the trend disrupting ecommerce
DESCRIPTION
Mike Rossi (Co-founder @ Sweet Tooth) gave a talk in New York City at Meet Magento NYC. The talk gave merchants an overview of the rapid trend of eCommerce merchants focusing on customer retention instead of just customer acquisition.TRANSCRIPT
@sweettooth
The Trend Disrupting eCommerce and Killing Businesses
Mike Rossi
@sweettooth
eCommerce has gone pretty well so far, right?
@sweettooth
But what about the next 5-10 years?
@sweettooth
vs.
@sweettooth
About Mike
• Co-Founder, CEO of Sweet Tooth
• Worked with Magento during its beta stages
• Helped hundreds of merchants with their eCommerce marketing efforts
@sweettooth
@sweettooth
@sweettooth
What did eCommerce marketing look like 5-10 years ago?
@sweettooth
Where did online store sales come from in 2004-2009?
@sweettooth
1. SEM, Pay-Per-Click Ads
@sweettooth
1. SEM, Pay-Per-Click Ads
@sweettooth
2. SEO
@sweettooth
3. Affiliates & Link Building
@sweettooth
4. Content Marketing
@sweettooth
What do all of these have in common?
@sweettooth
1. Get a visitor 2. Convert 3. Profit 4. Repeat!
@sweettooth
1. Find 2. Kill 3. Eat 4. Repeat!
@sweettooth
Important Metrics in ~20071. Cost Per Click (for SEM)
2. Marketing Costs per SEO Visitor
3. Conversion Rate
4. Cost to Acquire a Customer
5. Average Margin
@sweettooth
Example Merchant in 2007
• Sells apparel
• Cost to acquire a customer = $5
• Average order = $50
• Average margin = 30%
• Average profit per order =
$10
@sweettooth
So, what’s been happening in the past ~5 years?
@sweettoothSource: searchengineland.com
@sweettooth
These marketing methods have become less effective over time
@sweettooth
– Andrew Chen
“Over time, all marketing strategies result in shitty clickthrough rates.”
The Law of Shitty Clickthroughs
@sweettooth
…but why?
@sweettooth
2007 Merchant
@sweettooth
2014 Merchant
@sweettooth
More competition in every vertical!
@sweettooth
Side-Effects of More Competition
1. Higher pay-per-click ad prices due to more bidding
2. SEO is more difficult (i.e. less efficient)
3. Prices are driven down, which lowers margins
4. Commoditization
@sweettooth
@sweettooth
Example Merchant in 2014
• Sells apparel
• Cost to acquire a customer = $7.50
• Average order = $50
• Average margin = 20%
• Average profit per order =
$2.50
@sweettooth
2014 Merchant
@sweettooth
@sweettooth
So what have merchants been doing about it?
@sweettooth
Source: Monetate
@sweettooth
Marketing Budgets
@sweettooth
Important Metrics in 2014
1. Customer Lifetime Value (CLV)
2. Average number of purchases per year
3. % of sales from repeat customers
4. Churn, or the number of customers who never return
5. Some of the 2007 metrics too!
@sweettooth
@sweettooth
“Hunter” Merchant in 2014
• Sells apparel
• Cost to acquire a customer = $7.50
• Average order = $50
• Average margin = 20%
• Average profit per order =
$2.50
@sweettooth
“Farmer” Merchant in 2014
• Sells apparel
• Cost to acquire an existing customer = $2
• Average order = $50
• Average margin = 20%
• Average profit per order =
$7.50
@sweettooth
1. Referral programs 2. Lifecycle emails 3. Loyalty programs 4. Great customer service 5. Memoriable experiences
@sweettooth
vs.
@sweettooth
Important Metrics in 2014
1. Customer Lifetime Value (CLV)
2. Average number of purchases per year
3. % of sales from repeat customers
4. Churn, or the number of customers who never return
5. Some of the 2007 metrics too!
@sweettooth
&
@sweettooth
Questions? !
@m3rossi & @sweettooth