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15 Things to Consider Before Starting Your Ecommerce Business.

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While ecommerce marketing has elements of both retail selling and performance marketing, there are important differences that you need to understand when you set out to create a successful ecommerce venture. First of all, ecommerce buying differs from retail buying because everything is done “sight unseen.” There is no storefront with a door through which you enter.

And there is no salesperson to answer your questions (although the increased use of chats and phone in the ecommerce field sometimes – but infrequently – puts you in live contact with someone who can answer questions in addition to taking your order).

Retail buying involves being able to “touch and feel” the merchandise. But in an ecommerce store, the illustrations and copy have to provide a substitute for the touching-and-feeling experience.

General Performance Marketing Vs Ecommerce Performance Marketing

And ecommerce buying is also different from other forms of general performance marketing. In most cases, responding to a “traditional” performance marketing campaign (a single offer usually consisting of a promotional email or banner and a landing page with an order form) involves an impulse decision.

Such campaigns are most often acted upon immediately after they are clicked on, and responses come in a bell-shaped curve, quickly building to a peak and with all but a handful of responses coming within a few days utmost.

Ecommerce buying, on the other hand, seldom involves immediate response. The response curve generally has a much less predominant peak and a long “tail” with responses coming in for many days.

The exception is when you do a heavy promotion like “80% OFF for 24 hours” or have a very sought after product with limited general availability (e.g. a new PlayStation console on the day of its release date).

When ecommerce promotional campaigns are received, they are sometimes treated more like magazines (just recall how do you go about buying clothes online) or reference books (if you are into specialist merchandise, that is) than like promotional mailings.

Users browse through them, looking to see what is new, what is different, what will fulfill dreams or urgent needs. But little buying is done during this “just browsing” phase (sounds exactly like retail shopping). Instead, often items are added to wish lists or baskets for future reference and decision making.

Then, when something triggers a buying impulse, the ecommerce buyer goes to his or her favorite ecommerce store that is remembered as containing merchandise that can fulfill that buying impulse.

Memorability is Key

Thus memorability becomes a key ingredient in creating a successful ecommerce store. It is important that your customers and prospects not only remember your ecommerce, but remember what it contains.

In many cases, there may be a LIFO principle involved – last in, first out. The last ecommerce store promotion received may very well be what triggers a buying impulse… and that ecommerce store may get the order – unless the buyer remembers your store and takes the time to go to your website (having an important reason to do so).

To obtain this kind of memorability, your ecommerce store needs a distinctive personality. If it seems just like other online stores, there is little incentive to make a special effort to search it out.

You probably know what USP is – the Unique Selling Proposition so essential in marketing individual products. Ecommerce ventures, too, need a USP.

This is usually a single, frequently emphasized factor that quickly distinguishes your ecommerce from others that may offer the same type of products. The online store USP may be established by your design, copy style, product mixture, pricing, or something else which makes your “proposition” different.

A Visual Medium

Another way ecommerce marketing differs from other types of general performance marketing is that online stores are basically a graphics medium. Ecommerce buyers look at the pictures first.

Then, if they find they are interested in a product, they will read the copy, the reviews and comments to learn things which the pictures fail to tell them.

Few users look at the copy first – even the headlines. They go from picture to picture and then read copy only about the items which are of special interest.

Most other general performance marketing is a “copy medium.” In fact, for such promotional campaigns (e.g. a banner directing traffic to a landing page with an order form) you write the copy first and then design graphics to accommodate the copy.

In all other forms of marketing – including ecommerce marketing – you usually create graphics and then “fill the holes” with copy.

This is not to say that both general performance marketing campaigns and ecommerce do not need good design and good copy. But in general performance marketing landing pages or promotional emails, if you keep the same copy and change from one good design to another good design, you seldom see major changes in response.

If you keep the same design and change the copy – perhaps a new headline, a new lead paragraph, or a new offer – you frequently gain a substantial increase in response.

Online shops are just the opposite. Start with good copy and good pictures, and change from one good copy block to another good copy block, and you seldom see any change in response at all.

But keep the same copy and change the pictures – a new photo, new page design, or perhaps different pagination or buttons, a video presentation – and you can see major changes in response.

Help for Ecommerce Buyers

Ecommerce buyers like lots of help. One reason many of the best ecommerce buyers turn to their online stores is that they do not like to “shop.” If they did, they would probably be in their cars heading for the nearest retail store that carries what you are selling.

