a bit too pessimistic and mixes up numbers from different types of advertising.

A $3 CPC is something we might see for really competitive keywords on Google Search ads, where someone is actively looking for a product. For Google Display ads, which you mentioned, the CPC is usually much, much lower – often under $1, sometimes as low as $0.20-$0.50. So that part of your calculation is likely way off.

But here’s the catch. The reason Display ads are so cheap is because the people seeing them aren't looking to buy anything. They're reading a news article, checking the weather, or playing a game on their phone. Your ad is an interruption. So while the CPC is low, the conversion rate is often abysmal, sometimes well below 0.5%. You get what you pay for: cheap, low-quality, uninterested traffic.

On the other hand, if you were to pay $3 for a click from a Search ad, that person has typed in something like "protective ipad case with stand" – they have a clear need. Their chance of converting is much higher, so a 1-2% conversion rate is more realistic, maybe even higher for a good website. I remember one eCommerce client we worked with in the navigation space saw an 8x return on their ad spend using Meta ads, which is a similar "interruption" style platform to Display, but the targeting is much better which is why it worked.

The point is, you can't just take a CPC from one channel and a CVR from another and mash them together. The cost and the quality of the traffic are directly linked. Let's look at some more realistic ranges. For eCommerce sales in developed countries like the US, a typical CPC on Search might be £0.50-£1.50 ($0.60 - $1.80) and a typical CVR is 2-5%.

Let's do the math on that:

• Best Case: $0.60 CPC / 5% CVR = $12 Cost Per Sale
• Worst Case: $1.80 CPC / 2% CVR = $90 Cost Per Sale

As you can see, the range is huge. Your target of $15 is right at the very optimistic end, but it's not completely impossible like the $300 figure. It all depends on getting the right traffic to a website that converts well. Below is a little calculator you can use to play with these numbers yourself. See how much a small change in conversion rate affects your final cost.

I'd say you're starting on the wrong platform...

This leads me to my main point. Your calculation isn't just off because of the numbers, it's off because of the strategy. Honestly, starting with Display ads for a new product is probably the biggest mistake you could make.

Think about it. You have a new device that nobody has ever heard of. You're then going to spend money showing pictures of it to millions of people who are in the middle of doing something else entirely. It's the digital equivalent of being a door-to-door salesman trying to sell a new kitchen gadget. You'll get a lot of slammed doors (or ignored ads) for every one person who even shows a flicker of interest.

When you run a broad awareness or reach campaign on a platform like Google Display or even Meta, you're essentially telling the algorithm to "find the cheapest eyeballs possible". The algorithm does exactly that. It finds people who are not in high demand by other advertisers because they don't click, they don't engage, and they certainly don't buy. You are literally paying to reach the worst possible audience for your product. It’s a fast track to burning through your budget with nothing to show for it.

You said you can't think of a way to use text ads because your product doesn't have a known name. This is where you need to shift your thinking. You don't sell the name, you sell the solution. People don't search for "TheBoatDIY Phone Stand 3000". They search for "best phone stand for video calls", "magnetic car phone holder", or "cool popsocket alternative".

This is called search intent. You need to meet customers where they are, when they are already looking for what you sell. And the place they do that is Google Search and Google Shopping.

You probably should focus on intent first...

So, instead of Display, your first port of call should be Google Shopping. This is where your product shows up with an image and a price directly in the search results when someone searches for a relevant term. It's visual, it's direct, and it's targeted at people with their wallets already half-open. This is the best way for a new physical product to get discovered.

Alongside Shopping, you should run a Google Search campaign. The ad copy here needs to be laser-focused on the problem you solve. Here are some quick ideas for keywords and ad headlines, assuming your product is, say, a versatile phone stand:

Possible Keywords to Target:

• -> "adjustable phone stand for desk"
• -> "sturdy iphone stand for filming"
• -> "portable ipad holder"
• -> "best alternative to popsockets"

Example Ad Headline:

Headline 1: The Ultimate Hands-Free Stand
Headline 2: For iPhone, iPad & All Devices
Description: Stop fumbling with flimsy stands. Get the rock-solid, fully adjustable device holder for perfect viewing angles. Free UK shipping.

