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Tim Peter

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January 13, 2014

The Minimalist Guide to E-commerce Strategy

January 13, 2014 | By | No Comments

E-commerce strategySomeone asked me the other day to explain what “e-commerce strategy consulting” really means in a hundred words or less. Here’s what I came up with:

“E-commerce strategy consulting is all about helping businesses answer 3 questions:

  1. Where does your traffic come from?
  2. Where do your sales come from?
  3. How can you increase sales/traffic, lower costs, or, ideally, do both at the same time?

Boom. And I’ve got like 60-plus words to spare.

So here’s a quick look at how we answer those questions.

Where Does Traffic Come From?

In an incredibly simple model, you can look at all traffic originating from 3 places:

  • Direct navigation. This can include returning customers who know your brand, those who type your URL directly, and, at least in my models, customers from your email list.
  • Referred. This represents both paid and earned media and includes the sites linking to you (including both paid advertising and plain ol’ earned links) as well as social media. Link-building campaigns for SEO often contribute valuable traffic in addition to any search engine optimization benefit.
  • Search. Like referred traffic, this includes both paid (PPC) and earned (SEO) traffic. You may have heard me talk about this a time or two.

Now, search is also kind of referred, but is important enough to get its own bucket. But you probably knew that already. Also, most traffic usually touches more than one of these before becoming a sale. That’s where more sophisticated attribution modeling comes into play. But for the moment anyway, let’s stick with the simple model.

Of course, traffic in an e-commerce context is useful only if it eventually turns into a sale[1] (a topic I’ve touched on once or twice in the past, too). So let’s look at what matters there.

Where Do E-commerce Sales Come From?

As with traffic, you can divide your sales into a few categories. Most of these are the same as traffic, but there’s one important addition:

  • Direct. Again, these are the people who came directly to your site.
  • Referred. See the traffic section above, same rules apply.
  • Search. Ditto.
  • 3rd-party sites. Ah… something new. Many of the businesses I work with don’t just sell through their own sites; they also use third-parties such as Amazon, Google, eBay, Expedia, Booking.com, and others as distribution channels for their offerings. Figuring out the right mix of sales is a big part of where we spend our time.

Since most customers visit 7-10 sites (or more) prior to purchasing, it’s impossible to accurately reflect the real source of these sales without some attribution modeling (which is way beyond the scope of this post). We spend a lot of time figuring out the right model to understand what’s actually driving purchase across channels, including things like loyalty programs and other offline promotion efforts that are harder to account for.

How Can You Increase Sales/Traffic, Lower Costs, or Both?

This last question is really where the magic happens. And there’s no one simple answer that applies in every case. There are, however, some proven methods to work towards one:

  1. Start with your customer. Your customers don’t go online; they are online. And if they can’t accomplish their goals, you’ll never accomplish yours. Your e-commerce efforts should seek to help your customers accomplish their goals. Otherwise, they’ll find someone else who will help them.
  2. Develop a data-driven culture. No one, no matter how experienced, absolutely knows the right answer every time. I’ve been doing this for more than 15 years and still get surprised as customer behaviors shift over time. Instead, use data to inform your decisions. While it may surprise you, it will generally point you in the right direction. And don’t worry about “big data;” focus on “better data” (yet another topic I’ve addressed a time or two here).
  3. Test, test, and test some more. You think you’ve got the right solution? Great. Conduct A/B tests, multivariate tests, holdout tests, and other e-commerce testing techniques to validate what you think you know.
  4. Apply what you learn. E-commerce has been around for roughly 20 years, which, big picture, is still not very long. Your customers continue to adapt and change as they get more comfortable living their lives online. Take what you learn from your tests and use it to improve your customers’ online (and offline) experience with your brand.
  5. Lather, rinse, repeat.

Admittedly, that’s a pretty high-level look. But it also reflects a huge part of where we spend our time every day.

What About Mobile?

I know, I know. All this talk about e-commerce and not a word about mobile. That’s pretty unusual. Why didn’t I include it?

Simple. Mobile is incredibly important and it definitely influences the sales process. A lot. But, realistically, customers can only buy most products and services via a handful of channels:

  • In-store.
  • Online.[2]
  • Over the phone.
  • Sales rep (usually in-person or over the phone following lead generation activities).
  • Third-party channels.

Your e-commerce strategy must think about how mobile supports, influences, and enhances your customers’ experience during each of these activities. In fact, I’d argue that any strategy that doesn’t include mobile will leave a bunch of money on the table.

The actual sales channel though still falls into one of those buckets above. An app is just another form of online purchase. Someone calling from their mobile phone is still handled by your call center.

Conclusion

E-commerce is a broad, broad topic, covering a range of traffic and revenue generation tactics and techniques. Hopefully, this helps clear some of the clutter and makes a complicated topic more digestible. Because, as customers continue to increase their use of the Internet, everywhere, e-commerce isn’t a separate thing. It’s just shopping.

If you’re interested in learning more about the future of e-commerce and marketing via the social, local, mobile web, register to receive a special report I’ve produced in conjunction with hotel marketing firm Vizergy, “Digital Hotel Marketing in a Multiscreen World.” While it’s targeted specifically at hotel and resort marketers, the lessons apply to just about any business. You can get your free copy of the report here.

You might also enjoy some of our past coverage of the social, local, mobile web and what it means for your business, including:

[1]. Businesses that make their revenues on selling advertising focus heavily on traffic, since more traffic equals more revenue. Also, many businesses that care about conversions also sell advertising, so this isn’t always an either/or situation. but for purposes of this post, let’s pretend it is.

[2]. This includes websites, apps, and, in most cases, affiliate partners.

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