Hi there,
Happy to give you some initial thoughts on the profitability tracking for your D2C pet toy brand. Getting this right is absolutely crucial, especially with D2C where product and shipping costs can eat up margin quickly. Just looking at basic revenue/ad cost ROAS really doesn't tell you the full story of whether you're actually making money or just moving volume unprofitably. It's completely understandable why it feels messy, it honestly is for a lot of brands, but getting this sorted is probably the single most important thing you can do right now to know if your efforts are worthwhile.
Understanding your true costs per sale...
You've hit on the core issue – you need to move beyond simple revenue. The real metric you want to understand is your profit per sale, influenced directly by your cost per acquisition (CPA) via ads, your product cost, and your shipping cost for each order. Let's say you spend £10 on ads to get one sale. If the product revenue is £30, but the product itself cost you £8 to make/buy and shipping was £5, your gross profit before other overheads is £30 - £8 - £5 = £17. Your net profit from that sale, considering the ad spend, is £17 - £10 = £7. That £7 is what you want to see a positive number for, consistently.
Your marketing ROI, in this truer sense, is essentially that total profit generated via ads compared to your total ad spend. It requires dilligence to track this accurately per ad set or campaign, as costs and conversion rates can vary, but it's the only way to know if you're truly scaling efficiently. Without this, you could be driving lots of sales that are actually losing you money once all costs are accounted for. We see this quite often with D2C brands starting out and just tracking top-line revenue, they think things are great but then realise later on they were bleeding cash. This fundamental shift from revenue-focused to profit-focused tracking is the first big hurdle to overcome.
Looking at where people drop off...
To understand why your profit per sale might be low or inconsistent, you need to look at the whole customer journey driven by your ads, not just the final sale number. The eCommerce examples show the importance of looking at key metrics throughout the funnel. Are your ads getting clicks but not leading to website visits (low CTR)? This means your ad copy or images aren't compelling enough for your target audience, leading to high cost per click (CPC). Or maybe the targeting is off and you're showing ads to people who aren't really interested in pet toys, leading to poor quality clicks and high costs?
Are people landing on your site but not viewing product pages? This could mean you're getting the wrong traffic from your targeting (again, targeting is usually priority one) or that the initial landing page isn't engaging or relevant to what the ad promised. It needs to grab their attention immediately and make them want to see the toys you offer. A poor or slow landing page is a quick way to waste ad budget.
Are they viewing product pages but not adding to cart? This is usually down to the product presentation itself – the photos that don't show the toys well, maybe you haven't included great descriptions detailing why a pet and owner would love them (focus on benefits!), pricing issues compared to competition or perceived value, or maybe people aren't ready to buy yet and need more nurturing like retargeting ads over a longer period showing different angles or benefits.
Finally, are they adding to cart but not purchasing? This could be checkout friction – is the process too long, do they have to create an account, are there unexpected technical glitches? Unexpected shipping costs showing up late in the process is a big one for drop-offs for physical products. Or it could be lack of trust – does your site look professional and trustworthy? Do people feel comfortable entering their payment details?
Each drop-off point increases your effective CPA for a successful sale and reduces your profitability. Looking at these steps in your analytics helps pinpoint where the leaks are in your funnel. Are you bringing people in cheaply but they are poor quality and drop off immediately? Or are you paying a high CPC for potentially good traffic that's then getting lost on the site before converting? Understanding these points is crucial before simply throwing more money at the ads hoping sales will increase.
Optimising your ads and offer...
Once you identify where the issues are in the funnel by looking at the metrics, you can start optimising to improve that bottom-line profitability. On the ad side, relentless split testing of creative (images, videos, ad copy) and targeting audiences is vital. Testing different types of videos (user-generated content often works well for pet products!), different angles in your copy focusing on playtime, durability, safety – this stuff can make a huge difference to grab attention. Small improvements in CTR or conversion rate on the ad platform can significantly lower your CPA because you're paying less per valuable action.