This approach targets people who already have the problem and are actively looking for a solution. You aren't creating demand from scratch; you're capturing it. This is a far more efficient and profitable way to start. We've seen this work for countless eCommerce clients. By focusing on the right audience on the right platform, you give yourself a much better chance of success from day one.

You'll need a website that actually converts...

Let's say you get the advertising right. You set up a great Google Shopping campaign, your ads are showing to the right people, and they're clicking through to your site. This is where the next, and arguably most important, battle is fought. Your 1% conversion rate estimate might seem low, but for a new, untrustworthy-looking site, it could easily be that bad, or worse.

I've looked at hundreds of eCommerce sites over the years, and the ones that fail always make the same mistakes. You can have the best ads in the world, but if they point to a poor landing page, you're just paying to show people a website they'll immediately leave.

Here are some things that kill conversions:

• Bad Product Photos: Grainy, poorly lit images taken on a kitchen table scream "amateur". For a $40 product, you need crisp, clean photos from multiple angles, ideally showing the product in use. A video is even better.
• No Trust Signals: Why should someone give their credit card details to a brand they've never heard of? You need to build trust instantly. This means having clear contact info, a professional design, customer reviews (even if you have to get them from friends and family to start), and secure payment badges (like Shopify, PayPal, etc.).
• Poor Product Descriptions: Don't just list the features. Sell the benefits. Instead of "Made of aluminum," say "Built from aircraft-grade aluminum for a sturdy, wobble-free experience."
• Slow Loading Speed: If your site takes more than three seconds to load, a huge chunk of your visitors will just leave. All that money you spent on the click is wasted.

Getting your website right is not an optional step. Improving your conversion rate from 1% to 2% has the exact same effect on your business as halving your ad costs. It's that powerful. Before you spend a single dollar on ads, make sure the destination is worth visiting.

Let's work out what you can *afford* to pay...

Finally, let's flip the entire question on its head. Instead of asking "What will a conversion cost?", you should be asking "What can I afford to pay for a conversion?". You've said your target is $15, which is based on a single sale of a $40 product. But is that the whole picture?

This is where the concept of Customer Lifetime Value (LTV) comes in. It's the total profit you expect to make from a single customer over the entire time they're your customer. For a simple product like yours, maybe a customer buys once and that's it. But what if they love it and buy another one as a gift? What if you release a new version or a complementary product in a year and they buy that too? What if they tell two friends about it who both buy one?

Suddenly, that one $5 profit from the initial sale isn't the whole story. A healthy business model for direct-to-consumer brands is often a 3:1 LTV to Customer Acquisition Cost (CAC) ratio. This means for every $3 of lifetime value a customer brings, you can afford to spend $1 to acquire them.

Let's imagine a simple scenario. Your average order is $40. Your gross margin is 37.5% (that's your $15 profit margin). And let's say 1 in 10 customers comes back to buy something else within a year.

This is a simplified way of looking at it, but it changes the game. If you know a customer is actually worth $16.50 in profit, not just $15, you can be a bit more flexible. If you build a proper brand and people come back again and again, your LTV might be $50 or $100. At that point, paying $20 or $30 to acquire that customer looks like an incredible bargain, and it lets you outbid competitors who are only thinking about the first sale.

Stop thinking about the cost and start thinking about the value. That's how you build a scalable, profitable business, not just a product that makes a few quid on each sale.

This is the main advice I have for you:

To wrap this up, your caution is good, but your initial plan is flawed. You're right to be worried about a $300 CPA, but that's an unrealistic number based on a poor strategy. A $15 CPA is ambitious but not impossible if you do everything right. Here are the actionable steps I'd recommend.

As you can probably tell, there's a lot that goes into this. It's not just about flicking a switch on Google Ads and watching the sales roll in. It's about a deep understanding of strategy, channels, user psychology, and constant testing and optimisation.

Getting it right can be the difference between a profitable business and a failed project that cost you a lot of money. If you'd like to go over your specific product and plan in more detail, we offer a free, no-obligation initial consultation. We can take a proper look at your website and help you build a launch strategy that actually works.

Regards,

Team @ Lukas Holschuh