This is the ultimate e-commerce marketing strategy resource for SMEs and entrepreneurs. No pitch, nothing to sell. 8727 words, yours free to enjoy.
“But wait, George. So you mean e-commerce marketing is not just about pumping money into Facebook ads?”
Some of the things you’ll learn:
- The only three growth levers of an e-commerce marketing strategy. Focus on these and nothing else matters.
- The four dangers to an e-commerce startup (company killing).
- How to make your advertising work without a huge budget.
- How to pay less and earn more, on average, per customer.
- How to analyze your customers’ value with the proven RFM framework.
- How to set up a self-optimizing, near-automated marketing growth engine.
- How to outclass other e-commerce companies with branding, innovation, and distribution.
- Tips on how to cope with suddenly becoming the owner of a huge e-commerce company. 🙂
Don’t have time to read the whole 8727-word guide right now?
No worries. Let me send you a copy so you can read it when it’s convenient for you. Just let me know where to send it (takes 5 seconds):
If you’re an overwhelmed entrepreneur in need of an e-commerce marketing strategy, this post will improve your marketing (… and probably your life).
See, for the past few months, I’ve been talking to lots of e-commerce business owners. What I’ve realized is that many of them are stuck knee-deep in what I call “tactical marketing hell.”
Here’s how “tactical marketing hell” looks like for many e-commerce entrepreneurs. Tell me if that feels familiar.
You spend a big part of your day trying to piece together various digital marketing tactics so you can apply them to your e-shop.
“Tactical hell” can get messy very quickly because before you know it, you’re starting to get into what plugins and software to use, analytics, Tag Managers, what marketing channels are hot, you’re chasing this and that thing, then you try to understand your metrics (but you don’t necessarily know WHAT metrics to look for). Then you try out a blog, SEO, a new partnership, an influencer campaign, and Tik Tok seems to be where it’s at, but for the life of you, you can’t figure it out at all…
… and it usually doesn’t seem to work out quite so well, does it?
For the most part, being pulled into so many directions is a waste of time, and it leaves you overstretched, overstressed, sometimes going to bed with your eyes wide open and thinking:
“What am I going to do next?”
Eventually, you can’t help but ask yourself.
Is this even worth the Headache?
So, you do the natural thing.
You set out and call the experts. You bring in the cavalry. A marketing agency. And what does the marketing agency do? The agency does what every agency has to do to run a profitable business.
The agency “Pitchmen” smile, encourage, and court you so that they close you as a client. Then after you pat each other in the bank and drink to your future growth together, the “Pitchmen” vanish.
And it’s kind of not what you expected because instead of talking to the senior digital strategist with 15 years of experience, who’s five-levels-deep into his domain of expertise, you’re suddenly working with a bunch of interns.
And the thing with most interns is that they don’t know any better than you.
Unfortunately, when dealing with agencies, you’re usually fighting against a work culture that’s something like “let’s do shit all, figure it out all last minute, and then do the bare minimum to keep the client happy.”
(It’s true #sorrynotsorry.)
And, to be fair, even if they have nothing but the best intentions, the poor guys are likely being pulled around in 20 more accounts, so how could you expect them to focus on giving your business the attention it deserves?
If any of that sounds even vaguely familiar read on.
This post will seriously upgrade your e-commerce marketing strategy and company. I’m serious. We’ll walk out of “tactical hell” right now, step by step. Because I genuinely believe that people like you – the entrepreneurs, the bold risk-takers and dreamers – are the people that push our society and economy forward.
Then let’s jump right into it.
There are only three ways to grow Business.
You heard me.
Forget channels, tactics, trends, and markets, and let’s zoom out to a satellite view of a business. Most people never realize it but you can only grow a business in three ways:
- You can increase the number of customers.
- You can increase the number of purchases customers make.
- And you can increase the size of the average customer transaction.
This liberating axiom (coined by, I think, Jay Abraham) clearly shows us the highest leverage activities we can pursue.
Every activity that pushes these three growth levers forward should be carefully nurtured and prioritized.
Every activity that doesn’t push these three growth levers forward should be carefully examined, interrogated, if not outright shot, and killed.
Now the real tragedy is the following.
Most companies focus almost exclusively on acquiring new customers, completely neglecting the two other levers available to them.
Is that sufficient to run a business? Sure! Many companies live off new customers alone.
But they’re very far from optimized. Businesses that only rely on acquisition use one-third of their potential at best. To put this into perspective, and see how much money they leave to the table, consider the following basic math.
If we increase the three growth multipliers by a very modest 10%, we stand to grow our revenue by one third.
Let’s take it a step further. What if we were ambitious and shot for a strategic 33% increase in each of the 3 growth levers?
Suddenly our underperforming business would more than double in performance.
But that’s not the only reason to shift our e-commerce marketing strategy from getting new customers, to retaining and remonetizing customers.
Here’s the ugly truth that very few people in e-commerce would admit.
If you’re only relying on getting new customers, your e-commerce company is unlikely to be sustainable long-term.
That’s because the profit margin you have today won’t be the profit margin you have tomorrow.
Here’s what I mean.
