Solved: E-commerce CPMs High, Sales Dropping?

Hi there,

Thanks for reaching out! It sounds like you're running into a pretty common but frustrating problem with your e-commerce campaigns. It's easy to get fixated on a single metric like CPM when sales dip, but from my experience, it's usually a symptom of a deeper issue, not the root cause itself.

I've put together some initial thoughts for you. I think you'll find that by shifting your focus away from the daily cost fluctuations and onto a few more powerful levers, you can build a much more resilient and profitable advertising system. Let's get into it.

We'll need to look at why obsessing over CPMs is a mistake...

Right, first things first. Let's talk about CPMs (Cost Per Mille, or cost per 1,000 impressions). You've noticed they're rising, and your sales have dropped. It's natural to connect the two, but it's a bit of a red herring. Relying on CPM as a health metric is like a doctor only checking a patient's temperature but ignoring their blood pressure and heart rate. It doesn't give you the full picture.

CPMs go up and down for dozens of reasons completely outside of your control:
-> More advertisers are competing for the same audience (like before a major holiday).
-> Platform algorithm changes.
-> General economic shifts.
-> Even the time of day can affect it.

If your entire strategy is fragile enough that a 10-20% swing in CPMs cuts your sales in half, the problem isn't the CPM. The problem is that your profit margins are too thin, your conversion rate is too low, or your customer value isn't high enough to absorb these normal market fluctuations. For instance, with one women's apparel client, we achieved a 691% return on ad spend by focusing on overall profitability rather than getting distracted by fluctuating CPMs. It proved that the cost to show ads is far less important than the revenue those ads generate.

The real question you should be asking isn't "Why are my CPMs high?" but rather "How much can I afford to pay to acquire a customer and still make a healthy profit?". Once you know that number, the daily CPM becomes almost irrelevant. This brings us to the most important calculation in your entire business.

I'd say you need to calculate your real break-even point...

The game changes completely when you stop thinking about one-off sales and start thinking about the total value a customer brings to your business over their entire relationship with you. This is called Customer Lifetime Value, or LTV. When you know your LTV, you know how much you can spend to acquire that customer (your Customer Acquisition Cost, or CAC) and still be wildly profitable.

Let's break it down into three simple parts:

1. Average Order Value (AOV): How much does the average customer spend in a single transaction?
2. Purchase Frequency (F): How many times does the average customer buy from you in a year?
3. Gross Margin %: After the cost of the goods themselves, what percentage of revenue is actual profit?

When you have these, you can start to build a picture of what a customer is really worth. A simple way to think about LTV is: (Average Sale Value) x (Number of Repeat Transactions) x (Average Retention Time) x (Profit Margin).

But an even more robust way for subscription-like models or businesses with predictable repeat purchases involves customer churn. Let's make this practical. Use the calculator below to get a feel for your own numbers. This isn't just a theoretical exercise; it's the foundation of a scalable advertising strategy. It tells you your absolute ceiling for ad spend per customer.

Once you know you can afford to spend, say, £50 to acquire a customer, a day where your Cost Per Purchase is £35 is a great day, regardless of what the CPM was. And a day where it's £60 means you need to adjust, but you're making decisions based on profitability, not a meaningless impression metric.

You probably should redefine who you're actually selling to...

Okay, so now you know how much you can spend. The next question is, who are you spending it on? You mentioned you're "testing different audiences," which is good. But I'm willing to bet those audiences are defined by demographics and interests. Things like "Women, 25-45, interested in fashion and shopping".

This is the bog-standard approach, and it's why most ads are so generic and ineffective. It tells you nothing about *why* someone would buy from you.

You need to stop thinking in demographics and start thinking in terms of pain. Your Ideal Customer Profile (ICP) isn't a person; it's a person in a specific, urgent problem-state that your product solves. Your customer doesn't just want a new dress; she's got a wedding to attend next month and is terrified she won't find anything that makes her feel confident. She doesn't just want a new coffee grinder; he's frustrated that his morning coffee tastes bitter and he's wasting expensive beans.

Your job is to become an expert in that "nightmare". What are the specific frustrations, fears, and desires that lead someone to search for a product like yours? Once you understand that, your ad creative and targeting become laser-focused.

Instead of targeting "skincare," you can create an ad with the headline: "Tired of 10-step routines that just irritate your skin? Get a healthy glow in 2 minutes." You speak directly to their pain. This is how you cut through the noise.

You'll need to diagnose your funnel leaks...

You're getting some sales, which is great. It means things are working to a degree. But the drop from 8 sales to 4 suggests there are leaks in your sales funnel that are being made worse by the higher ad costs. You need to become a detective and find out exactly where your potential customers are dropping off.

Here's how I'd break it down, looking at your ad platform metrics:

1. Impressions but low Click-Through Rate (CTR)?
-> This is your first major leak. It means people are seeing your ad but not finding it compelling enough to even click. The problem is almost certainly your ad creative (the image/video) or the ad copy (the headline). It isn't resonating with the "nightmare" of the audience you're targeting. Your offer isn't clear or attractive enough.
-> **The Fix:** Test completely different images. Use lifestyle shots instead of just product shots. Try user-generated content (UGC). Write new headlines that call out a specific pain point. Getting the creative and overall strategy right can have a huge impact. For one of our eCommerce clients selling cleaning products, our campaign strategy led to a 190% increase in revenue and a 633% return.

