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.

What are the core competencies of Google?

These are the core competencies that made them successful in all search related products, image search, maps, Gmail, mobile search etc.

Google added new arsenal mobile operating system by acquiring Android, the idea was to benefit from cloud productivity and enterprise applications. But the reality is mobile manufacturers are more benefiting using Android operating system. Later now Microsoft and Apple coming out with cloud enterprise and productivity applications and they can acquire majority of the market. Here also Google didn’t acquired the competency required to sustain and make money from the mobile market. But Android is growing very fast and has been made positive impact on mobile manufacturing companies like HTC, Samsung, Motorola etc.

Now for Google Plus, Does Google have competencies to acquire the market share or Can Google build the competency to make that successful?

Facebook was successful because it was new to the customers and they build the competency of being the social network giant. Facebook played with human emotions because people like FUN, but people would not like it when it is repetitive. With the core competency to spreading content viral made Facebook so successful.

All of us know the rationality behind Google to become a social network giant. 25% of the display network is US is currently owned by Facebook. Google started social network Orkut before and failed the reason was the Google was not ready to be a market leader because of the lack of competency.

People use Google search because Google provide the best search results which is their core competency. If Google want to start un-related product or service that doesn’t require current competencies they have to find a way to build the competency before thinking of a product or service.

Adding friends into a circle or hanging out with friends through your webcam is no more FUN

Now consider our scenario Google Plus a hit.

Let us consider Google can build competencies to influence human emotions and become a social network giant. Google is promoting Google Plus to regain the display market share and produce more social friendly search engine results. In that case what are the competencies they can use to make Google Plus a good social network. One of the main competency they can leverage is the customers, they already have access to huge customers. They have to build a strategy to influence the customers using Google Plus. This competency should have to be build and use other competencies like skills of Google engineers, ad inventories to promote the product.

If Google Plus become success, people will start sharing contents naturally search engine results become more semantic which is a future of search engines. The success can produce good search results for customers. In that case, Google may become a threat to themselves.

Why Success of Google Plus may backfire?

Till date, Google’s most revenue generating platform is Google Adwords. Almost 95% of the revenue of are through adwords. By the success of Google Plus customers will prefer to go to the links that are shared by their friends. So Google will be able to produce more user friendly semantic search results. In that case, what will happen? Google Adwords revenue may go down because then users prefers to see the search results which are shared or recommended by friends through Google Plus.

I would like to hear your comments about this. Please share this post and leave your thoughts as a comment.

One of the economics concept in the book was thought provoking. The definition of economics given by most of the economists as the “study of societies allocation and distribution of scarce resources”; scarce resource can be money, food, equipments, land, fresh water, oil or anything. But Is that definition true?

According to Paul Zane Pilzer economics is not at all the study of scarce resource instead it is the study of “abundant resource”. Because there are no resources to be scarce, the resources we called today are inventions of human mind. Through out history, if any resource run out human being will define new resource. For instance, 5000 years ago sea oil was something that polluted the water but today it is considered as a great resource. Oil became resources only when human learned how to refine oil and use oil to drive machines so as the land. Land was originally a place to kill animals and go on. Another example is whale oil, in 1850 we harvested lot of whale oil and finally it ended up everyone predicted it as the end of the economy because we don’t have oil to make things. Finally in 1859, we drilled first oil well so we defined new resource then. Considering the same example, oil is now running out so human being are moving into more efficient nuclear system, solar systems, electrical systems etc. So before any resource run out human being will define new resources.

So there are no resources to be run out because they all are fictional inventions of human mind before anything got run out we apply our mind and invent new resources.

The supply of the resource that you have deal with any moment or time is defined by the technology with which you use it. When ever you want to find how much resource is available what you will do is count it, but it is fundamentally wrong. In 1973 average mileage of the car 9 miles a gallon but within 10 years we retool our engineering and made car more efficient to 22 miles a gallon which is still continuing using various electronics systems. So we doubled our resources more  than our supply.

In early days wealth were equivalent to your physical resource available, whether you as an individual or a country.

But today Wealth can be calculated as = P (physical resource) times T (Technology), so the technology with which you use that matters. In the past technology changes happens very slowly, but today it happens every seconds so you have to retool yourself to become competent. Let us consider with a classical example, In 1980, Russia was the country one of the wealthiest nation in terms of land and fresh water. Meanwhile, Japan was the country which has less fresh water and land but today Japan is third largest economy. What they did was they increased and developed new technologies.

Do you still think Economics is the study of scarce resources allocation and distribution? We are living in an economy where we have unlimited opportunities and resources. So all of us have opportunities out there retool yourself to find the best opportunity for you and become a millionaire.

1) How to do Scenario Planning?

2) How to improve cash flow in your organisation?

3) Total Quality Management (TQM)

4) Marketing Healthcare services

5) Multi-criteria decision analysis (MCDA)

6) The Power of an MBA

7) ROI calculator for SEO consultants.

A collaboration between competitors is likely to be advantageous to target a new market, new project or any area of domain , competing with a bigger player and also helpful to reduce operational costs if you are in manufacturing or FMCG sector. Sometime collaboration can create a better strategic barriers for other competitors to enter your domain.

Main benefits

1) Increase selling Power: I have a product which targets ESOL market in India, China and other countries. I found few more companies who are targeting same market but with different products. So we decided to form a consortium so that we can cross sell the products, also it creates a better competitive edge for us because we created a barrier even for big companies that target ESOL market. The consortium registration is at its final stage and will be registered in few weeks at Glasgow.

