I am a CEO

I recently did some analysis for one of my e-commerce client, as the part of analysis I studied different channels from which the company is generating revenue and new channels that may anticipate revenue in near future. There was a clear indication of revenue through mobile devices. Most of the companies are now looking for mobile strategies, however it would be advisable to understand how well your customers are using different channels and growth of different channels.

In this post, I am going to explain different channel effects, how to understand different channel effects, strategies to improve various e-commerce key performance indicators (KPI’s) etc.

There are mainly two things that affect online retail economics

1) “The Cross Channel” effect

2) “The mobile effect”

Both of them may play a significant role in your e-commerce revenue.

The Cross Channel Effect

There might be customers who prefer to research online and purchase offline (ROPO)  or research offline and purchase online. How you are measuring this? It is very critical to understand how your customers are responding to this effect. It is advisable to add measurable element in offline marketing so that you can understand customer economics when they buy products or service online. The same is applicable if your customers are doing research online and doing purchase offline.

The Mobile Effect

Because of the growth in mobile devices including iPhone, iPad, Android phones customers are using mobile phones for doing commerce or doing research about the product or service. How effectively you are understanding this effect with your customers. Similar to ROPO there might be customers who prefer to buy using their personal computer but would prefer to shortlist the products or services when they travel or when they are free using mobile devices. It is recommended to add easy “add to cart” feature in mobile website so that it can be easily tracked when they go online to purchase the product.

It is essential to back up customer behaviour with data and retool the business strategy accordingly. I am going to explain how you can easily analyse the growth of different channels and its impact on the revenue.

Analysis

For example I am going to analyse the growth of mobile traffic in one of my blog over the past 54 weeks. Download the data from Google Analytics and plot a scattered diagram in excel, you can refer second part of my post about study buying behaviour of customers to do this.

You can see in this diagram the slope (R Square is 0.7) that means that there is a strong correlation that traffic is growing.

Draw the same scattered diagram for the last 54 weeks this time the revenue corresponding to each week. Consider the R Square again, if that slope is greater than 0.6 then there should be a strong growth in revenue during the past one year.

If there is not enough growth in revenue further investigation should be done, it could be due to mobile effect. A simple wishlist implementation in mobile site can help to investigate further if the customers are actually buying from the site or they are just browsing from using their mobile devices.

You can do the same analysis for affiliate channels and other channels including offline channels that drives revenue to the e-commerce site.

Understand fundamental KPI’s and think strategies to improve it

E-marketer should understand the basics of a business then only you can understand and improve various KPI’s properly. It is rather very simple if you think for a moment. I would ask you to think from the gross trading profit level below that, it is with finance and account managers to manipulate and adjust revenue. Gross trading profit is trading profit per order multiplied by number of orders. Number of orders is conversion rate multiplied by online visitors. Trading profit is gross profit per order – delivery cost – promotional cost (coupon code or anything) – marketing cost per order. Like wise design the entire KPI tree and find strategies that can increase “gross trading profit“. The tree look something similar to the diagram below.

Adopted from ecommera

Now be ready to take bold decisions.

So if you are able to increase Average order value (AOV) your gross trading profit will increase. How you can achieve that? Is it possible for you to provide free delivery for purchase, for instance £100; this will increase AOV. How can you lower down cost per visit. Look at different channels that drive traffic to the site which among them is most cost effective. Think whether increase marketing budget on cost effective channel increase revenue? Is it possible to pull out promotional coupons or codes will that decline revenue or increase revenue? Like this unravel and identify different strategies to improve revenue.

This is not a one time process you have to do it continually and optimise your revenue and marketing spend. You have to cover your e-commerce site with your own funnel and improve it perpetually.

I would like to learn more from my reader please add your thought as a comment and dont forget to share in Facebook and Twitter.

Tags: customer behaviour, ecommerce, funnelling, mobile strategies, online marketing, regression analysis, retail, retail business, ROPO, Strategy