Ecommerce Profitability: The Critical Second Sale

via Practical Ecommerce http://www.practicalecommerce.com/articles/61531-Ecommerce-Profitability-The-Critical-Second-Sale

Acquiring new customers is so expensive for retailers that it wipes out any profits from a first time sale. New analysis from my firm, SeeWhy, of data from Forrester and U.S. Census Bureau shows that on average 73 percent of online conversions come from first-time customers, but that these first-time conversions are not profitable due to the acquisition costs.

In contrast, the 27 percent of conversions that come from returning customers generate 41 percent of the revenues, and 100 percent of the profits. This mirrors work done years ago by Bain and Company and made famous by Fred Reichheld’s book, The Loyalty Effect.

There are several factors at play here.

• Returning customers spend more than first time customers.
• The cost of acquisition is born solely by the first purchase.
• Factoring in customer service, fulfillment, and returns eats into margins.

New shoppers generate an average 9 percent loss, due to the acquisition costs, compared with repeat shoppers who spend more and generate a 14 percent gross margin, on average.

However, it’s worth noting that even though new customer conversions are not profitable, they still make a contribution to overhead. A proportion of new customers will go on to become profitable returning customers.

Your own data will likely show some variation from industry averages. I’ve assumed a gross margin of 40 percent — some retail sectors are significantly more profitable than this, and others less — and I’ve also not amortized the customer acquisition cost across the expected lifetime purchases of a new customer. However, if this prompts you to do your own analysis, and consider tactics for securing the second sale, then it will have been a fruitful exercise.

So what tactics are important when it comes to getting the first and subsequent second sales?

Getting the First Sale

Getting ecommerce prospects to purchase for the first time is a topic that warrants a novel, but here are three essential tactics to focus on.

• Nurture new prospects: Remarketing, brand messaging, promise of service. Only 0.25 percent of new visitors buy — but if you can get them back to the site, your chances of securing a conversion go up 9 times. The reality of the conversion process is that each visitor is on a journey toward a potential purchase, spanning a sequence of visits to your site and others.

There is a huge temptation to view all visitors on a particular page as equal and to focus solely on conversion optimization of the page. Prospects behave differently from customers and have different needs. It’s also tempting to chase the holy grail of securing a conversion from the first time visitor. But it’s probably going to take a sequence of visits before your prospect is ready to purchase.

Nudging nervous prospects with reassuring brand messages via email helps drive new customers back to your site. This is best done using retargeted advertising and email remarketing, and the key to success here is to be 100 percent consistent with your brand and to promise great service.

• Build trust: Content, authority, social proof. You can build trust in your brand and purchasing experience with great site content. When writing content, step out of your shoes and into those of your prospect by giving objective advice about which products to buy so that you earn a trusted adviser status. Remember that new customers aren’t looking to be sold, they are looking for confirmation that your proposition is a good fit.

Social proof in the form of reviews, testimonials, number of products sold, and authoritative reviews by independent third parties, are all critical for building trust in both your products and the brand and service that go along with it. Don’t forget to feature reviews and testimonials about your service — they may have decided to buy the product, but not yet decided whether to buy it from you.

• Make it easy: Phone numbers, free shipping and returns, payment methods. Studies consistently show that consumers seek free shipping and free returns above all other promotions. Easy returns are of particular concern to first time customers who have no experience with your brand or customer service. If you can’t offer free returns then make the process transparent and as easy as possible. Don’t bury this information on your site or hide your phone number, which only deters nervous prospects from purchasing from you. A prominent phone number goes a long way in reassuring a prospective customer that you will be easy to contact when something goes wrong. Ensure you have thought through your payment strategyas it has a big impact on mobile conversions, in particular.

The purchase process should be easy and intuitive. Read Steve Krug’s book Don’t Make Me Think and consider your own site experience while wearing the shoes of a prospective customer.

Getting the Second Sale

Again, I’ve picked three tactics, out of many, to focus on in securing the second sale.

