How to Choose Which Products to Use in Ads
A simple guide on choosing the right products for your ads by focusing on demand, supply, and margin to maximize profitability and long-term customer value.
How to Choose the Right Products for Your Ads. This is Merchandising for Facebook Ads, Explained.
Hey everyone! Let’s break down how to choose which products should go into your ads. The short answer?
Pick products with high demand, good supply, and strong margins.
Here’s what that means.
1. Demand: What Your Customers Want
Demand simply means what people are actually buying.
Best Sellers: These already prove what your customers love.
Seasonality: Preferences change. A clothing brand might sell more jackets in thewinter, and more crop tops in the summer.
Lifetime Value (LTV): Some products attract new customers but don’t bring them back. Others create loyal repeat buyers.
Example:
A cheese brand used a product that attracted tons of new customers in their Facebook ads, this great for capturing demand, terrible for lifetime value.
When they switched to a slightly less exciting, and hyper-palatable cheese, with a much smaller TAM, their new customers kept coming back and lifetime contribution profit grew.
Sometimes the right product isn’t the one with the lowest CAC, it’s the one that creates the largest business impact.
What about new products?
There’s always risk. You pay for inventory and ads before you know if people want it.
If you can, test new items with your existing customers via email or SMS before investing heavily into Facebook ads to liquidate inventory... or ad spend.
Supply: How Much You Have and When You Want to Sell It
Supply isn’t just stock, it’s also about timing.
A quick rule of thumb? Make sure your days of inventory > your lead time.
If ads make you sell out faster than you can restock, you limit profitability and reduce opportunities for return customer orders. This can damage your customers experience with your product.
Sometimes, even low-profit acquisition can be worth it if it helps you grow your active customer base, but most of the time this is only a good idea if you can restock quickly enough.
3. Margin: What You Actually Make When You Sell This Product
Your gross profit must be higher than your cost of acquisition (CAC) to be profitable on acquisition.
If your CAC is higher than your gross profit from the first sale, you’re operating at a loss on acquisition, so you need strong lifetime value and cash to fund acquiring at a loss.
The more customers you acquire at a loss? The larger the obligation.
Example:
A $100 product with 80% margin gives $80 gross profit.
If your CAC is $40, you keep $40 on the first order,.
If customers come back and create $400 lifetime value at the same margin, that’s another $280.
This is a great product for ads.
Product Scenarios: What to Advertise and What to depriotize
1. High Demand • High Supply • High Margin
The dream product.
Everyone wants it, you have lots of it, and it’s profitable.
Use this in ads, no debate.
2. High Demand • Low Supply
Customers want it, but stock is limited.
Choose between:
• Using it to acquire new customers (If you goal is growth)
• Saving it for return customers (higher unit profitability)
If supply is too low, you may bottleneck future sales. Factor in your lead times.
3. High Demand • Low Margin
People want it, but you don’t make much on it.
Risky for ads since you may not recover your acquisition cost.
This product might be better for:
• Bundles
• Promos
• Low-cost marketing channels, like retention marketing, or influencer collaborations.
However you could use this product to acquire a high volume of new customers, if high demand is helping drive low acquisition costs at scale, that mean that you don't need a high margin to sustain being profitabile on acquisition.
4. High Supply • Low Demand • Low Margin
This is tricky. You have a lot of it, no one wants it, and you don't make a lot when you sell it.
Avoid using paid ads here.
Instead, liquidate your inventory through:
• SMS
• Bundles
• Sales
Paid ads will likely light your marketing budget on fire.
If you don't know your products Demand, Supply, or Margin yet.
Test new products with existing customers first.
Use small ad budgets to validate demand before scaling.
Remember: existing customers aren’t always the full market, but they’re a great starting point.
The TLDR:
Choosing the right products for ads comes down to three considerations:
✔ High demand
✔ Stable supply
✔ Healthy margins
Get it right, and you’ll save yourself a lot of headaches.
Thanks for reading, and happy merchandising.
