Scaling revenue is great, but only if it’s tied to profitable products or leads. Otherwise, you’re just inflating numbers without adding real value to your business.
In the world of marketing, revenue growth is often positioned as the holy grail of metrics. It’s the one that gets talked about in meetings and emails, often accompanied by a plethora of buzzwords with little to no data to back them up. But here’s the truth: for many brands, revenue growth is not a business strategy. I’ll repeat it again for the people in the back: revenue growth doesn’t always lead to sustainable business growth.
The bigger picture
Businesses often get fixated on increasing revenue, especially when managing large inventories. And yes, revenue can be an important indicator of performance, but it doesn’t tell you the full story of what’s actually working for your business. When it comes to SKU-led strategies, revenue tends to become a bit of a vanity metric.
Imagine this: you have hundreds or even thousands of products in your inventory, each with its own price point, cost, and performance. While revenue can show you what products are trending, it doesn’t account for your profit margin. And without profit, endlessly scaling revenue becomes a pointless exercise.
The problem with revenue-centric strategies
Here’s an example to help illustrate what I mean.
Imagine you’re selling two types of backpacks:
Backpack A sells for £80 and costs £40 to make. After shipping and fees, you’re left with about £30.
Backpack B sells for £65, costs £50 to make. After the same deductions, you’re lucky to make £5.
Now imagine that because it’s converting so well, your campaign is only pushing Backpack B. Now you’re basically burning money. Sure, it’s driving revenue, but at what cost? If you’re only focused on revenue, your budget will end up being funneled towards products like Backpack B, barely covering their own costs or, worse, losing money.
The case for margin-focused optimisation
Optimising towards margin instead of revenue isn’t the most glamorous approach, but for high inventory businesses, it’s the right one. It requires more discipline and patience, and it may result in initial dips in performance. But if you hold steady and allow the algorithm to adjust, the long-term benefits of higher profitability will start to show.
The key to this strategy is understanding that it works best in businesses with large inventories where a substantial volume of profit is driven from gross revenue. This is where the data really becomes your best friend. If your business model relies on high revenue but struggles with profitability, it’s worth reassessing your approach. Without a solid margin strategy, the algorithm won’t have anything to optimise for, and you’ll end up scaling the wrong products.
It’s not just physical products: The lead gen parallel
This principle doesn’t just apply to physical products, it can also be crucial for lead generation businesses. A good example of this would be a service business that deals with a wide variety of trades, each operating on different revenue margins. If you’re not considering the margin of the leads you’re generating, you risk scaling the wrong types of leads. Those leads might look good in your reports, but if they’re unqualified or have low profit potential, you’re likely wasting your ad budget.
Cutting the right campaigns
It might sound counterintuitive, but sometimes it’s better to cut back campaigns that look successful based on revenue metrics if they’re not actually driving profit. You might be seeing nice numbers in your reports, but those numbers don’t always tell the full story.
Revenue vs. profit
At the end of the day, profit is what makes a business sustainable. Google Ads might give you metrics that look impressive in reports, but that doesn’t mean that those numbers are actually making you money. Revenue is a useful metric, but profit is what actually grows your business. These two things are not the same, and failing to recognise that distinction can lead you down the wrong path.
Final thoughts
For businesses with large inventories, optimising towards margin rather than revenue is the smarter, more sustainable strategy. It might take some time to adjust, and you might see some initial drops in performance, but ultimately, it’s about driving profit, not just revenue. Focus on margin, be patient, and the results will follow.