• Deliver exceptional service. We know that customers choose to spend with you again based on both price and previous experience. So it’s critical that first time purchases go off smoothly, and you should use any hiccups as opportunities to deliver exceptional and memorable service. These are the “moments of truth” that cement a relationship with your brand and lead to brand advocacy and future purchases.

Since the first purchase is unlikely to be profitable, you may encounter resistance internally to spending money on outstanding service. This is why understanding where the profit comes from is important. Leading ecommerce companies know this. It’s not a coincidence that Amazon is the largest ecommerce retailer and also has the highest customer satisfaction score.

• Get customers browsing your products on their tablets. Tablets are increasingly being used for recreational shopping, so take a page from the catalog companies’ playbooks and link the pleasure of browsing catalogs with easy online purchases. There are massive online conversion benefits from having customers research your product catalog at leisure on their tablets. If you were planning on building a tablet app soon, you might want to reconsider and look at digital catalogs instead as they are more in line with what customers want when shopping recreationally. Or, focus your efforts in having a stunning tablet shopping experience that recognizes the recreational nature of how many consumers are starting to shop — in the evenings from the couch.

If you’ve not yet investigated digital catalogs, they can be produced cheaply and will drive high-quality traffic to your site that spends more. Put this on your to do list, or read my previous article, “Do Digital Catalogs Drive Conversions?” to learn more.

• Keep email communications relevant. Simply adding new customers into your email program will keep your brand message in front of them but does little to build a relationship. Instead, think about triggered email programs that are more relevant, including leveraging recommendations on the purchase confirmation, soliciting for post-purchase reviews, and real-time triggered emails based on products and categories browsed. All of these techniques increase the probability of securing future purchases.

Conclusion

Examine your own numbers so that you have a clear picture of profitability for new and returning customers. The tactics above offer some opportunities to improve first and second time conversions. Actually making changes that improve the new customer conversion experience can be challenging. But hard data tends to win the day and offer objectivity that allows you to make much better informed decisions.

Digital Marketing And Analytics: Two Ladders For Magnificent Success

via Occam's Razor by Avinash Kaushik http://www.kaushik.net/avinash/digital-marketing-analytics-ladder-step-by-step-success/

The most common mistakes digital practitioners and leaders make is to either do things in the wrong order, or to try and do too much at one time.

Progress in digital marketing and analytics in either scenario becomes painful (the organization / systems / thinking is simply not in the optimal position). People become frustrated (you hire smart people, they run off to build you the Taj Mahal, meanwhile you don't have a functioning toilet). Business results suffer.

There is something in humans that makes us want to do the hard things, to shoot for the most complex right away, to want to be challenged to infinity. In many cases, it is a tendency we have to learn to restrain.

More often than not, magnificent success results from executing a business plan that is rooted in a strong understanding of the landscape of possibilities, and a deep self-awareness of business capabilities. These business plans will contain a structured approach, do this, then do this2, then make sure we are really good at this3, then this 4 and so on and so forth.

In other words: Evolution. It works.

Said another way, digital revolutions more often than not fail. One day your leadership realizes you stink at digital (all of it or just Facebook or search and display or mobile or whatever). They find the closest industry leader (L'Oreal, Booking, Zyrtec, Innocent Drinks, CSC Consulting). They say: "Do whatever we need to in order to get there in 90 days. Go!!"

If you hear that, run. Else you'll be standing in a place where a flaming crater will appear in the near future.

I'll be the first to admit that selling evolution is hard. Revolutions just sound so darn sexy! Still, reality is reality.

In this post I want to arm you with the evolution you should undertake in your companies when it comes to marketing and analytics. Additionally, I'll make the hard tough difficult painful choices on your behalf and order things to deliver the highest possible impact, so you'll know exactly what to do and what you will get from it all.

In other words: Two inspiring ladders of awesomeness for you! One for digital marketing and one for digital analytics.

Your ladder might look a little different, but I hope the process I follow will help you make the hard choices most relevant for your company and the evolutionary position it finds itself in.

Ready?

Digital Marketing: Ladder of Awesomeness/Sustainable Success.