2. High CTR but low number of Landing Page Views?
-> This can be a technical issue. It usually means your website is too slow to load, especially on mobile. People click, wait a few seconds, get bored, and leave before the page even loads. You've paid for a click that never even had a chance to convert.

3. Lots of Landing Page Views but very few Add to Carts?
-> This is a big one. You've gotten them to the shop, but they're not taking the next step. The leak is on your product page. The issue could be:
-> **Poor Product Photos:** Are they high-quality? Do they show the product from multiple angles, in use?
-> **Weak Product Descriptions:** Does your copy just list features, or does it sell the benefit? Does it answer common questions and overcome objections?
-> **Price/Value Mismatch:** Is the price too high for what's being offered? Is shipping too expensive or unclear? Are there no trust signals like reviews?
-> **Wrong Traffic:** It's also possible your ad, while compelling, is attracting the wrong kind of person. They click out of curiosity but were never really in the market for your product. This goes back to the ICP definition.

4. Lots of Add to Carts but few Completed Purchases?
-> This is the classic "cart abandonment" problem. You've got them to the very last step. The leak is in your checkout process.
-> **The Causes:** Unexpected shipping costs are the #1 killer. A complicated checkout process that requires creating an account is another. Lack of trust signals (no security badges, no clear return policy) or not enough payment options can also cause people to drop off.

Here's a visual way to think about this diagnostic process:

You'll need to structure your campaigns for profit...

"Testing different ad variations and audiences" is the right idea, but without a structure, it just becomes a chaotic mess where you can't tell what's actually working. For all our e-commerce clients, we use a tiered approach based on the audience's "temperature".

Top of Funnel (ToFu) - Cold Audiences:
-> These are people who have never heard of you. Your goal here isn't necessarily an immediate sale (though it's a bonus). It's to find new potential customers.
-> **Who to Target:** This is where you use your pain-point ICP to build lookalike audiences (e.g., a lookalike of your past purchasers) and detailed interest/behaviour-based audiences.
-> **What to Show Them:** Your ads should grab attention and introduce the problem your product solves. Short videos, engaging lifestyle images, and clear benefit-driven headlines work well.

Middle of Funnel (MoFu) - Warm Audiences:
-> These people have shown some interest. They've visited your website, watched one of your videos, or engaged with your social media page. They know who you are, but they're not ready to buy yet.
-> **Who to Target:** Retargeting audiences of website visitors, video viewers, and social media engagers from the last 30-60 days. Exclude people who have already purchased.
-> **What to Show Them:** Now you build trust and handle objections. Show them customer testimonials, reviews, user-generated content, or different use-cases for your product. You're reminding them why they were interested in the first place.

Bottom of Funnel (BoFu) - Hot Audiences:
-> These people are on the verge of buying. They have added a product to their cart or initiated checkout but didn't finish.
-> **Who to Target:** Retargeting audiences of 'Add to Cart' (last 7-14 days) and 'Initiate Checkout' (last 7-14 days).
-> **What to Show Them:** This is where you give them a final nudge. A simple reminder ad ("Still thinking about it?") can be very effective. Sometimes, a small discount or a free shipping offer can be the thing that gets them over the line. But be careful not to devalue your brand by always offering discounts.

By splitting your campaigns like this, you can allocate your budget more intelligently. You can spend more on the BoFu and MoFu audiences who are more likely to convert, while using ToFu to constantly feed new potential customers into your funnel. This creates a sustainable system rather than just hoping for random sales.

This is the main advice I have for you:

I know this is a lot to take in, so I've boiled it down into a table of actionable recommendations. This is the exact process we'd start with to diagnose and fix the issues you're seeing. It moves the focus from things you can't control (CPMs) to the levers you can pull to directly impact profitability.

As you can see, tackling a sales dip is a systematic process. It requires digging into the data, understanding the customer psychology, and structuring your efforts in a logical way. It's rarely about just finding one magic audience or ad creative.

Running a business is demanding enough without also having to become a full-time expert in the ever-changing landscape of paid advertising. Implementing all of this correctly—from the calculations and audience research to the technical campaign setup and ongoing optimisation—is a significant amount of work.

This is often where bringing in a specialist can make a huge difference. We do this every day, so we can typically diagnose these issues and implement effective solutions much faster than someone trying to learn it all from scratch, helping you avoid costly trial and error.

If you'd like to go over your specific campaigns and website in more detail, we offer a completely free, no-obligation initial consultation. We can take a look at your account together on a call and give you some more tailored advice on what your biggest opportunities are right now. Just let me know if that's something you'd be interested in.

Hope this has been helpful and gives you a new way to think about your campaigns.

Regards,

Team @ Lukas Holschuh