If you have a page full of similar items and each is treated the same, buyers quickly get confused. They do not want to have to read every block of copy on tens or hundreds of similar pages and then decide for themselves which is just right to fit their needs. Instead, they want you to tell them which of these items you recommend.

And they do not want to have to struggle to find items in your ecommerce store – they want it organized like a good brick and mortar store. In my own ecommerce consulting experience, I have found that the quickest way to improve an ailing online shop is frequently just to do a better job of organizing merchandise into easily remembered “departments,” filters, tags and recommendations.

This not only makes it easier for the buyer to find items of special interest, but aids in establishing memorability for your online shop. It is easier to remember that an online store contains an assortment of a particular type of merchandise than that it contains a specific item.

Strategic Ecommerce Areas

Four key areas are important to consider before you can really begin creating your ecommerce business. They represent the starting point in your relationship with the audience to whom your ecommerce promotions will be sent.

Each of these areas has to be preceded by one simple word – “perceived” – because what may actually exist is not as important as the way the audience perceives things to be.

Perceived Availability

The first of these key areas is availability – perceived availability. Does your audience feel that the products you are offering are more readily available from you than from someone else?

While a product or service may be readily available from a local merchant, this becomes a major competitive advantage only if the potential buyer is aware of this fact and thus determines it would be easier to purchase from a nearby source than from an online store.

Of course, almost every product – or a satisfactory substitute – is generally available to those who are willing to take the time to shop around in stores or other ecommerce businesses.

But there is a constantly expanding market of people who feel they have better uses for their time than “shopping around.”

That is why, if they discover something in an online store which appears to be unique and not readily available through some source with which they are already familiar, this registers in their minds and gives this online store a special advantage over others.

Ecommerce specialists have developed lots of special techniques to encourage their customers to perceive their products or services as being unique and thus not easily available elsewhere – exclusive colors, designs, and packaging, special combinations of products, attractive and easily understood credit plans, early introduction of new and improved products. And a variety of other effective techniques which traditional retailers have been reluctant to adopt.

The “exclusive” is an important selling element for many ecommerce stores. Often an ecommerce marketer develops a special graphic device to identify products that, in the form being offered, are available only through that online store.

When customers see a product they like that carries the special graphics stamp, they can make a quick decision on whether to order it or not. Since this product is available exclusively from this one online store, there is no reason to delay a decision and shop around.

Often just using the word “exclusive” is an advantage. Experience has shown that such a word – when used in a meaningful way – frequently increases sales of products so identified.

Perceived Authority

The second key area – and probably the most important for an ecommerce marketer – is perceived authority: What gives you the right to say what you are saying and expect to be believed?

Every successful ecommerce business has some kind of authority. It may come from the product assortment itself. It may be due to the geographical location of the company (think fashion and Paris).

It may come from known activities of the ecommerce marketer in other fields. Or perhaps the online store is built around the personality of an individual or is highly specialized and carries products around one distinct niche, e.g. hearing aids.

AdvancedHearing.com ecommerce store – an example of niche ecommerce.

A good example of how perceived authority directs how an online store communicates with an audience is those ecommerce businesses you find attached to a well-known business.

Example: Have a look at Ryanair, the European low-cost airline, with its ecommerce business attached to the main airline business. It carries the authority of the airline whose name appears pretty much everywhere in the online store which sells tickets for every conceivable tourist attraction worldwide.

Ryanair’s Ticket ecommerce platform – an example of borrowing authority from the main business.

In some other online stores attached to airlines you will find many items of luggage. When the copy in one of these online stores says a piece of luggage is “durable” and “complies with luggage limits” the writer can stop right there. Airlines are the ultimate authority on the durability of luggage – they know more about smashing it up than anyone else – and on the compliance with their own annoying rules and limits…

So when they say it is durable and compliant, they do not need to say much more.

But suppose your authority is based on being a manufacturer of pantyhose, and you want to sell luggage. If you simply claim it is durable, you are not anywhere yet.

You must give full details about the materials used in its construction, cite laboratory tests, include testimonials, or do something else to make up for your lack of authority on this type of merchandise.

Actually, customer testimonials, reviews and comments are a very important element in building authority. Many online stores fill their pages with dozens of testimonials – not just to fill space, but because they have found these testimonials help to sell products.