My current title is Digital Marketing Evangelist so you can just imagine how absolutely excited I am about all the digital possibilities. Owning audiences, instead of just renting them. Earning time, instead of just buying it on TV. Creating persistent relationships, instead of just transient ones. Not letting budgets limit our creativity. And so much more. I'm like a kid in a candy store. I want to do everything right away. I want to go from single cell life to fully formed homo sepians in seven days.

I've also discovered that that is the easiest path to failure. : )

So, based on my spectacular successes and painful failures around the world, I've developed a ladder of sustainable success. Here is what it looks like:

Let's look at each step on the ladder in some detail.

The very first thing you want to do is create an acceptable website. One that reflects the customer expectations of 2013. A good example, for e-commerce and non-ecommerce sites, is http://www.csc.com/. Look at the colors. Look at the icons. Look at the way the text is laid out, how video is incorporated, the structure of the site and everything else. Your first job is to beat them at everything. During this stage you should also invest a lot in Search Engine Optimization. You will have great content, in a good experience, and focus on getting free traffic.

[To learn more about the Do in stage one please review my See-Think-Do-Coddle framework for content, marketing and measurement.]

Second, create the world's greatest mobile experience. Yes. Don't do paid search. Don't run to buy display ads. Definitely do not start Tweeting or embarrassing your brand on Facebook (we'll do that in a bit). Focus on the mobile experience. Because of this lovely graph from Business Insider and it's representation platforms people use to visit top destinations….

Scary, right? Exciting, right? Focus on mobile like crazy, tablets in particular. Beat CSC's experience. BeatMotrin. Beat Beneful. Don't be like IBM's tablet experience (old, substantially brand negative). Or Ford (it is amazing that in 2013, for such an expensive product, it looks so…. 2005).

Now that you have build a decent foundation and are getting a decent amount of free traffic you know what is working and what is not, you are ready to move to step three. Start investing in your email marketing strategyfor extending relationships, and your paid search strategy for brand terms. Email allows you to start building aowned audience that you can (if you don't stink) start relying on (rather than constantly having to rent them from TV or Google). People typing a million variations phrases with your brand terms are looking for you, make sure you show up and capture the traffic you deserve.

Step four is focusing on expanding your reach to new relevant audiences. The cool part about display advertising is that we can build our brands cost effectively, introduce our products to a new audience, and create demand based on a number of intent signals (this last part is often missing from offline media). Based on what people read, what sites they've visited, their demographic and psychographic signals and so much more. Don't go all crazy with display ads, just focus on your brand, products and services. Learn, get better, try some more.

The site is now working well across platforms, we are starting to get a lot of free and some paid traffic, we are optimizing for conversions and task completion rate, time to move to step five in the ladder and focus on creating micro-outcomes on our website. Here is what it looks like for the Venetian hotel and casino in Macao:

In orange is the macro-outcome (number of casino room reservations), in purple are the micro-outcomes. All clustered into See-Think-Do. Less than two percent of people on your website will complete the macro-outcome (conversion). Having a robust cluster of micro-outcomes allows you to deliver something of value to the other 98% and establish a relationship with them (and get some economic value in exchange!). The smartest companies in the world are very good at this, step five. It does require working with your CMO, VPs, Directors, IT, Offline Sales, UX, IT, and more people than you could ever imagine. It is worth it.

Time to start kicking things up a notch in step six. Start investing in creating the world's most beautiful, functional, brand-enhancing, customer joy inducing website! You have content, you have traffic, you have micro-outcomes, you are making loads of money. Invest in the site experience now to differentiate yourself from the competition, and create irrational loyalty. Beat Bonobos (I. Love. Them!). Beat L'Oreal (except for their irritating 40 question survey in a single long window, they are nearly flawless). Beat Palms casino (try booking, try the menu, try anything, pretty awesome all around).

You are a big company and you can do two big things at one time. Now is also the right time to start investing in Facebook and YouTube. These two social platforms (eschew others at this point) allow you to learn how to earn attention in two different form factors. In both cases you'll learn quickly that pimping is the best way to fail. Expressed by me on behalf of all humans on earth: The world's greatest social media strategy: 1. Entertain Me 2. Inform Me. 3. Provide Utility. Nothing else works. Learn that in step six.

