Hey there, Gamal here!
Welcome to this week’s newsletter. If you follow me on LinkedIn, you might’ve caught my recent post where I claimed that performance marketing in e-commerce can’t realistically chase two big goals at once: scaling up (driving higher revenue) and improving efficiency (driving better profitability). Some folks agreed, some didn’t, and that’s exactly why I’m diving deeper here, to clear the air and give you a practical framework for deciding when to scale and when to optimize for efficiency.
The Great Debate: Can You Really Do Both?
Let’s set the stage:
Scale Up: Pump more into your top line. This often means bigger budgets, higher reach, and more volume of sales.
Efficiency: Keep your costs in check. This is where we’re laser-focused on CAC, CPA, ROAS, or POAS.
The tension is that as you scale up, you tend to drive your CPAs (Cost Per Acquisition) higher and your ROAS/POAS lower because you’re inevitably paying more to reach a broader audience. On the other hand, if you shrink your budget to crank up efficiency, your total sales volume often slips. Think of it like trying to max out your reps in the gym while also trying to run a marathon, sure, you can do both, but not at the same time with the same intensity.
My Opinion: You can be strategic about balancing these two objectives, but you typically have to commit to one dominant focus in a given time frame (e.g., a month, a quarter, or a specific campaign). Trying to do both in equal measure every single day is a recipe for mediocre results.
When to Scale Up
1. Leadership is Expecting More
If your boss or board has granted you a bigger budget than last year and they’re explicitly expecting more total sales, congratulations, you’re in scale-up mode! But watch out; you don’t just spread those additional funds evenly across all months and markets. Focus on your Tier 1 campaigns, your major seasonal events, or your most profitable markets. That’s how you get the most bang for your buck.
2. There’s a Big Seasonal or Prominent Event
Black Friday, major holidays, or big brand collaborations, these are prime times for ramping up your spend. The ROI might still look good because consumer buying intent spikes.
3. Defending or Attacking Market Share
If a competitor is making moves or if your category is heating up, scaling aggressively can help you defend your position. It might not be the most efficient in the short term, but it’s necessary to maintain visibility.
When to Optimize for Efficiency
1. Budget Cut, Lower Targets
If you have less budget this year and your leadership expects fewer total sales, you’re in cost-saving mode. This is where you trim inefficiencies. But don’t slash budgets equally. Double down on your star performers (campaigns or markets). Think “survival of the fittest,” marketing-style.
2. BAU (Business as Usual) Months
Not every month is a mega-sale month. In these quieter periods, make efficiency your best friend. Test new channels or tactics at low budgets, refine your audience targeting, and nurture existing customers. Save the big spend for big moments.
3. Product Profitability Differentials
Not all products or categories are created equal. If you have a product with a killer margin, it might be worth scaling. But if margins are razor-thin, focus on efficiency to ensure you’re not funneling all your marketing dollars into an unprofitable black hole.
The Gamal Framework: Budget & Revenue Alignment
Here’s a quick strategy I personally like to use:
Share of Revenue vs. Share of Budget
Calculate how much revenue (as a percentage of total) you expect each month to deliver. Match that against how much budget (again as a percentage of total) you’re allocating.
If a particular month is supposed to deliver 20% of your annual revenue, does it also receive ~20% of your annual budget? If it receives less, you might be missing potential sales. If it gets way more, check if it’s justified by historical performance or upcoming promotional events.
Market-Level Allocation
Perform the same exercise on a market-by-market basis. If Market A usually drives 30% of your sales, does it also get 30% of your ad spend? If not, are you okay with that mismatch because maybe Market A is cheaper, or Market B has more growth potential?
Factor in competition. Some markets might demand a higher share of your budget because they’re highly competitive, especially if your company’s big on maintaining brand visibility.
Add Profitability to the Mix
If you can track profit share by product, region, or month, incorporate that. A high-revenue strategy is nice, but if the margin is slim to none, you’ll burn the midnight oil for not much gain.
Plan for the Trade-Off
Realize that in the months or markets where you’re going all-in, you might see your efficiency metrics suffer, and that’s okay, provided it was a conscious choice.
In other segments where you’re not seeing major growth potential or facing stiff competition, shift to cost-control tactics.
A Visual Sneak Peek
As you increase spend, you see a pretty good rise in sales, until you reach a point of diminishing returns, where each incremental dollar yields less and less
The more you spend, the more your efficiency typically goes down. This is where your ROAS, POAS, or profit margin might take a hit
Moral of the story: You can’t have it all at once. If you want that big volume surge, accept that efficiency dips. If you’re aiming for ultra-lean costs, accept that you won’t hit the highest possible sales volume.
Extra Thoughts & Overlooked Factors
Competitive Landscape: If a giant competitor enters the market with a massive ad spend, you might need to scale up just to keep your share of business.
Seasonality: Plan your budget around known sales spikes (or slumps). Being prepared for cyclical trends ensures you’re not over- or under-spending when it matters most.
Testing & Innovation: Even in scaling phases, set aside a small budget for experimental channels or audiences. In an efficiency phase, test new tactics that could later be scaled.
Collaboration with Other Departments: Make sure your e-commerce team and finance folks know your plan. If their sales forecasts are way off from your marketing realities, it’s time to align or negotiate expectations.
Wrapping Up
At the end of the day (or the quarter), your job is to spot opportunities for growth and times when tightening the belt is the smarter move. This isn’t about being rigid or picking only one path forever; it’s about sequencing your approach. You can scale in some months or markets while optimizing for efficiency in others, just make sure it all aligns with your overall business goals.
Need More?
If you found this insightful, check out my podcast Reach4growth on YouTube (shout-out to our 20K subscribers!). I dive deeper into all things performance marketing and e-commerce, sometimes with guest experts who share amazing stories, sometimes with me just ranting on about the latest trends, always with a bit of humor (and, hopefully, a lot of value).
As always, if you have any questions or want to share your experience juggling scale and efficiency, drop a comment or shoot me a message. I’d love to hear how you’re tackling these trade-offs in your own campaigns.
Until next time,
Gamal