First of all, the cost of acquiring new customers by advertising, in general, is increasing. CPMs, CPCs, CPAs – whichever way you’re paying for advertising, it all goes up over time.
It happened to Google a decade ago, and it’s been happening to Facebook for the past few years. It’s going to (eventually) happen to any new or smaller platform you may have in mind too.
That includes Tik Tok, Pinterest, Snapchat, and Reddit – you name it. When these companies mature as advertising platforms, they will, without a doubt, increase the cost of attention, and by extension, decrease our profit margin when we buy advertisements on them.
Secondly, e-commerce is booming globally. More than 2.1 billion shoppers are expected to purchase goods and services online by 2021. Global e-commerce sales are expected to top at 4.2 trillion USD in 2020, but shoot up to an amazing $6.5 trillion by 2023. This means that more and more people will rush in to take part in the big online opportunity. So even though today we may have a manageable number of competitors, many others will soon enter the space.
Unfortunately, the more entrants that enter a market, the more fragmented the pie becomes – so our piece will grow smaller and smaller over time. Plus, the increased competition will further increase our advertising cost because more people will be bidding for the same audiences.
This means we will pay more for less attention while fighting off new competitors hungry to eat our market.
Worse, there’s a third wave that’s coming to shake our e-commerce plans. It’s called technology. Thanks to technological innovation, the barrier-to-entry for pretty much all markets spirals down at an accelerating pace.
In other words, starting a new business is getting easier day by day. Therefore, building a differentiated business and securing a competitive advantage over the long term is getting harder and harder.
Sure, an e-commerce business may have a few good years at first. But if others can clone three-thirds of your business model from their mobile, how long until they start taking your share of the market?
E-commerce business math refresh.
Profit margin = (Sales – Expenses) / Sales. In e-commerce, our key expenses are the marketing cost of acquiring a new customer, the cost of the good that’s being sold, and the cost of fulfilling and delivering the order.
The cost of goods sold and our logistics costs are somewhat fixed so we can plan around them. But if our marketing cost goes out of whack, we won’t be able to make a profit.
There’s another negative side effect of technology. The more technology progresses, the more “spoiled” we become as consumers. Sixty years ago, people were purchasing products and merely hoped they worked. In comparison, the expectations today are off the charts.
Once variety of choice was the ceiling – think eBay and Amazon. Now there’s a certain expectation of fast and affordable shipping.
How long until people’s expectations change to same day, free shipping?
And as long as it’s the big boys like Amazon that set the pace, which they will, small entrepreneurs will be very hard-pressed to keep up. Take a look at what Amazon offers in the US. Small entrepreneurs don’t have the supply chain or infrastructure to match that kind of shopping experience, so they will be forced to deal with an ever-shrinking profit margin just to keep trailing the big players, if not straight up, go out of business.
In other words, and in no uncertain language, if you rely only on acquiring new customers, you will eventually face intractable problems – the profit margin you have today won’t be the profit margin you’ll have tomorrow. And tomorrow will come knocking at your door sooner than you think.
Given the above, what can we do? What we can do is to avoid relying on acquisition altogether. We need an e-commerce marketing strategy for all of the three growth levers at our disposal.
And the way to do so, frankly, is probably not what you think. Instead of optimizing for as much revenue and top-line growth as possible, we need to optimize for profitability.
More on that in a second.
First, let’s optimize your acquisition funnel.
Because before we start optimizing for profit, we first need to establish a stable and healthy stream of new customers.
I daresay it is heresy – it goes against everything a marketing textbook would say – but the best way to do so is to engineer a reverse, “Bottom-Up Funnel.”
The conventional approach is to advertise for awareness, advertise for consideration, and only then push for the purchase.
This is all nice and dandy if you have deep pockets, but for smaller companies, the pockets are not quite so deep (yet). So, we can’t afford to run advertising that is not profitable.
Our advertising needs to be a profit center from day one.
So, what we need to do is start from the bottom-funnel purchase goal, then reinvest our earnings into mid-funnel consideration, then reinvest our earnings from consideration into top-funnel awareness.
What I mean by start from the purchase is that the single-minded focus of the first campaigns we run should be to drive purchases profitably. And the most probable way of having our ads be profitable from the get-go is to keep the advertising focused on our product’s value proposition for a niched-down audience.
Only if our campaigns are profitable, and only if we’re in the black, should we consider moving up the funnel. We’re going to re-invest into consideration campaigns only if our purchase campaigns give us a comfortable surplus – not before.
So how are we going to run profitable consideration campaigns? We’re going to relentlessly focus on trust-building content – which may mean several things, depending on our niche. Some universally applicable ideas that come to mind are user-generated content, expert endorsements, product reviews, and straight-up product comparisons.
After we crack consideration and return to being profitable, we’re ready to re-invest our new financial surplus into awareness campaigns. Be warned. What I mean by awareness is nothing like the spray and pray approach of pumping out content and hoping for the best.
Our awareness ads need to be kept measurable, accountable, and interlinked with our consideration and purchase campaigns. Our awareness campaign’s content goal should be to articulate our brand’s big unifying promise or concept. Our awareness campaign’s performance goal should be to reach as many new people as we possibly can and let them self-segment themselves based on how they interact with our content.