[Bonus: Facebook Marketing: Best Metrics, ROI, Business Value ]

Now that your earned, owned and paid media strategies are in full swing, and you are the proud owner of the world's greatest desktop and mobile website, let's focus on enhancing your ability to get a massive audience.(Cartoon by Hugh MacLeod)

Step seven is to to build out an incredible category/industry/ecosystem targeting Search and Display strategy. This will result in you getting magnificent at brand marketing, at the See and Think stages. The result will be an even larger owned audience, less getting into dog-eat-dog Do stage fights. You'll have complete spectrum of coverage, being there from understanding customer intent at the earliest stages and converting that into demand for what you have to offer.

From step five on you were likely already delivering some multi-channel value for your company. Some of your micro-outcomes were likely already connected to your offline existence (maps, phone calls, offer redemptions, etc.). Now in step eight, we really kick things up multiple notches when it comes to creating a truly fantastic multi-channel (or the flavor of the month, omni-channel) execution engine.

The picture above is from my first book, Web Analytics: An Hour A Day, from page 235. It is a part of multi-channel analytics chapter.

There is a lot of difficult work to be done (systems, processes, integrations, optimizations) in order to ensure that your digital existence is driving nonline value. Now is the time to undertake that work. Not in step three. Definitely not in step one. Now. Step eight (after you've gotten the first seven things done).

The last step before nirvana, step nine, is to focus on getting better at loyalty marketing. (Cartoon by Tom Fishburne)

My definition of loyalty marketing, from the Coddle-stage, is to create unique content and to execute targeted marketing for those people/business entities, who have purchased from you two times or more. I have a higher standard for who our customer is. Not the person/business entity who's purchased from us once (they might not have had a choice), but the entity that's purchased from us twice at least (because the second time they made a choice to do business with us). Have a completely separate and focused set of people and work to deliver joy and delight to these entities. It is the only recipe for long term sustainable success.

Now you know the nine steps to nirvana. And you know exactly the order in which you should consider prioritizing your efforts. If you do step five before two, you can. But your success will be much more limited.

Understand the choices that resulted in what you are supposed to do in each step, then customize this, using the choices above, to create your own step ladder to deliver amazing digital marketing success to your company.

The cool thing about the web is that you don't have to do all of the above based on faith, you have a BFF in data! Let's go there.

Digital Analytics: Ladder of Awesomeness/Sustainable Success.

If you open your copy of Google/Adobe Analytics or CoreMetrics or Webtrekk you'll notice that every single report has a gigantic number of metrics in it. And…. they have many reports!

So on day one, as soon as we get access to the digital analytics tool, we go all crazy. Not only do we puke out a lot of data to every breathing human up and down the chain of command, we treat every bit of data with equal importance. The first part is frustrating, the second part is deadly.

Regardless of if you are a B2B or B2C or A2Z company, regardless of if you are big or small, regardless of how great you think you are, I believe you can benefit from taking one step at a time when it comes to ensuring that data analysis drives business value. It might seem sacrilegious to suggest that you should worry about Visits first and not Profitability, but that is exactly what I'm going suggest because when we overshoot our capabilities, we fail to hit even our local maxima (forget about ever hitting the global maxima !).

My assumption is that everyone on this blog is smart enough to balance for focus and ensuring the company stays a viable entity as it climbs each step in the ladder of success. Hence none of you will mis-understand that recommending a focus on CPA in stage four means you run the company to the ground because you ignore business fundamentals!

[A tiny hidden agenda I have in this post is to share how to make hard choices. You can imagine how difficult it is to say focus on page depth, don't focus on conversion rate, or don't worry about any content metric, focus on clicks. It seems crazy. But a big part of being successful is being able to understand business reality and have the skill to make these hard choices. I hope you'll pick up a couple of tips about making those choices.]