Ever wonder why so many ecommerce businesses seem to waste so much space on seemingly valueless editorial material about the companies, the facilities, the people behind them or how-to guides?

It is not just an ego trip in most cases, but rather a carefully calculated program of building authority in the minds of their customers to encourage buying with confidence. And such space is far from wasted when it eliminates the need for a lot of backup copy for each item in the store (and it gets a lot of SEO value as well).

Decathlon’s how-to guide building company’s authority in sports.

Perceived Value

The third key area is value – perceived value. And this is a frequently misunderstood word. Value does not just mean the lowest possible price. It has to be the right price for the particular audience to whom the ecommerce is designed to appeal.

In general, ecommerce buyers tend to position themselves in one of three basic value categories:

  1. Good. These buyers are always looking for a bargain. They respond readily to “sale” and discount ecommerce promotions.
  2. Better. These are the customers who look for the best combination of price and value.
  3. Best. There are always some who want to feel they have bought something a bit better than similar items owned by their friends, relatives, neighbors, and co-workers.

The basic audience of any given online store will generally be composed of buyers who have positioned themselves within one of these three basic value categories. They will generally concentrate most of their online buying from stores within a single category.

It is very difficult for an ecommerce business to create an image of regularly carrying merchandise in more than one of these value categories.

(This is not to say a “Best” online store cannot have special presentations of remainder items at “Good” pricing – but it is important to establish a basic image of just a single value category.)

It is best to keep an open mind about specific pricing when starting your ecommerce venture. Unlike the majority of retail stores, which establish specific markups for each category of products they sell, successful online stores do a lot of price testing and let their customers help them pick the “right” price for products.

Whenever pricing tends to differ from normal, it is important to have an easily understood reason why, e.g. a specific deadline or a strictly limited (and stated) number of items for sale.

Some other easily understood reasons why prices may be different from normal include the following:

  1. The items are manufactured by the online store, so there are no middlemen costs to be absorbed.
  2. Out-of-season items are being offered to reduce the marketer’s warehousing costs.
  3. The ecommerce marketer has made a volume purchase.
  4. It is a traditional sale period (e.g. Black Friday).
  5. Items are remainders, available in limited quantity.
  6. Introductory prices are being offered to help establish the demand for a new item.
  7. Special values are being offered to entice a prospect to become a first-time customer.
  8. Last year’s models are being liquidated to make room for newer merchandise.

Price testing is often an important part of successful ecommerce operations. Rather than simply using standard markups for each category of merchandise, many ecommerce marketers make tests of different price points.

Then they establish the “right price” for a given item based not only on which price pulls the greatest number of orders, but on which price produces the greatest total net income when volume is multiplied by the profit per item sold.

Perceived Satisfaction

The fourth key area is perceived satisfaction. Since online stores most often require dealing with an audience “sight unseen,” it is necessary to make customers feel they are not going to have any hassles in dealing with you. That is where an online store’s guarantee of complete satisfaction “or your money back” becomes so important.

Such guarantees are not anything new. The first recorded guarantee was used back in the days of Colonial America by Benjamin Franklin, who distributed a catalog of books which could be bought by mail. His famous guarantee:

Those persons who live remote, by sending their orders and money to said B. Franklin, may depend on the same justice as if present.

Unfortunately, when lawyers get their hands on a guarantee, they usually want to build in a lot of restrictions for fear some customers will try to rip off the company.

Experience has shown, however, that a restrictive guarantee seldom results in fewer requests for refunds or replacements than a wide-open guarantee with free returns included.

Meanwhile, you have lost the promotional value of a guarantee that tells customers they can order from you without worrying about what will happen if they are dissatisfied with what they receive.

But the customer’s perceived satisfaction does not start and end with the guarantee. Smart ecommerce marketers are very selective in the merchandise they offer to help quiet any fears customers might have about potential dissatisfaction.

In clothing, for example, they often purposely select styles which do not require top-model’s body or involve colors which reproduce well and are easily envisioned from online photos, and copy which not only describes the product but carefully spells out details that, if misunderstood, could result in dissatisfaction.

Of course, just creating a guarantee and splashing it everywhere does not mean much unless you back it up with good customer service.