Then, we will expose these new engaged audiences to our consideration and purchase content so we begin to monetize them. How to target and interlink campaigns can get quite technical, so it goes beyond this guide’s scope, but I’ll write a post and do a deep dive on that too.
Need guidance? I can help.
There’s no cost or risk in scheduling a meeting with me.
Does all that I’ve shared with you so far make sense? That was step one of our e-commerce marketing strategy.
What we’ve accomplished so far is that we’ve understood that marketing is not an expense but a profit-center, and we’ve also mapped out the sequence of steps towards a well-oiled and profitable “Bottom-Up Funnel.”
Now, let’s move into the second stage.
How to start earning more per customer.
If you’ve followed my advice and made your ads profitable, you may be thinking something along those lines.
“My ads are profitable at a $1000 / day spend, so I’ll just increase that to $10.000 / day.”
Wrong. Because if we do so, we’ll soon face the Iron Law of Performance. The Iron Law of Performance dictates.
“The more you increase your advertising budget, the more your performance, dollar to dollar, decreases.”
And if we’re not careful, we may quickly go from making money to losing money in no time at all. That’s because if we increase our advertising budget we will, on average, be paying more to acquire a new customer.
Given the above, here’s what we need to do. Before we can really scale our advertising budget, we should do all we can to maximize our average profit per customer.
We can do so by increasing the performance of our acquisition marketing. Meaning convert more customers from the same number of ad viewers. But that’s hard to do and often not entirely in our control.
Or we can do so by making our marketing spend more efficient. Meaning figure out a way to pay less per new purchase. That’s actually fairly straightforward to do.
The smartest way to do so is unrelated to the ads themselves. What we need to do is find a low-cost way to communicate with people that have shown us their interest, so we get them to purchase.
Remember how I started this guide? There are only three ways to grow a business. The “Bottom-up Funnel” we mapped is taking care of acquisition – aka, we have a blueprint for getting new customers.
Now it’s time to use low-cost communication channels to push forward the second growth lever at our disposal.
We’ll now work on getting people to buy more frequently.
A simple plan to automate lifecycle communication.
If you think about it, our e-commerce company’s relationship with people can be mapped into a spectrum (or a series of “relationship status” updates).
On the far left of the spectrum, we have the people that are barely aware of us. On the far right of the spectrum, we have people that have had a long, satisfying relationship with us but are now slowly moving on. In-between we have everything, from new subscribers to first-time buyers to enthusiastic fans that promote us to their family and friends.
We should not communicate with people who barely know us in the same way we talk to our enthusiastic fans.
That’s what lifecycle communication is all about—Delivering the right message, to the right person, at the right time, based on the stage of our relationship with them.
Lifecycle communication is channel agnostic, but for our purposes, we’re interested in a low-cost, easy-to-automate channel: Email. So let’s set up a lifecycle email program as an additional layer to our e-commerce marketing strategy.
Here’s what we need to do to get started.
- We need a way to get people’s emails. So, first of all, we need to give people an incentive to give us their email – a special offer, a discount, some sort of valuable gated content, or something else entirely that our audience will love.
- Secondly, we need a lead capture form to feature that incentive or “bribe” on our website. We can use all sorts of email capture tools. Bars, lightboxes, exit-intent popups, welcome mats, chatbots, it doesn’t matter, as long as our offer is valuable, clear, and non-spammy.
- Thirdly, we need to connect our email capture mechanism to email software like Klaviyo, or Mailchimp, so we can deliver the incentive we promised, then chart out the automated sequences of communication we’ll send out to people when they start a relationship with us.
Makes sense? Let’s unpack these three action steps.
How to incentivize people to give you their email.
I’ll start by saying that we don’t need to reinvent the wheel.
The rules of the game are simple. Our email capture form should convey value to the visitor, in a crystal-clear way, without being annoying, spammy, or overly intrusive.
The reaction we’re going for when people see our offer is “sweet – I’m in.”
Big e-commerce giants tend to offer a financial incentive in their email capture forms. In other words, they tell visitors that if they provide their email, they will receive a discount on their first purchase.
That said, in some cases, you may not want to provide a discount, especially if the brand is premium. Most premium brands find that offering free shipping or some other shipping upgrade is an easier pill to swallow than a straight-up discount.
Regardless, financial incentives like discounts and shipping upgrades are so common because they work.
But they are not the only tool in our toolbox.
Additional offers worth experimenting with are exclusive access to digital content, such as a relevant ‘ultimate guide’ on making the most of your products, access to a ‘members only” community group, direct influencer access, in case you’re working closely with an influencer, and so forth.
Regardless of the incentive we choose, maintaining a good shopping experience for our store is key. This means we should go for one intrusive lead capture method at most – I like welcome mats and exit-intent lead capture better than most other options.
We should also make sure we sprinkle opportunities to sign up for our lead capture offer throughout our website, in low-key, non-intrusive ways, such as having a sign-up form in our e-shop’s footer or inside the content of our blog posts.
We should never, ever, deploy a lead magnet to pages we’re directly advertising because it may interfere with the shopping process. If we have a specific landing page that we’re buying ads for, that landing page should not have an email capture form. The sole focus of that page should be the purchase.