Ready to read something outrageously controversial? ; )

Focus on Visits and Click-thru Rates first. Don't do anything else. Nothing. Just Visits and CTRs. Focus your analysis on looking at dimensions that help you understand where your precious visitors are coming from, if you are doing any kind of inbound marketing (in the digital marketing ladder I recommend SEO in stage one) then what is getting more clicks and what is not. Optimize for Visits and CTRs will help you focus your precious energy on certain geographies, certain referring sources, certain keywords, certain digital activities and optimize to get higher clicks. A very good thing in stage one.

Now that people are showing up, we are ready to see what content they are consuming and how well/badly our welcome pages are doing. Focus on Bounce Rates ("I came, I puked, I left!") to help you optimize your landing pages and the sources driving traffic to those pages. Calls to action, text, graphics, offers, bids, ad text, targeting and more. Your job is to get in front of the right person, get them to the right page, and entice them to stay.

In stage two also focus on Pages per Visit, or Page Depth, (don't use time on site, it is problematic) as in the sample table above. This will help you optimize both for mobile and desktop experiences.

It is time to make some money in stage three. (See what I mean by making tough choices? Obsessing about making money first will cause your company to make the wrong choices initially. Just make sure you are not losing money, then obsess about it only in stage three.) For B2B companies Macro Outcome Rate is related to lead generation, for B2C it is often the e-commerce Conversion Rate. Additionally in stage three focus on Page Value, with it you are not only optimizing for content consumption (stage two) you are also optimizing for which content most creates revenue. Then zero in on that content and people/teams inside the company that create that content.

Your business is now humming on all three of the initial key things you need to do for acquisition, behaviorand outcome. In stage four become an insane fanatic about extracting the highest possible value you can from every dollar you are spending on marketing and advertising. Focus on optimizing your Cost per Acquisition (CPA).

This will not only reduce cost, if you do it right, it will force your company to invest more in activities that improve shareholder value and kill the shiny objects that our management teams chase due to advice from "marketing gurus." This effort is so important that I want you to focus on it singularly (unlike all other stages).

Stage five, as in the case of our digital marketing ladder of success, calls for stepping up our level of sophistication. Focus on cart and checkout abandonment rate (don't combine the two). Go buy a simple A/B testing tool (Visual Website Optimizer, Optimizely), go crazy optimizing every little thing to take money from the people who want to give it to you! It is also time to become more sophisticated about identifying the value of your marketing spend, focus on the Assisted Conversions metric (you'll find it in the Multi-Channel Funnels report). Make decisions based on last click conversions delivered AND the assisted conversions. Don't worry about attribution modeling yet. Just focus on the last column in that report, then optimize your campaign targeting, content and success measures.

We've nailed down what we are doing on our owned platforms, time to focus on our rented platforms. You are working very hard by this stage on Facebook, YouTube etc, stay away from awful metrics like Views, Likes, etc. So, in stage six, obsess about Conversation Rate and Amplification, two of my four best social media metrics ever.

The above metrics will force your company to use social for what social is really good at. Force them to execute my recommendation for greatest social media strategy: 1. Entertain Me 2. Inform Me. 3. Provide Utility.

Stage seven where you start to focus on the metric that differentiates losers from winners: Economic Value. We focus on all 100% of our visitors (not just the one or two percent that will convert), we will focus on all of the See-Think-Do-Coddle audience consideration stages. The surest way to do that is if we identify the micro-outcomes and the economic value each outcome adds to our business. This is so amazing because it will force your company to focus on what makes money now, what will make money 90 days from now and 9 months from now!

None of the above was really hard. Stage eight is hard! We are going to obsess about Profitability. Not just the fake "ROI" number in many digital analytics tool, but true profitability. At the very minimum, for a dimension you care about like campaign… Profitability = Revenue generated – campaign cost – cost of goods sold. You can add other costs if you have access to them.