2) Collaboration to build a barriers to entry:  An example is the consortium formed by Nokia and other companies to develop protocol specification for Bluetooth.

3) Collaboration to gain entry to new market: For cloud computing products Microsoft and HP work together to become the best in the industry.

4) Increase buying power: The buying power can be increased by collaboration, this kind of collaborations often happened in solar power sectors where raw materials are quite expensive.

How you can do Collaborations?

Even if you are a start up, it is better to have a legal structure for collaboration.

1) Forming consortium

2) Forming Partnership

3) Forming Separate Limited companies

4) MoU (Memorandum of Understanding)

Your requirement to conduct Scenario planning

• Good team (5 – 8 members) who can think diversely
• Get 2 different colored of “Post It” notes (For instance Yellow & light blue)
• White board

Stage 1

Appoint a Facilitator, if possible make it external facilitator so that he can have neutral opinion about the problems.

Identifying knowledge gaps.

Knowledge gaps are likely to be in strategic nature in organizational level. This is the identification of issue in the organization or the project which may create critical impact on the organization or for the project, which is an uncertainty which may have severe impact over time. If you can categorize and create uncertainties according to social, technological, economic, ecological, political, legal it will be really great.

Note down all the uncertainties in yellow post it. This is basically the brainstorming process, wherein all the team members identify uncertainties. The most important thing while identifying uncertainties is be clear about the uncertainty, that means don’t write an ambiguous uncertainty.

Stage 2

Exploring the scenario context

First thing to do in this stage is interviewing the team members. Ask questions about the problems in the order of Future, Present & Past. Record their feedback, this should be comprehensive and accurate. Collate and analyze the result of interview process prepare a good report, set your agenda and circulate it. The next process is very critical, invite remarkable people to see the report and check the validity of the assumptions and criteria’s which taken into consideration.

Stage 3

Developing the scenario scripts

In this stage team should identify the driving forces and test its outcome. Driving forces are major source of change that impact future it can be  either predictable or unpredictable. Individual members in the team records those driving forces in “postits” and also for each driving forces, record 2 polar outcomes. The driving forces and outcomes should be numbered in such a way so that we can easily be clustered later. The fundamental thing to be take care while identifying driving forces is the ambiguity of the driving forces it should be unambiguous, that means anyone can understand the uncertainty in a single reading and make a sense of single meaning.

The next process is to clutter the related driving forces from the driving forces that are contributed by the team member. Name the clusters using short titles, again make sure that it should be unambiguous and also the title should encapsulate the full content of the cluster. The next process is to draw “cause and effect” relationships between the driving forces inside each clusters. If any of the uncertainty cannot be linked with any “cause and effect” relationships, then it does not belongs to the particular cluster.

The next process is to rank the cluster headings in a high / low impact and high / low predictability in a 2 dimensional space. This should be done asking everyone in the team to rank according to them. A simple debate can be done to identify the positions of cluster name in the 2×2 dimensional matrix space. After the ranking, select 2 (A & B) cluster name which is believed to have a highest impact on the business problem and also highest level of uncertainty over the potential outcome.

After selecting two scenario dimension A & B do a brainstorm and name all 4 possible futures according to the scenario dimension selected and record it in a 2×2 dimensional matrix space. Include all the polar outcomes we recorded for all the driving force in appropriate 4 future space. This require some brainstorming and agreement between team members.

Split the team into four groups and each group design any of the story line. The task is to produce logical “cause and effect” relationship using the outcomes and design the future of the business problem, the outcomes should be interlinked with cause and effect relationship. Present the story line to other team members and argue and test the logic.

Stage 4

Do Stakeholder Analysis

Test the understanding of the business problem with the stakeholders. Stakeholders are people who are interlinked with the business problem. For eg: If we are doing a scenario planning for the growth of the country, stakeholders includes Ministers, common people, professionals, scientists economist etc. Describe the story line to them and check the logic of the story lines. Refine the story line if there is any logical mistakes or go ahead to the next stage.

Stage 5

Iceberg analysis

The iceberg analysis is a three level analysis of the events. At the top level the event itself and at the second level which are the trends and pattern which may cause the event and the bottom level shapes the trends and pattern with a high level of consistency.

Stage 6

Impact organizational thinking and acting

Execute the different strategies according to the scenario designed by the team in the organization. Change management is very important in implementing strategies in the organization. Employees might not welcome all the changes imparted to them. It is easy for the companies that follow agile operations strategy to implement change management.

The scenario planning process cannot be explained from a blog post, but I think this post will be useful to start off. You can use this report also. For more reference read the book “The Sixth Sense” by Kees van der Heijden, Ron Bradfield, George Burt, George Cairns & George Wright.

1) Customer satisfaction
2) Employee involvement
3) Continuous improvement in performance

The TQM Wheel

Ref

Steps involved

1) derive the customers requirements or need (Product Planning matrix write it in the left side as shown in figure below)

2) develop or improve product / service concepts to satisfies the requirement and also from company perspective (write it in the top as shown in the figure below)

3) evaluate the product / service concept to optimum, each customer is rated from 1 – 5 for each criteria

4) Consider competitor or current product / service for technical evaluation with customers requirements.

5) Impact and relationship with the customer requirement and product specification has to be noted(Interactions in the figure shown below)

6) Assign a relationship weight according to companies effective products feasibility, multiply with the customer rating to jolt down the main features.

7) Do a technical difficulty rating (1-5, 5 being difficulty and risky)

8 ) Analyze the matrix and develop strategy accordingly.

Use this QFD to work with.