Regarding the lead capture’s actual content, clean copy that communicates the offer will trump clever copy in nine out of ten webshops. Remember that most people visit our online store to shop stuff and are not necessarily looking to be entertained.
In as far as design goes, the examples above are a great starting point. The general idea is that we want to avoid unnecessary clutter so that people focus less on our design and more on the incentive we’re offering them.
What to do after people sign up.
(Email marketing is a super exciting topic which more than deserves its in-depth post – stay tuned.)
What we need to do now is to chart the lifecycle-based automation sequences that we’ll send out to subscribers, based on the relationship they have with us. Notice that I used the word sequences. These are not individual, one-off emails but series of emails sent based on a common, pre-defined trigger.
There are endless ways to chart these sequences, so I’ll just explain, in-depth, how to set one of them up, then cover a few more I like to give you ideas and inspiration.
New subsriber automation: 3 – 5 emails.
Targetting: Sent immediately to all new subscribers that haven’t made a purchase. If they make a purchase, they get removed from this sequence, and added to our welcome offer automation (see below).
Email 1: The goal is to deliver our introductory offer and introduce our brand. The offer comes with a 48-hour deadline.
Email 2: Reminder to take advantage of the offer they signed up for before it expires.
Email 3: Social proof content. How many people love us, user generated content and more.
Email 4: What makes our brand different. Why our products are special.
Email 5: Visual email that showcases our most popular products. No offer is made. The products are presented and sold at full margin.
If they don’t make a purchase through those four emails, we automatically add them to our welcome offer automation (see below).
Browse automation: When people view a product more than once (and we already have their email), we’ll funnel them inside this automation.
We’ll send them three emails, in sequence, reminding them about the product they were checking.
The last email can have a small discount or similar incentive.
Cart abandonment automation: What we want in a cart abandonment sequence is to a) solve any usability or buying problem that may be present (so we should make sure we provide our customer support details), b) remind people of the awesome product they were looking to buy, and c) if nothing else works, give them a little extra incentive to buy now.
Welcome offer automation: This is probably my favorite automation of all because it’s so simple yet works so powerfully. We want to deliver an additional offer immediately after people buy so that we incentivize them to buy again while their credit card is still out.
This may not make intuitive sense for some product types. We should try it anyway because it’s been proven to work countless times in countless markets. I recommend a sequence of emails with an escalating offer, over a period of a few days.
Double-sell automation: What do people buy after they buy our bestselling product? How many days pass until they make their second purchase? In this automated sequene, we are going to recreate that experience.
In case you’re not quite sure what people buy second, or you don’t quite have so many repeat purchasers yet, you can use common sense here. When people buy travel pants, they may enjoy a travel backpack.
Triple-sell automation: As above, only now we’re going to move one step further: What third product could we sell that would make sense with our buyers’ past purchases? What is the right timing for our product type, in case replenishment is a factor?
Who is your best and most valuable customer?
It’s simple. Our most valuable customers are the people that spend the most money on our business. We should definitely chart a “VIP” automation sequence for them.
A VIP automation sequence can have many goals. I strongly recommend surveying VIP customer segments because we should be growing our company to serve them best. So it makes sense to spend extra effort to ensure we know what they want.
VIPs are also an excellent segment to ask for reviews. Of course, we should make sure to reward them with some perk too. VIP discounts seem like the obvious solution, but that’s far from our only option.
Reactivation automation: Every customer lifecycle ends, and for most e-commerce companies, that lifecycle won’t be particularly long (unlike in, say, a SaaS company that may very well keep milking a subscriber for years).
This automation is specifically designed to push decaying customers back in line for one or two final purchases. Timing is of the essence here. We’ll target customers with more than one purchase over their lifetime, and we’ll time this 30, 45, 60, or even as far as 90 days since their last purchase, depending on when our average customer decay starts.
As I said, I’ll eventually write a separate post to walk you through the exact triggers, sequences, and best practices to set and interlink these automation sequences. But that’s like the cherry on top. You don’t have to get things perfect.
Even if you don’t get it perfect, the impact of just a few of these automations will be monumental. If you execute the plans above, you will interact with your customers anywhere between an additional eight to fifty times during the lifetime of your relationship with them.
All in a low-cost autopilot mode, with very few headaches, in a paint by numbers sort of way.
And if that ain’t amazing, well, then you’re not paying attention.
More ways to increase your profit per Customer.
Email and automation are not the only ways to maximize our profit per customer. Thankfully we have an entire host of other cool tools in our arsenal.
Our best help in this comes from the retail merchandising world. Have you ever wondered when you buy stuff from a store, why easy, impulse purchases tend to gravitate close to the checkout area?
As it turns out, it’s strategic. Shoppers at the point-of-sale are already ready to buy, so they are in the perfect condition to buy more. We want to scoop ideas like these from retail stores and apply them to our e-commerce website.
Here are some key tactics we can borrow.
Bundling: There are many ways to bundle products to stimulate more purchases. All of them are worth experimenting with.
First of all, you can bundle the same product based on volume. Meaning, sell more of the same, at a discount that escalates the more volume people buy. For example, buy 3, get 1 free.