Testing different offers (like a small discount on a first purchase, a bundle deal combining popular toys, or a free shipping threshold) can also impact conversion rates both on the ad level and on the website itself. We've had eCommerce clients where better creatives or finding slightly different niche audiences on Meta has drastically changed profitability overnight by lowering CPA or increasing conversion rates of clicks.
On the website side, you mentioned pet toys – product photos are HUGE. Are they high quality? Do they show the toys clearly, maybe in use by happy pets or showing the scale next to a person? Video showing the toy in action can work wonders too, really brings it to life and shows how fun it is. Are your descriptions detailed and persuasive, highlighting the benefits for the pet and the owner, not just listing features? Does your site build trust? Things like prominently displayed customer reviews (maybe photos or videos of pets with the toys is even better!), clear contact info, a simple and fair returns policy, maybe even links to social media showing satisfied pets and owners and community engagement can make a big difference in that final conversion step.
Making sure your website loads fast and isn't cluttered is also important – especially on mobile as that's where most social traffic comes from. A confusing or slow site loses people quickly. All these site improvements work to increase your conversion rate after someone clicks the ad, which directly lowers your effective CPA and boosts profit per sale. It's about getting the right traffic AND then converting them efficiently at a cost that leaves you with a healthy margin after product and shipping costs. It's not just about driving traffic, it's about driving *profitable* traffic, and the website plays a massive role in that.
Reccomended Actions Overview
| Area | Recommended Action |
|---|---|
| Profit Tracking | Implement system to calculate Gross Profit (Revenue - COGS - Shipping) and Net Profit (Gross Profit - Ad Spend) per order/ad set. Get granular where possible. |
| Funnel Analysis (Ads) | Analyse CTR, CPC, and landing page view rate per ad set/creative. Identify ads/audiences with poor initial engagement or traffic quality based on downstream site behaviour. |
| Funnel Analysis (Website) | Deep dive into website analytics: entry pages, time on site, visits to product pages, add-to-carts, and checkout initiation vs. completions. Identify major drop-off points in the journey. Use heatmaps/session recordings if possible. |
| Ad Optimisation | Continuously A/B test different ad creatives (images, videos, copy) and targeting audiences to improve CTR, CPC, and specifically, the quality of traffic based on site behaviour metrics. |
| Website Optimisation | Improve product photography/video, write persuasive benefit-driven product descriptions, build trust signals (prominent reviews, clear policies, contact info, social proof). Improve site speed and mobile experience. Streamline the checkout process. |
| Offer Testing | Experiment with different offers (discounts, bundles, free shipping threshold) to see impact on conversion rate and average order value, always checking the impact on overall profitability. |
Putting it all together...
As you can see, moving from simply tracking revenue to understanding true profitability involves looking at multiple layers – your ad performance and the quality of traffic it sends, your website's ability to convert that traffic efficiently, and your underlying product and shipping costs for each order. It's definitely more complex than simple revenue ROAS but absolutely essential for sustainable growth. Getting this alignment right, where your ad costs are low enough to acquire customers profitably given your product and shipping costs and your site converts well, is what allows you to scale confidently, knowing that each sale from ads is actually contributing positively to your bottom line.
This is where having experience running campaigns specifically for D2C eCommerce and understanding how these pieces fit together, how small tweaks in creative or on the product page can swing profitability from negative to positive, really helps accelerate the process and avoid costly mistakes. Navigating these metrics, setting up the right tracking, and optimising based on true profit rather than just revenue can be time consuming and tricky to get consistently right, especially while trying to run the rest of the business.
If you'd like to discuss your specific setup, the numbers you're currently seeing from your ads and website, and challenges in more detail, we'd be happy to book in a free consultation to explore some of these points for your pet toy brand and identify the most impactful areas for you to focus on improving profitability.
Regards,
Team @ Lukas Holschuh
