We've spoken with dozens and dozens of e-commerce companies over the years. Although the products being sold range wildly (from custom kitchen aprons to DNA polymerases reg-agents), success for any one of these companies comes down to answering the same four questions:
- How do I get more people to my website?
- How do I get more website visitors to make a purchase?
- How do I efficiently deliver products to my customers?
- How do I get customers to make repeat purchases?
It's easy to see how these four questions relate to what are considered the most important metrics behind a successful e-commerce strategy: number of unique visitors, conversion rate, gross margin and percentage of repeat buyers. Above all of these metrics, however, is the one number we’ve seen as the ‘holy grail’ in determining marketing spend and customer value: Gross Profit per Visitor.
It's from these four questions that we've developed a 'framework' to help companies establish a successful e-commerce strategy and calculate their Gross Profit per Visitor. This framework, which we call the e-commerce Customer Lifecycle (ECL), spans four distinct phases of how customers interact with e-commerce companies and the underlying role of analytics:
Acquisition focuses on tactics that will drive visitors to your website. Popular tactics include search engine optimization, paid-search, social media and affiliate marketing. Successful companies pay close attention to the cost associated with each of these tactics / channels and to the conversion rate produced by each.
Conversion focuses on getting the visitors of your website to purchase products. This step is where user experience design, branding, content and your on-site strategy are crucial. Success is measured by conversion rate.
Fulfillment focuses on getting products in the hand of your customers as quickly and efficiently as possible. Technology has become an important element in coordinate shipping from multiple vendors / warehouses, managing inventory across multiple channels and calculating shipping effectively. The proper operations system can save companies huge margins on fulfillment.
Retention focuses on getting customers to continue coming back and purchasing products. Relationship management is essential and driven by marketing automation platforms, loyalty programs and referral incentives.
Gross Profit per Visitor - The One Number Above All
What we feel is the REAL differentiator with this framework, however, is the underlying / unifying concept of Gross Profit / Visitor (GP/V). GP/V is a metric e-commerce companies can utilize to understand the profitability of each visitor and visitor segment (i.e. geographic target, demographic target, specific traffic source, etc.). In turn, this metric can also be utilized to calculate the 'drivers' behind the profitability of their business. If we see higher GP/V for certain segments, such as customers coming to the site via Social Media vs SEO, we can then modify our Acquisition strategy to leverage Social Media further.
For companies interested in reviewing their e-commerce strategy with this sort of model, we've put together a short ‘audit’. Answer the questions below to help guide you through the process of optimizing your ECL: