Ecommerce Strategies for Growth - Two Ways Your Business Could Be Stuck, and Lost.
I've spent a lot of time implementing various ecommerce strategies. Both as an operator and advisor. The reality is that few of us know how to get to the next level.
If your ecommerce business does $20 million, do you know what it will take to get to $40 million? If you're doing $1 million, do you know what's going to get you to $5 million? Odds are you have a general idea of your strengths and weaknesses. You may have ideas how to scale your systems and grow your team. The big question to answer is, what changes do you need to make in the future that lead to that jump in the first place?
There are two groups of activities that will help you navigate your way out of the woods, and onto the path to new peaks. Both are critical to building growth and sustaining scale.
Some types of tasks and improvements are described as "transactional".
With these, for every action taken, you expect a predictable return. You perform action X, you will have outcome Y. These types of activities are the foundation of a functioning business. These activities are the backbone of your day-to-day operations. PPC marketing expenses are "transactional" producing a finite amount of revenue per dollar invested. Even if you include lifetime value, this amount will approach a finite value.
Hiring talented customer service staff also falls under this category. Customer service staff are the life blood of your customers' experience. Customers have questions, you need to provide answers if you want to win or keep their business. If they call, email, tweet, chat, or walk in your door get ready to help. For every hour your staff works, they can help a finite number of customers. With a fixed number of staff, you can help a finite number of customers.
These tasks and activities aren't exponential, but they are critical. This is how products get on your site in the first place. This is how visitors will find your site. This is how products get put into boxes. This is how anything gets shipped to customers and so on.
Strategic activities are those which provide incremental value to the business. Strategic activities provide value to the business long after the work is complete. Your customer satisfaction or company reputation are the results of transactional activities. Transactional activities may have a long-lasting effect, but that is not their primary function. Having your developers build a new feed manager that improves your Google Shopping presence is an example of a strategic activity. The new feed manager has an impact on your business long after the work is complete. Writing compelling content draws organic traffic to your site for months to come. Writing content is also strategic with no cap on the amount of benefit you can gain. When you pay for a click, you're getting one visitor. When you write a great piece of relevant content, you don't have the same limitation.
Strategic advantages are expensive, though. Typically, strategic activities are in the red for a period of time. A transactional activity implicitly pays for itself in the execution. A strategic activity pays for itself in the continued application of the produced advantage.
It's a bit like the "Production vs. Production Capacity" concept in the 7 Habits book, except applied to businesses instead of people. There...I just saved you the time of reading it.
Once you have the concept of these two different types of advantages, you can start planning a roadmap to balances the two. Too much focus on transactional activities, and you're swimming upstream. Too much focus on strategic activities in the short-term could sink you before you see the pay-off.
Balancing the Two Ecommerce Strategies, Forging a Path
There is a reason that a ship has both navigation equipment, and a steering wheel. The wheel lets you set a course according to the navigation plan and make constant corrections along the way.
Likewise, you will make a general plan for how to get where you want to go. However, expect to make constant corrections along the way. Shopper behaviors will change over time. Your competition will change directions and you'll need to react. Product lines trends will come and go. The currents and tides will always effect your course.
However, be conscious of how you balance the transactional and strategic aspects of your journey. An unbalanced plan may cause specific symptoms to watch out for.
Too Heavily Invested in Transactional Ecommerce Strategies
Symptoms: You feel like your competitors are moving faster than you are. Your overhead feels very high, so it's hard to invest in developers, designers, and other roles that don't support sales right now. Customers are happy, but they're expensive to attract to the site in the first place. Conversion rates are low, but you don't have the resources to figure out why, or to fix it, which exacerbates the problem. Your development team is small, and over-loaded. Marketers and others don't feel like they can get anything out of the programming staff, due to the clogged pipeline.
Resolution: You will need to aggressively manage your development pipeline, to ensure you're getting the absolute highest value out of your technical resources. This is like what adults told you savings accounts would work like when you were little. Every dollar you save pays you back a little forever. If you can get your focused on new projects, instead of constant bug fixes, they have a chance at contributing long term value. The same is true of content developers, designers, and any other strategic resources. Paired with careful margin management and you will move from fighting the battle to winning the war.
Too Heavily Invested in Strategic Ecommerce Strategies
Symptoms:More than occasionally, your developers ask you what they should work on. You may have gotten here following an "if you build it, they will come" mentality, especially after some previous level of success. But now, the project pipeline is overdrawn. On the other side of the business, your customer satisfaction levels are dropping. You can't afford to expand your customer service staff. Your reputation is dipping. No amount of clever programming or merchandising is going to fix it. You start throwing projects against a wall to see what sticks, rather than reacting to new opportunities as they come up.
Resolution: In minor cases, focusing your idle strategic resources on helping your transactional processes can avert disaster. For example, if you have idle development hours, focusing them on your order management tools might streamline transactional efforts. If you have idle content writers, connect them with service staff that field the same questions every day. See if you can get the site to answer the question before a call is required. In severe cases, however, you may have to adjust the size of your strategic team. This is a painful situation. If it comes to that, the remaining resources must be similarly invested--in getting the transactional team out of the woods.
Effectively executing ecommerce strategies are a bit like climbing a ladder...
I've been in both situations. If you can keep it near the middle, it'll still oscillate back and forth a little. Just move one boot up one rung of the ladder. Get ready to swing the other way and move the other boot up shortly after.
If you keep checking your balance between transactional and strategic investment, and advantage, you likely won't swing yourself off the ladder. If you're stuck and can't seem to get up to the next rung, are you putting all of your weight on one foot? See if you can shift a bit of attention to the other, and I'll bet you find your breakthrough.
Have questions? Drop me a line via the Contact form--I love to talk shop.