Secondly, you can create bundles of products that make sense together. Think water-resistant boots bundled with outdoorsy, cargo pants. It makes sense because the products have related use cases. One complements the other. And you can still sell the products individually.
Upsell: An upsell is essentially a more premium version of the base product. Can we always offer that? Not always. Some product categories have cleaner upsells. You can easily upsell an extra 500GB of hard drive in a laptop purchase, but that’s not always so easy for other product types, like apparel.
If you can offer an order-upgrade, however, you totally should. Even if the upgrade seems mundane, some people always enjoy having the best possible option, so they’ll take the offer.
Generally speaking, the best place to offer an upsell is during the checkout process or right after the purchase, on the thank you page. That’s because an order upgrade is a very easy sell. It means more of the same, but better, so people don’t need to check an entire page of product details to make a buying decision.
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Cross-sell: Want fries too? We’ve all heard this phrase before. The same concept applies to e-commerce. Want [related product] too? We can apply the same logic we used in our double-sell and triple-sell email automation. What do people buy second after they buy our first product? What should people buy second so that they make the most out of their first purchase? Or we can use one of the many plugins and tools that take care of our cross-sells for us.
If we have a cart functionality, the best way to offer a cross-sell is during the product page, below the product’s details, and before the checkout initiates. We don’t want to add cross-sells inside the checkout flow because those are not quite as simple buying decisions as an upsell. It’s not a case of more of the same but better.
People may stop shopping to go check out the cross-sell product, then they may get confused, tired, or distracted for whatever reason and not buy.
Downsell: A downsell is something that’s rarely used these days outside of direct response funnels, but it should be in vogue again. It’s a lower-cost offer that comes after a customer rejects an upsell. It works like this.
The customer selects the base product, and then we upsell them a premium version of the same product at an additional cost. If the customer says they’re not interested, we’re offering them a slightly more affordable upgrade, which, in comparison to the upsell, seems reasonable and affordable. That’s the downsell.
These tactics are proven and very powerful. We don’t have to use all of them at the same time, as even one or two of them could significantly boost our average profit per customer.
For me personally, it took me a while to truly understand these concepts and their implications. But when I did, something clicked inside my mind. I suddenly stopped thinking about the products being sold, and I started thinking about the customer’s uses cases. I started thinking about the problems we were solving or the outcomes we facilitated with our products.
That’s a fascinating experience because when we focus on customer needs and use cases, product development and line expansion becomes simple. New opportunities open up. Opportunities to sell up, to sell down, to sell laterally, to sell in any direction possible.
Are we ready to scale our advertising now that we maximized our profit per customer?
Not yet, but we’re almost there. Let’s review what we’ve accomplished so far.
We understood that advertising is supposed to be a profit center and not an expense. We have mapped the steps of a “Bottom-up Funnel” that allows us to acquire new customers profitably.
Then we covered how to develop a layer of automated, low-cost lifecycle communications aimed at getting people to buy more than once.
And finally, the cherry on top, we spoke of transforming our website into a spiderweb of upsells, cross-sells, downsells, and product bundles, so we get to increase our transactions’ average size.
If we’ve come this far, we’re already in a position to do better than the vast majority of e-commerce companies. But before we really crack the top 1% mark, we need to pause, take a step back, and think of our customers.
See, not all of our website visitors are equal. In fact, in most cases, the vast majority of our revenue comes from a tiny small segment of our customers. These people are repeat buyers – they spend more than most people do, and they buy more frequently. Some people call them whales. I call them high-value buyers.
It makes sense to acquire more high-value buyers, right?
So, our first step is to find who those high-value buyers are. And the simplest, most straightforward way of doing so is applying the trusty RFM segmentation framework.
What is the RFM framework and how can I use it?
RFM stands for Recency, Frequency, and Monetary Value. RFM is a criminally underused method of analyzing customer value, with origins in old-school database marketing.
- Recency: How many days since the customer’s last purchase?
- Frequency: How many purchases have they made?
- Monetary value: How much have they spent?
As it turns out, these three dimensions are excellent at analyzing a customer’s value. And they’re ordered based on their importance, meaning that recency tends to be more important than frequency, and frequency tends to be more important than monetary value.
The logic is that the longer it takes for someone to return to our e-shop (meaning, when recency is high), the less likely it is that they will come back. The more frequently someone buys from us, the more likely it is they will buy again in the future.
So, our most valuable buyers are the customers that spend a lot (high M), buy frequently (high F), and have made a purchase recently (low R).
And if you’re paying attention, you’ve realized that this is the exact kind of behavior we want to create and nurture with the lifecycle email program we discussed in the previous sections. In other words, we want to condition new customers to develop high-value buyer behaviour.
For smaller retailers (less than 10M in annual revenue), the easiest way to take advantage of RFM is to keep thing things simple and create Google Analytics segments based on these three dimensions.
Once we’ve broken down our customer base into segments, it’s time to start analyzing this group’s characteristics and purchasing behavior versus the less lucrative segments. Are they of a certain age group? Do they come from a certain traffic source? Do they seem to prefer certain kinds of products? What is their main purchase motivation? Why did they pick our product and not somebody else’s? What additional products would they like?
