The Virtuous Webstore: Acquire, Engage, Optimize, Repeat
It’s hard to overstate the importance of having your own webstore. But simply having your own webstore does not mean much if you don’t have a system to invest the time and resources necessary to make it your largest online channel. We believe 8 out of 10 webstores (i.e. Shopify, BigCommerce) generate less than one order per day on less than one hour per week of effort.
If you’re like most online retailers, you’re selling on marketplaces like Amazon, Walmart, Jet and eBay and these channels are more than enough to keep your team busy. We commonly hear the analogy that Amazon’s marketplace is like a drug, the firehose of demand produces exhilarating growth during your initial stages. Then marketplace dynamics set in and fierce competition erodes your margins.
For this and other reasons, it’s not possible to build a defensible long-term ecommerce business by operating primarily as a 3rd party seller on marketplaces. At the end of the day, the only customers you own are the ones that purchase directly from you.
So, how do you control your destiny as an online retailer? Focus your team’s efforts on building your webstore into your primary source of revenue. There is a three-part system for achieving this that we call the Virtuous Webstore. The idea is that there’s a positive feedback loop or “flywheel” that produces dramatic webstore growth.
It all starts with customer acquisition. In this first step, we focus on understanding how much it costs to acquire each new customer. There are many different customer acquistion channels you will test out. Here’s a short list:
- Google Shopping
- Facebook ads
- SEO and content marketing
- Social media influencers
- Direct mailers
- Radio ads
- Magazine ads
- TV ads and infomercials
- Event sponsorship
With Google Shopping and Facebook ads, you pay for clicks to your webstore’s product pages, for direct mailers you pay per recipient. If each new customer costs less to acquire than they contribute over their lifetime as a customer, then you have a profitable, repeatable acquisition channel.
We believe Google Shopping is by far the most valuable customer acquisition channel and best place to start. Here’s an overview of the Google Shopping user experience:
Google Shopping links to your webstore’s product pages based on search relevance and per-click bids. It is a lot more complicated than selling on marketplaces, and many retailers have a difficult time configuring, managing and optimizing campaigns that are cost effective. We’ve partnered with Google to offer sellers a highly simplified and automated managed Google Shopping service called Programmatic Google Shopping. This service feels like you’re selling on a marketplace because your ad spend as a percentage of revenue is tightly controlled.
We recommend experimenting with as many customer acquisition channels as are relevant to your business. Think about where your target market spends their time, and implement a cost-effective experiment for each channel to see if you can acquire them cost effectively. To do this, you must first be sure to have tracking mechanisms in place to know exactly how each customer found you. For Google Shopping, this is easily tracked between Google Adwords and Google Analytics. For direct mailers, this is more difficult to track through unique coupon codes or unique URLs.
Don’t worry too much about the initial status of your customer acquisition unit economics and tracking capabilities, the Virtuous Webstore is an iterative process focused on continuous refinement of each core activity.
Now that you’ve acquired customers on your webstore, it’s time to nurture them into lifelong customers. Acquiring a customer that places just one order is not nearly as economically viable or interesting as acquiring customers that place multiple orders per year. In this stage, we focus on maximizing your customer lifetime value. Selling to existing customers is a lot more cost effective than acquiring new customers.
This is where email marketing campaigns and loyalty programs come into play. Give your customers a reason to come back to your webstore.
Some things to consider:
- Frequency and consistency is important. Make sure you are on a consistent cadence or else your relationship will grow stale. For most product categories, we recommend emailing your customers at least once per month, ideally once per week.
- Relevance is important. If your emails are not relevant your customer will unsubscribe and tune out. We recommend segmenting your customers by things like browsing history, past purchases, or survey information you can collect from time to time. At check out, one of our clients that sells appliance parts asks every new customer if they are a contractor or a DIYer. This allows them to tailor future communications relevantly.
- Tone is important. Your tone should match your brand and your company culture. If you’re a playful brand with quirky customer support, you’ll want to let that shine through in your communications.
There are several engagement channels to consider:
- Direct mail
- Phone call
We love loyalty programs as an ideal mechanism to condition repeat purchasing. Points and webstore cash can also contribute to increased average order value.
Take a step back and analyze the data. What is your conversion rate? What is your bounce rate? What is your customer acquisition cost (CAC)? What is your customer lifetime value (CLV)? What is your fulfillment performance and customer service rating? Where and how can you make adjustments to optimize these metrics?
To increase conversion rate, we recommend focusing on the the quality of your product data, site design and searchability. SearchSpring is an indispensable asset to ensure your customers have a successful browsing and shopping experience. We also recommend adding elements that increase trust, namely the Google Customer Reviews badge which can be activated in your Google Merchant Center and displayed on all of your webstore’s pages.
Quickly making even the smallest of optimizations will allow you to build momentum. As conversion rate and customer lifetime value increase, so too can your investments in customer acquisition. It really is a flywheel for growth, and momentum is key as it energizes you and your team and positively reinforces the actions necessary for growth.
Your webstore can and should be your top sales channel. By following this proven strategy to focus on the actions to acquire customers, engage customers and optimize your webstore, you’ll be well on your way to a defensible, long-term ecommerce business. There’s no reason your webstore can’t look like this:
About the author
Daniel Sperling-Horowitz is the President of Zentail, a Y Combinator-backed ecommerce platform leveraged by top 1000 internet retailers. Zentail’s software makes it easy to centrally manage product information, inventory, and orders for all major online channels. Zentail’s Programmatic Google Shopping service automates and optimizes highly efficient and controlled Google Shopping campaigns.
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