Profitability is one of the main reasons I'm so excited about cost data upload into Google Analytics. Now you can measure what the actual amount of money each campaign/activity delivers to your business. You can do it for Bing, email, AOL ads, social, even SEO! You can finally see that the Conversion rate for Yahoo! ads is 10%, the Average Order Value is $200, compare it to Google ads conversion rate of 4% and Average Order Value of $100, and notice that the Profit per Order from Yahoo! is -$15 and for Google it is $163. #omg

Stage eight also includes improving the sophistication of analyzing the offline impact of our online activities.Multi-channel measurement and optimization. It is a long hard slog, but by the time you get to stage eight, you are ready, your company is ready, you are going to get so rich!

The last stage, stage nine, is also the most strategic and deadly awesome: Optimizing for customer lifetime value.

Asking you to wait until stage nine for LTV is like saying don't believe in Jesus until time x. It seems silly. It seems insane. The sad reality is that it takes a lot (from a data, people, process perspective) to be ready to optimize for LTV. But by this stage you've put all your ducks in the proper order, you've done your multi-channel optimization (and more critically data integrations required between your online and offline sources), you have moved away from considering cookies to be customers to changing your entire Google Analytics existence to focus on people (across devices, channels, online and offline). Now you are ready for LTV. And you are going to do it without frustration and with a huge fast impact on your business. [For more guidance see the LTV post and download the lifetime value model.]

Bish. Bam. Boom! You are there. You've achieved nirvana! : )

Closing Thoughts.

It is hard to have the discipline to systematically get good at one thing at a time. But evolution works spectacularly well. That is what we need.

It seems crazy that you are a large company with tons of people and money. Gosh, you have 25 people just in your digital analytics team and a two million dollar a year adobe analytics contract. Still, for all those people prioritize one stage at a time (while other things can happen, they just won't be a corporate priority), and move your company forward one stage at a time.

It is hard to get nine women to make a baby in one month.

I wish you all the best in climbing the digital ladder of amazing success.

As always, it is your turn now.

Do you agree with the step-by-step approach? Would you change any stage in the digital marketing ladder? Perhaps do Email before SEO, or Social as stage one? How about the analytics ladder? Would you make different choices in the order of the metrics? Is there a metric I'm over-valuing or completely missing from the ladder? If you've been successful getting your company to be good at many things all at one time, what's your secret?

Please share your perspectives, critique, life lessons, and insights via comments below.

Thank you.

5 Ecommerce Metrics You Should Be Tracking

AUGUST 8, 2013 • FERAS ALHLOU

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When it comes to ecommerce analytics, business owners and marketing managers typically focus on metrics like conversion rates, number of transactions, and average order value.

These are valuable, and should be monitored. After all, measuring such outcomes is what directly impacts revenue and the bottom line.

Thanks to Google Analytics as well as Mixpanel, Flurry, Site Catalyst, and other analytics platforms, these ecommerce metrics are readily available to site owners.

Conversion rates, number of transactions, and average order value are easy to measure.

While focusing on the outcomes is key, close attention to tracking user behavior and interaction with the site or mobile app will also yield significant incremental improvements. Here are five interactions you don’t see a lot of people measuring, when they really should be.

1. Product Categories

You can easily report on top products, what’s selling, and what’s not selling on your website. However, go beyond that and consider rolling up your reports to the product category level. As can be seen in the screenshot below, some categories can be driving more revenue than others. In this example, it seems that men — or those who buy gifts for men — spend more money on watches.

Setting product categories can help you determine which products are selling best.

Once you have your categories identified, segment one layer deeper to get insights on product categories by traffic channel, campaign, or even by keyword. See what’s driving high-ticket items and categories, and where the marketing dollars should continue to flow

2. Product Comparison

Many ecommerce sites allow shoppers to list products next to each other for ease of comparison — dimensions, features, pricing, and other features — and also for an opportunity to upsell the higher value products.

Create a metric to track product comparison data.

If your site has thousand of products, or even hundreds, it’s not practical to list them all in a comparison table. What you typically see is a selector box for shoppers to check on the products they want to see next to each other.

One useful measurement technique in this scenario is to track the specific user interaction — with an “event” if you are using Google Analytics or Mixpanel. From there, you’re able to track the products that are getting compared. You can then run reports on what products are purchased and each product’s presence — or lack of presence — in the comparison interactions, and assess any correlation between the two.