Answering these questions is an iterative, long-term process. And honestly, it’s not a process that should be completely outsourced to a low-ranked marketer. The real value comes if we reposition our business to serve that segment’s needs better, and the only way to do so is for us, CEOs and owners of the company, to be involved and believe in this process.
We’re ready to scale our advertising, but that’s not all.
Suppose we set up our email automations, performed a good RFM analysis, found our most profitable buyers, and went down the rabbit hole of understanding who they are and what they need.
In that case, we are in the perfect position to create ads that resonate with them. This means we’re ready to scale our advertising. We can increase our budgets with great chances of being profitable.
But that’s not all we’re going to do. We’re going to create two additional tactical layers into our e-commerce marketing strategy: We will set up high-value buyer lookalikes and RFM-based, post-purchase retargeting.
First of all, we are going to ask Facebook and Google’s algorithms to find more people like our high-value buyers. The terminology used differs among platforms. Facebook calls it lookalike audiences, and Google calls it similar audiences, but the purpose is the same.
The idea is that you provide a set of data to the platform’s targeting algorithm, and the targeting algorithm finds people with similar or near-matching data.
Let’s take a step back, so we’re clear on what we’re doing now.
A quick review of our Growth Engine:
1. We have an advertising customer acquisition funnel, which we’ve calibrated to resonate with people likely to be high-value buyers, thanks to our RFM analysis.
2. We have automated, back-end email systems that train and condition new customers to exhibit high-value buyer behaviour (repeat purchases, bigger transactions) as soon as they enter our list.
3. We’re using our increasing pool of high-value buyers to ask Facebook, Google, Youtube, etc. to find more people like them, further refining and optimizing this entire engine.
The result of this process is that we will acquire more and more high-value buyers over the long term, and we’ll be spending less and less of our marketing budget on low caliber prospects. We’ll start increasing our marketing budget’s productivity, dollar to dollar, continuously.
Let’s move on to RFM-based, post-purchase ad retargeting.
RFM-based, post-purchase ad retargeting.
When it comes to retargeting, there are all sorts of frameworks circulating the web. A common practice is to create “cold,” warm,” and “hot” audiences, moving people from one targeting layer to the next based on how they interact with the ad.
For example, if someone sees an ad, clicks, goes to the product page, starts the checkout, and leaves before purchasing, they would be a prime candidate for being targeted by a “hot” ad. If someone watches a small portion of a “cold” video ad, they may be retargeted by a “warm” ad, and so forth.
For me, that’s a sub-optimal way of organizing things. What ‘warm’ or “hot” means differs among people, causing confusion and misunderstandings. Secondly, it’s not complete, as it only covers the relationship before the sale. It misses half the picture, which is the relationship after the sale.
It amazes me to say this, but few people in e-commerce do post-purchase retargeting. That’s mind-boggling because barring a bad customer experience or specific fringe product categories (e.g., refrigerators), few people are more likely to purchase than the people that have already purchased before.
There are many ways we could approach post-purchase retargeting, but why not make things easy on ourselves and use the proven RFM-segmentation framework we explored earlier?
Remember that recency means how many days since the customer last made a purchase, frequency means how many purchases have they made, and monetary value is how much have they’ve spent in total. Surprise! We can copy and paste most of our email automations and set them up as ads because they’re based on that very same RFM logic.
When people have a frequency of 1 and recency of 0 to 5 (meaning they bought once during the last 5 days), we could show them a retargeting ad with very similar content to the first email of our post-purchase welcome offer sequence.
If they don’t buy during that five-day window, and their recency increases to 6 and beyond, we can funnel them into ads with similar content as the rest of our welcome offer sequence.
If we set up these kinds of ads in email and across multiple advertising platforms, our offers become consistent, and they achieve omnipresence.
Omnipresence is useful because of how online shoppers behave.
Here’s how online behaviour works based on the latest research by Google. A great way to think about shopping behavior is that it’s like strolling an infinite high street. As we move up and down the internet street, we follow two main patterns of behavior. We explore (the expansion of options), and we evaluate (the narrowing down of those options).
Unlike most marketers think, that process is not always linear, nor is it perfectly funnel-shaped. Online shopping is more often than not a low-stakes and often low-involvement environment. This means that if we like something, we may buy, but if not, it hardly ever matters because there’s plenty of other options to check out.
So we bounce off and move from exploration to evaluation back and forth, in a loop, until we make a buying decision. This is precisely why omnipresence matters. Showing up multiple times during this process, especially with an additional purchase incentive like a discount, is enough to stimulate many new purchases.
Going beyond: The three force multipliers.
If you’ve managed to set up everything we’ve covered so far, congratulations. You’re almost certainly in the top 1% of e-commerce companies, at least from a marketing perspective.
Something interesting will happen at this point. Because we focused on activities that push the three growth levers forward, your store is likely starting to be very profitable.
And because we used proven segmentation and automation techniques, likely, our e-commerce marketing strategy engine doesn’t take that much time to maintain. What most people would do, at this point, is take a step back and enjoy what they’ve built.
Who could blame them? Setting all these systems up is hard work, simple as it may all sound on paper.