Profits in ecommerce are made by getting previous customers to buy frequently – and dissatisfied customers do not come back for more.

These four key areas – availability, authority, value, satisfaction – are the starting point. You cannot really select the right merchandise, design a webstore, write any copy, or decide when and to whom to promote unless you clearly understand your relationship with your market in each of these areas.

What It Takes to Start an Ecommerce Business

Five key factors are involved in evaluating the potential for starting a an ecommerce business.

Products

It takes unique products to make an ecommerce business stand out from competition. If potential customers already have a source for the products you plan to present, there is no reason to change buying sources.

And you need substantial margins for profit. As a general rule, you should have at least three times markup on the majority of products if your anticipated average order will be $35 or less, and two times markup if your order will be between $35 and $75. If your average order will be over $75, some products might carry a slightly lower markup.

Be prepared for failures on a substantial number of the products you pick for your first promotions. Sales results will quickly tell you what kinds of products your customers want to buy from you.

And when you find out, quickly remove all “losers” from your future promotional campaigns. As a general rule, even after you have discovered what types of products your customers want from you, you will probably find one-third of the products in any given promotion will be profitable, one-third will just break even, and one-third will be losers.

If you just carry the same products as others or have to look to outside vendors when others already have similar proprietary products available to them without middleman costs, your chances for success are slim.

Authority (Again!)

Why should someone feel you are the “right” source for what you plan to sell? There should be something which instantly communicates to potential customers that you, more than someone else, should become their preferred source.

Perhaps you are the creator of the products, maybe you have developed a reputation in something that implies you know more about the kinds of products in your ecommerce store than others might know, maybe you are located in an area considered the right place to find the kinds of things you plan to sell, or perhaps your name is so well known that people already have a desire to have some special relationship with you.

However, if you do not already have some kind of authority, it may take several years to establish enough of it to be competitive against those who do have an accepted authority base.

An important thing to recognize is that what you perceive to be your authority may be limited to those you are already serving in some way and may mean nothing to others to whom you will have to promote your online store if you hope to produce enough sales to be profitable.

Email Database and Facebook Custom Audiences or “Hot Buyers” Traffic Source

Do you already have a list of confirmed ecommerce buyers – or will you have to start from scratch in building your list by means of SEO, media buys or search ads?

While it seldom, if ever, appears on the balance sheet, the email database of buyers is the key asset of an ecommerce business. You can have the greatest products, the best prices, and the most beautiful online store – but they are all for naught if you do not have the right mailing list.

Just a list of emails or a cold traffic source does not mean much. In any given universe, fewer than 1% of the people are likely to buy from an unknown online store – and it is too costly to promote to people who will not even consider buying.

You can advertise on Facebook your best items (especially targeting your competitors), even as loss leaders, to slowly create a customer database and a prospect list (of those who interacted with the ad but did not buy) an then do some lookalike profiling. But that is costly.

You can rent the use of others’ email lists of ecommerce buyers – but so can everyone else. But if you have exclusive access to a list of people who are known to desire the kinds of products you plan to sell and have already demonstrated their willingness to buy sight unseen from online stores, you are already a step ahead of potential competition.

Facilities

Do you already have facilities to process orders, make shipments quickly, maintain a simple CRM, and provide efficient customer service. Or do you have to develop such facilities from scratch? Obviously, you have some major economic advantages if you can utilize facilities which require only cost-sharing.

It is important to recognize that successful ecommerce businesses are built upon fast turnaround – generally a maximum of 24 hours from the time an order is received until shipments are on their way to the customer. And similar short turnaround is essential for good customer service operations as well.

Will your facilities permit this kind of dedicated service, or will you have to set up completely separate facilities for your ecommerce venture?

Staff

Do you have people who know and understand ecommerce marketing? While you can obtain outside services to perform almost every ecommerce operation from selection of merchandise through store development, order processing, and fulfillment, most successful ecommerce businesses perform most of their work internally.

Because of the rapid growth of ecommerce, there is a severe shortage of experienced personnel. So if you already have an internal staff that can do much of the work, you have a competitive advantage over others.

It is important to recognize that ecommerce marketing is different from other forms of marketing since you have to deal with customers sight unseen. And that requires very special skills. Designers and copywriters, for example, may be the world’s best when it comes to working within other marketing disciplines, but lack the knowledge of how to create an online store and promotions which produce profitable response.