In addition, you may find there are products you prefer to be considered yet aren’t getting selected by users for comparison. Now that you have this information, you can take action. For example, you might promote your preferred products on banners, on your home page, or in your email marketing campaigns.

3. Live Chat Tracking

You have probably seen live chat features on sites more often than not. You come to a site to check out a service or a product and you’ll see an invitation — sometimes a pop-up — asking if you would like to chat with a customer support agent. I’ve seen ecommerce businesses where the average order value is 25 to 30 percent higher when a purchase included a live chat.

This is not a general recommendation for each site owner to run live chat. Test it in your environment to assess what works for you.

If live chat is a service you offer, or are considering, it’s important that you track how many of your visitors are using live chat and of those visitors, determine:

• Conversion rate;
• Average order value;
• Overall generated revenue.

If you implement live chat correctly, you can further measure the impact on product purchases in specific categories. For example, if there’s a high correlation between high-ticket purchases and live chat interactions, it might be profitable to hire additional staff for extended live chat hours.

4. Shopping Cart Removes

While it’s common to measure “Add to Cart” clicks to track which products are added to the online shopping cart and track based on where that action occurred — whether they are on the product page, promo page, or a product modal — it’s also useful to also track cart removes, or the products that visitors added to cart and then later removed.

Let’s say you sell trampolines and want to sell add-on items such as safety nets. If you start seeing a lot of cart removes of safety nets, maybe it’s time to consider offering a discount on the combination of the trampoline and the safety net or send follow-up emails with a promotion to shoppers who didn’t complete the purchase of the safety net.

5. Know Your User Segments

If you follow my articles, you know I emphasize segmentation. In actuality, I don’t think I emphasize it enough. Real gems are found in zooming in on a segment of users along with the purpose of their visits. If you are new to the concept of segmentation, write down the various types of customers that buy from you.

For example, you might be primarily a consumer product store, but also have a reseller or a distribution channel. These resellers are identified upon login and your system will present the pricing and discounts that are unique to them. When tracking transactions and revenue, it’s important to segment your reports by these user types. Otherwise a large order at a highly discounted price for one of your resellers will skew your revenue and conversion data.

Below is a screenshot of data from an ecommerce site in the education industry. The site segments the visitors by graduate and undergraduate, and reports on the sales numbers accordingly. You can see that while the graduate visits are roughly 19 percent of the total, the revenue from those visits is roughly 30 percent of the total. If the reporting was just on aggregate visits and aggregate revenue, the site would have no idea about how each of these segments are performing and its contribution to the bottom line.

Groups with fewer visits sometimes generate more revenue.

via Practical Ecommerce » Articles http://www.practicalecommerce.com/articles/4137-5-Ecommerce-Metrics-You-Should-Be-Tracking

10 Things I Would Do Differently in my Ecommerce Business

AUGUST 16, 2013 • DALE TRAXLER

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After I sold my business last year, I wrote a series of articles on the importance of developing an ecommerce strategy. I’ve written over 70 articles since then, addressing best practices and how to improve an ecommerce company.

But in this article, I will address what I would do differently in my business, knowing what I do now. Here are 10 things I would do differently if I were to start a new ecommerce business today.

1. Get More Outside Advice

As an entrepreneur, it is easy to fall into a trap of thinking you know more about your business than anyone else. In hindsight, I would organize a team of business advisers.

I would seek financial experience, ecommerce experience, entrepreneurial experience, and someone with experience and skills I do not have. This could be a board of directors for a corporation. Or, it could be a quarterly lunch or get together over a beer at the local pub.

Share your business status, what’s working, what’s not working. Talk through your objectives for the short term. You’ll likely get some good feedback. If nothing else, you will need to organize your thoughts and push yourself through a review of your business on a regular basis.

2. Go for Traffic, Revenue, and Profits — In that Order

When we started our business, we focused on growing a highly profitable company. We were not focused on building the biggest brand with the most traffic. Several of our competitors focused on traffic and revenue growth. Over time, they grew much larger than us.