However, what I would invite you to do if you ever reach this point is the exact opposite of sitting back and relaxing. As you may recall from the beginning of this post, there are tremendous forces at play against small entrepreneurs.
As a quick recap, the cost of digital advertising is increasing. More and more people are interested in e-commerce, and technology is driving the-barrier-to-entry down in most markets. Finally, big players like Amazon are setting the bar of customer expectations higher and higher, which means smaller companies will need to fight very hard to keep up.
Given the above, what we need to do is start fortifying our e-commerce company. We want to build a moat and a wall around our e-shop(s) to increase our chances of long-term survival and success.
There are three pathways we can follow to do so. Three powerful force multipliers.
Branding, product innovation, and distribution.
Let’s quickly go through them before we unpack them.
Branding: Not something the marketing team concocts or writes down a piece of paper. It’s what people outside the organization think of us.
Product innovation: Fine-tuning, improving, or recreating products from scratch so that they give more value, more efficiently to our customers.
Distribution: Finding new ways to deliver value, from a new digital channel, to establishing a retail presence, to creating a new B2B arm for our company, to entering a new geography.
The truth is that if we don’t tap into one or more of these three force multipliers, we’ll eventually hit a profit ceiling.
Much has been said and written about all three of them, so I’ll try to unpack, in brief, some key concepts here.
The four layers of branding.
Branding strategy definitely deserves its own deep dive post (stay tuned), but until then, I’ll give, in brief, my take on engineering a brand.
As I said, a brand is not something the marketing team writes down on a paper. It’s the perception that people outside the organization have of us. This means we need to have our ears pinned to the ground to keep ourselves tuned to how people feel about us.
That being said, strong brands are not built by accident either. In my mind, a strong brand has concrete building blocks that are both consistent and distinctive. Let’s imagine a pyramid with 4 layers.
At the top of the pyramid, we have a promise or an idea that invokes a feeling. For example, Disney’s promise would be something like “spreading happiness.” The feeling would be joy. That promise and feeling are what binds everything that the brand does together. They’re the ultimate source from which we can flesh out taglines, slogans, positioning statements, vision statements, and everything else.
The easiest way I know to come up with the core promise is to ask ourselves why we do what we do, five times, consecutively, until we reach the root cause. The feeling will flow organically out of the deep “reason why” we come up with. Keep in mind that only the CEO or founder of a company can complete this exercise. This is NOT something we want outsource to a low-rank marketer.
If we move one level down the pyramid, we encounter the brand character. This is the long-term personality we want our brand to show across our communication. It’s how we will express the promise at the top of the brand pyramid. A strong brand character means that even if two advertising campaigns are wildly different in content, they should still feel related and consistent. People should always be able to identify the brand in them.
The fastest way I know to develop a lifelike brand character (or any character) is to use the screenwriting concept of the “character diamond.” According to the character diamond theory, a fleshed-out personality has four components. A dominant primary character trait. An opposing, counter-balancing secondary attribute. A quirk or humanizing flaw. And finally, a list of non-negotiable beliefs.
Branding: The character diamond concept
Let’s create a character diamond for (imaginary) health and fitness brand High-Energy LLC.
Primary character trait: Always high-energy.
Counter-balancing secondary trait: Reckless.
Human flaw: Sometimes arrogant.
Non-negotiable belief: “One workout a day.”
Notice the tension between being high energy and being reckless. That tension is what makes a character interesting.
Does this make sense?
Let’s slide down to the third layer of the pyramid. Now we’re looking at the more “practical” building blocks of a brand. We can group them into two distinct buckets. On the one hand, we have the points of difference, and on the other hand, we have the points of parity.
The points of difference are the characteristics that set our brand apart from the competition, so we win the hearts and minds of our target audience. Usually, they’re some variation of “better than” or “different from” the competitors. They can’t be completely isolated from what happens in the bigger market or industry.
The parity points are the characteristics that our brand needs to have to neutralize the strength of our competitors’ claims. Parity doesn’t mean we are the “same as,” but rather that our audience does not perceive us as meaningfully different from our competitors in what our competitors claim to be their biggest strengths. To make the most of this layer, we need a deep understanding of the competitive landscape and market.
The fourth layer of branding is the broader assets and customer experience. As I said, strong brands are both distinctive and consistent. This goes beyond a cohesive color palette. Strong brands are distinctive and consistent across all executional assets, whether those are visual, verbal, textural, taste, or audio-based. Strong branding cross-pollinates areas like product development, customer service, packaging, and more.
There’s only one way to achieve that level of cohesiveness. First, we need to map out the brand’s assets and touchpoints, whether external and client-facing or internal and employee-facing. Now we need to see how we can rework them to deliver the overarching brand promise through an identifiable character and consistent execution.
In search of innovation.
From my perspective, there are two viable ways to innovate products. One of them is straightforward, relatively low-risk, and has a medium-sized upside. The other is very complex, high-risk but has a potentially giant upside. Both require substantial investment, which means the product innovation force multiplier is not for the faint of heart. It’s perfectly fine to be a re-seller. Many people do, and they do great!
First of all, what exactly is product innovation? Product innovation is to create a new product or improve a product feature to deliver more value more efficiently to the end-user.