Or perhaps your advertising agency handles your regular advertising with outstanding results. Unfortunately, however, few agencies have experienced ecommerce personnel on their staffs, and when they try to apply the techniques which work well for general advertising and even general performance marketing to ecommerce, they most often end up with an online store which fails to win out against competition.

You may not have built-in strengths in all five of these essential areas—but it is recommended you have some advantage over competition in at least three of them if you hope to have a real chance to become an important entry in today’s competitive ecommerce world.

There are three other factors which many people consider even more important – and they certainly are of extreme importance – but if you are lacking in strength in the five factors just mentioned, strengths in these three are not likely to overcome your deficiencies.

Money

Starting a new ecommerce business requires a lot of money. You cannot just create a simple online store, promote it to a few thousand users, and start making money right away. It takes a minimum of three years just to know if you have a viable ecommerce business or not.

It takes a year to do the initial testing. To determine the right product mix, to find out which database, audience and traffic sources are most likely to convert, to work out the bugs in order entry, packaging, shipping, and customer service.

Then, the second year, you are ready to go to work to capture as many first-time buyers as possible. But it takes a third year to determine the most important factor you will need to know to properly evaluate your future ecommerce potential – how many of those first-time buyers are willing to buy from you again.

So you will need financial backing to provide support for at least three years while you are waiting to find out if you really have a viable ecommerce.

Hopefully, there will be some income rolling in during those three years, but if you are counting on online store income to pay the bills you probably will not have nearly enough to accomplish the all-important task of developing a substantial customer base.

There is a basic formula to successful ecommerce:

PROSPECTS = COSTS
CUSTOMERS = PROFITS

In other words, you invest money to attract first-time buyers and produce profits by selling to your established customers. If you are making money from campaigns to prospects, chances are you are not promoting your ecommerce with enough intensity.

As a general rule, customers will convert three to five times more readily from your campaigns than will even good lists of prospects who have never bought from you before. So it is important to develop a database of your own ecommerce customers just as soon as possible. And that takes lots of money.

Bright Idea

Many think all it takes to be successful in the ecommerce field is to come up with a bright idea. Unfortunately, what seems to be your bright idea is probably something that has already been tried before and found unprofitable.

You think it is a bright idea because you do not see it being used by anyone else. But there are a lot of truly bright people in ecommerce marketing, and they have already evaluated thousands of seemingly bright ideas – and have already market-tested many of them. You do not see them being used because they failed careful evaluation or testing.

If you think you have a bright idea, spend lots of time evaluating why other ecommerce marketers are not already doing just what you are thinking about doing.

Bright ideas are important. The most successful businesses involve a lot of bright ideas. But, even if you have come up with a truly new and unique idea, you still need strength in the other areas already mentioned.

Desire

Then there is the matter of really wanting to be in the ecommerce business. It takes a lot of dedicated effort to create and maintain a successful ecommerce business.

It will not succeed if you fight it all the way. That is what has happened to a lot of retailers who have taken a stab at ecommerce. For years, it has been considered “the enemy” by retailers.

So it is like joining the enemy camp when they decide they had better see if they cannot expand their business by promoting their online counterparts.

Most often, the management of these retail stores, deep down, does not really have a desire to be in the ecommerce business, and as a result, it does not provide the support those responsible for the ecommerce need to be able to succeed.

Summary

  1. General performance marketing, suitable to long copy landing pages and single product promotions, differs from performance marketing for ecommerce businesses.
  2. Be unique – or perceived to be unique. Give your ecommerce prospects good reason to buy from you rather than from thousands of other online stores.
  3. Prospects are costs. Customers are profits. If promotions directed to prospects earn you a profit it is likely you are not aggressive enough with your ecommerce marketing strategy.

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The expert's thoughts on direct response - growth hacking - performance-based marketing activities - DIRECT MARKETING

About Me, Rafal Lipnicki.

the direct / performance marketing consultant with a strange sounding name

Who.

Not your usual "guru" but a real-world performance marketing & innovation consultant based in Europe and an experienced senior executive at leading multinational companies.

What and Where.

I am a consultant for hire, working remotely and on-site all over the world (but Europe is always preferred). See my consulting services page for details.

How.

Contrarian advice most of the time. Document-based audits, workshops, one-off projects, mentoring programs, and more.

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