Though I do not know if they became highly profitable, they grew their revenue and cash flow to be much larger than our business. I wish we had invested earlier in revenue growth. We did do that after about four years, but we never really gained a competitive advantage. We were more of a highly successful niche player. I think we could have been in the Internet Retailer 250 list if we had jumped on the opportunity from the beginning.

That’s harder to do today with the number of ecommerce operations. But, whatever your business, grow your traffic and revenue first. Then tune your operations for higher profitability. I’m not suggesting you lose a ton of money, just be willing to sacrifice some profits for future growth.

3. Hold on to your Cash

You can never have too much cash. Apple’s stockholders seem to think it should reinvest its cash or increase dividends. But I say keep whatever loose cash you have, available for reinvestment.

Skip the new car. Invest in mobile, multichannel marketing, and new products to sell. Save it for a rainy day or new investment.

4. Emphasize Multichannel Selling

We started selling on Amazon in 2010 with great success. I wish we had done it two years earlier when Amazon’s marketplace was ramping up. Today, I’d be looking at all my multichannel options very aggressively.

Advertise your products on Google Shopping and use Google’s Product Listing Ads. Become visible on comparison-shopping engines. Build scalable pay-per-click campaigns in case your search rankings diminish because of a Google algorithmic change.

Sell on the marketplaces best suited to your products. Look at new social commerce opportunities with Pinterest and Wanelo. Use Facebook and Twitter. Get your online store mobile friendly now. Make sure your emails are mobile friendly too.

5. Do A/B Experimenting and Testing

Creating a great customer experience in your online store usually takes many iterations. You need to constantly improve your search and navigation, merchandising, shopping cart, and checkout.

Do this with systematic A/B testing or multivariate testing if possible. Unfortunately, many online stores do not have enough traffic to generate statistically significant results. You need about 100,000 unique visitors per month for accurate A/B testing. But if your traffic is less than that, you should still experiment and test. If you have a low sample size, but see a high percentage change from a test — say a 40 percent increase in clicks on a button color change — you can be pretty sure that’s a good change. If you see a 2 percent increase, you won’t know for sure.

Give it try. Focus on your shopping cart and checkout where you may have the highest impact. Try a mini-cart and a one-page checkout — both are likely to show positive improvement.

6. Delegate More Tasks

I should have delegated more responsibility to a couple of key staff members. They would have benefited through the opportunity for more personal growth. I could have focused on more strategic activities.

7. Go Low Rent

You own an ecommerce business. You have offices and maybe a warehouse. You don’t have to impress anyone, especially not your staff. You rarely, if ever, hold a customer meeting.

Keep your rent low. Have adequate space and equipment, but skip the class A or B space. This will help your profits and help lower your breakeven point.

8. Adjust to Economic Changes Quickly

I was proud that we kept our staff together — with the exception of a single part time employee — through the worst of the recession. We cut back some hours, but we did not have to eliminate any of our regular staff. However, in hindsight, I probably should have.

If you find yourself with too much space, equipment, or staff, try to downsize quickly. Don’t let your bleed cash on things you are not using or resources that you don’t have fully utilized. You can always shift back.

9. Do More Ecommerce Networking

During my 10 years of owning an ecommerce business, I attended exactly one Internet Retailer conference. I learned a ton, but never attended again. I corresponded with handful of other ecommerce owners, but I had little exposure to other solutions and strategies. Today, I have a large network of vendors, consultants, and business owners that I talk to. I read many ecommerce blogs and articles. I attend webinars. I know far more than I did while running my business. I wish I’d done that all earlier.

10. Use Analytics

To our credit, we used analytics in many areas of our business. But it took us a few years to get the hang of it. Let your analytics drive your marketing, product selection, store design, and operations. Use every tool you can to capture and analyze your data. Make decisions based on the numbers, not what feels right.

via Practical Ecommerce » Articles http://www.practicalecommerce.com/articles/57206-10-Things-I-Would-Do-Differently-in-my-Ecommerce-Business