The obvious way to chart out what innovations to pursue is to start from what consumers want to accomplish, what obstacles they have in their way, and what potential solutions we could leverage to either remove the obstacles or help them achieve the outcome they want.
The easiest way to deeply understand consumers is dirty, hands-on, bottom-up analysis.
What is bottom-up customer analysis?
Qualitative research, done smartly. Meaning interviewing people, surveying people, reading what they share online, and so forth, then codifying the findings, quantifying them, and analyzing them based on the frequency by which they occur.
This way we can create or improve our products to give our customers more of what they want. It’s a low-risk way to develop product features because what they say will likely be close to what they want.
If we pursue this innovation model, our products will be differentiated and stand out from what’s available on the market.
Unfortunately, we are not likely to maintain this advantage over the long-term because competitors will eventually create me-too versions of our products. And because we did not truly break ground from the original version of the product but built upon what was already working, it wouldn’t be hard for them to copy us.
This innovation model works perfectly fine, and it’s a reasonable way to innovate if you have limited resources. But that’s not the only way to innovate.
There’s a second way, which is far riskier, but also has a far bigger potential upside. This innovation model rejects the notion of giving people “more of what they want but better” and sets out to create something new. Something they would love but haven’t even thought of yet.
It usually takes a genius to get this right. But there’s a sneakier and safer way, which is to monitor and harvest signs of genius and innovation from small, passionate, niche communities.
New distribution channels mean new profit centers.
Distribution can mean many things, so let’s define it. At its core, the distribution force multiplier is about finding a new way to deliver value.
In the context of the e-commerce marketing strategy we’ve outlined so far, which we based on performance advertising, a potentially lucrative new distribution channel would be a well-thought-out, search engine optimized, content marketing program.
I won’t expand a lot on SEO or content marketing. I will briefly say that if you’re going off by keywords, you’re doing it sub-optimally. The best way to think about content marketing is the following.
To do content marketing effectively, an e-commerce company needs to create a small, internal, “media company.” This means we need to communicate with people effectively through different formats, including text, video, audio, photography, and any combination thereof.
Any content we put out must be consistent with our brand, so we should decide the broad topics we’ll pursue beforehand. Equally important is not to lose touch with society’s pulse, so we can also participate in topical events, conversations, and happenings around us.
When it comes to our content’s quality, we should be comparing ourselves to media companies, not competitive e-commerce companies (the bar is very low). Ultimately, we want our content to be so good that it aggregates people into an audience sharing an experience, like a television series.
But let’s look further than content marketing. How else could we grow our distribution?
Ways to think about distribution
- What non-competitive companies do I share an audience with, and how could I partner with them to reach more people?
- Where and how could I establish a retail presence?
- What new tangible or intangible assets or companies could I acquire?
- What products and marketing programs would I need to develop to acquire a new audience?
- What new marketing channel could I explore?
- What new geography could I enter?
- If I sell to consumers, how can I sell to companies?
- If I sell to companies, how can I sell to consumers?
Does this make sense? The possibilities are endless.
All that being said, perhaps the most relevant distribution channel for an e-commerce company is to establish a retail presence. This means opening physical stores across the country or making our products available in other people’s physical stores.
Wrap up: How to cope with owning a huge e-commerce Company.
We’re crawling towards the ten thousand word mark, and I don’t believe the content was fluff. I’ve shared plenty of material with you.
Before we wrap up, however, I want to address one final thing. If you follow the advice I’ve shared so far, you will likely succeed. It’s not guaranteed by any means, and there are critical success factors that I didn’t cover here, such as market and product selection, logistics, customer care, and more.
But even so, I genuinely believe that if you follow the advice, you’ll have a far better chance than most. So, I want to close this post with some piece of advice to the “future you,” that’s suddenly the head and owner of a vast e-commerce empire.
As a thank you, I would really appreciate if you shared this content with your network.
First of all, your day-to-day will be very different.
Whereas you once used to be lean, fast, even experimental, now you will be forced to slow down. Whereas you probably started solo, now you’re giving jobs to a ton of people. Every single one of them needs attention, but none of them needs as much attention as your company. There will be times where you may feel overwhelmed, because it will seem like every day, there’s a new issue.
My first piece of advice is to work on yourself. Whether that’s direct work with a coach, reading books, going for a morning run, or meditating before work, it’s incredibly likely that you’ll need to step up your mental game. Even though I tried to give you a straightforward growth framework, things will undoubtedly grow more complex over time and you will need to keep a cool head.
My second piece of advice is to compartmentalize your work life. Don’t let managing the company consume your entire life. Take your mind off work, and spend time with those you love, frequently, so you get to come back to work feeling recharged and fresh.
My third and final piece of advice is not to lose your point of view. Your unique point of view, the fact that you had something interesting to say, is what created this fantastic company you’re leading. You can’t outsource this to an external partner, nor an inhouse team. So, don’t push yourself out of the process too early. It’s likely you who binds everything together.
Those were my two cents.
I hope you found this post as insanely valuable as I found it insanely entertaining to write. Please share this work with friends and colleagues that might find it useful!
PS. Feel free to “steal” my ideas. But please link back to this post.