Many of you are looking at the wrong data, says chief scientist Ross
Michael Ross, chief scientist at eCommera, suggests that focusing on the right inputs, in other words customer data, will drive profit for optimised websites.
No matter how long retailers and brands spend worrying over how to optimise their eCommerce operation, many are simply looking at the wrong data and failing to focus on the right actions which will drive profit.
Here, Michael Ross, chief scientist at eCommera, the decision intelligent commerce company, outlines what you need to know.
Historically retail success has required the right mix of art and science: the art of relying on gut instinct when customers are mostly anonymous, and the science of range planning and merchandising.
In the store, the necessary activities are well understood, the costs predictable and the data simple. These have led to the creation of rules of thumb. Most successful retailers know their sales per square foot and the stock turn required to make a store work. And profit per store is a simple and democratic measure of success.
The Internet however and the way consumers now shop, has disrupted this happy model and introduced a completely different recipe for success.
Making sense of new customer data
The balance of power in retailing has shifted from the store to the customer. Customers are now shopping in complex ways: they research online and purchase offline; they research offline and purchase online; they shop on mobiles in store. It simply makes no sense to look at ‘store’ profitability if customers are in your store, buying on their mobiles and opting for delivery to home.
This customer-centric world demands new activities, new data and new costs. The fixed costs and guaranteed footfall of physical retail are replaced with the variable costs of Google (imagine a landlord who charged a cost per visitor?) and broadcast marketing is augmented with one-to-one CRM.
Bulk distribution costs are replaced with per order costs of picking, packing and shipping. Returns move from a minor detail to a complex cost of doing business. And customers move from anonymity to known individuals whose every click is tracked.
New activities mean new decisions; and new costs mean different decisions. These decisions require rules and the new data allows rules to be codified using maths.
New questions for each department
Operations need to ask: ‘how can you make the trade-off between cost versus service?’ Marketing asks: ‘what profit per order maximises overall profit?’ Merchandising asks: ‘Do you get a better return from 100 more visits or a 10 per cent discount?’ And those responsible for customer next best action should ask: ‘When is the optimal time to target a customer who hasn’t purchased?’ These are just a few of the many questions that teams should be asking.
Focus on inputs not outputs
Far too many online retailers focus on the wrong measurements to assess their business. A classic example is conversion rate. The problem with this metric (besides it being an average) is that there are so many things that can affect it, from your stock levels to your sort order to your price competitiveness. Knowing that conversion has gone up, down or stayed the same does not give you any clues about what you should be doing to improve trading on the site.
In online retail there are many metrics that can be used to both gauge success and to help teams decide what to do in response to fluctuations on the site. Conversion rate is by no means the best one.
Focus on taking action not talking about results
Amazon is one of the few (and possibly only) retailers in the world where the CEO doesn’t obsess about conversion rate. In Amazon-land, you can cry about conversion but you can’t directly do anything about it. The Amazon discipline is to measure things that are actionable – if a measure doesn’t directly drive an action, they don’t talk about it.
Finding issues
The right analytics tools such as DynamicAction will enable you to unearth issues and address them. For example one luxury goods brand discovered checkout pages on its eCommerce site were experiencing high views per visit and that the log in page of the process was flawed. After a page redesign and an A/B test, the client realised a 3 per cent increase in revenue.
Addressing problems with agility
In addition to the right analytics tools, you need the right eCommerce platform to execute your strategy and make changes. It’s important to select a partner which allows updates to be implemented rapidly without disruption to day to day trading and is ideally part of a managed service. In this way you can respond quickly to optimisation opportunities and implement corrections and improvements to drive sustained profit.
For more information, visit: www.ecommera.com
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