Magento and Razor 360 Present: 7 Tips to Accelerate Your eCommerce Evolution
Make sure you have the tools, resources and knowledge you need to ensure success when implementing an eCommerce solution. Going online involves much more than just setting up a site. This webinar discusses eCommerce from a holistic perspective, providing real-world guidance on how to cut through the clutter of options and select the right tools, models and tactics to accelerate your own online success.
Full Webinar Transcript
Scott Dahlgren: Welcome to our webinar presented by Razor 360 and Varien, the Magento Company. My name is Scott Dolgren, I’m the director of channel development for Varien, and I’d like to thank everyone for taking time out of their busy schedule to join us today. Joining me here today is Douglas Hollinger from Razor 360, who is a Magento Enterprise partner located in Dallas, Texas. Doug is the managing director leading the e-business strategy practice, and in a few minutes we’ll talk about ways to evolve and mature your e-business by sharing his experience, knowledge and know-how to help you avoid some of the major pitfalls that many companies encounter when developing and deploying your e-business strategy.
Doug will discuss e-commerce from a holistic perspective, providing real world guidance on how to cut through the clutter of options, and select the right tools, models, and tactics to accelerate your online success.
My role today is to cover the housekeeping items and review the agenda. I’ll provide a quick overview of Varien, and then I’ll hand it over to Doug.
The agenda today is very simple. It will consist of a brief overview of Varien, followed by the presentation by Doug, and then – time permitting – we’ll have a Q and A. So our goal is to leave about 10 minutes at the end of the presentation for Q and A, and we’ll do our best to answer any questions in the time remaining.
Let me remind you — to ask a question, please remember to submit them using the question box that is normally to the right of your screen. And if we run out of time, and you have a question after the webinar, we will provide contact information on the last slide so that you can send us an email later.
We will also be recording this, so that anyone not able to attend today can listen to it at a later time. So let’s get started.
Varien, the Magento Company, was founded in 2001 by Roy Rubin, originally as an e-commerce consultancy focused on open source e-commerce, where we worked with hundreds of clients and gained a tremendous amount of experience and knowledge. We were somewhat disappointed with the solutions available, so we started the Magento project in 2007, with the goal of developing a world class e-commerce platform.
The first release of Magento was in March, 2008, and in the first 18 months we surpassed over a million downloads. And right now we’re at over 1.2 million downloads. We now have over 30,000 merchants using Magento to drive their online sales, totaling over 25 billion in transactions, which makes Magento the fastest growing e-commerce platform in the world today.
A significant contributor to this success is a thriving and active community that has emerged around Magento, with over 115,000 community members consisting of developers, designers, online merchants, and marketers. Magento continues to be enhanced and extended by both Varien, as well as the community, and there are now over 1300 Magento extensions available through our Magento Connect marketplace.
Tens of thousands of companies, big and small, have adopted Magento to run their online business, including notable brands such as North Face, 3M, Espresso, Homedics, Vizio, and many others.
We offer two products, our community edition, and our commercial open source product called Magento Enterprise Edition. Both are viable options, but there are distinct differences between the two, and let me just talk about those.
Magento Enterprise Edition is considered a commercial open source product, which really can be viewed as a hybrid, blending a supported vendor backed solution that is typical with proprietary solutions, with the openness, flexibility, and lower total cost of ownership that you find with open source.
Magento Enterprise Edition has the backing of a solid company – Varien – managing product direction, providing SLA based support, warranties and indemnification, and continuing to add new functionality on a regular basis.
Enterprise Edition, like other commercial open source products, remains true to the spirit of open source, by providing access to source code, and the ability to customize and integrate easily, enabling the community to continue adding new functionality faster than any single company could do themselves.
The result is a solution that the mid-market, and even larger companies, can implement quickly at a much lower cost and with greater confidence that the product is high quality, supported, and backed by a solid company.
So I’d like to introduce Doug Hollinger and Razor 360. Razor 360 is an independent, full service, e-business agency leveraging a comprehensive set of e-commerce solutions that are purpose built to drive transactions and help their clients mature and continue to evolve their e-business to ensure that they thrive in a digital economy.
Razor 360 provides an end-to-end solution that streamlines the complexity of e-commerce by helping their clients with strategic planning, design and development, online marketing campaigns, and product fulfillment.
Doug Hollinger is managing director at Razor 360 and leads their e-business strategy practice, overseeing project and program delivery. Doug has more than 15 years of strategy, user experience, interactive design and traditional marketing experience, having directed major engagements for clients in health care, retail, financial services, telecommunications, travel, and manufacturing industries.
For the past 10 years, Doug has helped both start-up and enterprise clients to find, fund, and execute large e-business programs, and his clients have included Nokia, Buy.com, Price Waterhouse Cooper, Novation, Calanders.com and Norwegian Cruise Lines.
So with that, I’ll hand it to you. Doug, welcome.
Doug Hollinger: Thanks, Scott, and thanks very much to Magento for hosting this today, and we appreciate the opportunity to speak to all of you, and appreciate your taking time out of your busy schedule — as Scott said – to come and listen to our presentation. So just to reiterate what Scott said briefly, Razor 360 is a purpose built e-business agency. E-business and e-commerce is our sole focus, and we look at e-business as an entire holistic offering — so, everything from strategy to digital design and marketing to the underlying technology with folks like Magento, and on to fulfillment and customer care –so that our clients can basically put all the pieces in place to be successful. And, just again briefly, we were built by a proven management team.
Razor was founded in 2003 as a traditional marketing agency, and then we saw a need in the market for this sort of end-to-end e-business offering. So Razor 360 was created specifically for that purpose, and as we evolved we’ve really been helping folks like you – small, medium businesses who are trying to get online or extend their e-commerce offerings – to be successful in this ever evolving e-business landscape.
One thing that we do is we hire very experienced professionals with specialized competency and very deep industry knowledge, so that when we come in we can speak the business language and get right to the point, and help you succeed and kind of jump-start your competition.
So, since we’re talking about what makes for a mature e-business and how you’re going to evolve into a mature e-business, I think it’s good to take just a couple of minutes and say what does that look like? When we’re out talking to clients and we’re dealing with this industry, we tend to see some patterns repeated, and we’ll talk about some of those today.
What we do see is a sort of a typical internal e-commerce group that maybe started as a side project and it’s grown and evolved over time, but we see a lot of folks with silos in the organization, and this is reflected in their e-commerce presence.
There’s some expertise in house. But again, people kind of learn by burning their hands on the stove and we want to avoid that as much as possible. And what we want to move to is a mature e-commerce channel that really has all the pieces in place for success.
One model that we use with clients when we’re talking about an operational view of e-commerce is this picture here where we have all the components in place. And we help through centralized account management, and our own domain expertise, to make sure everything’s aligned, and then we can measure performance across all of these areas.
So we’ll repeat this, in addition to a good governance model and a good staffing model, we’re going to look at these slices of the pie, so to speak, from digital marketing and merchandising to your underlying technology platform to how you fulfill products and fulfill your grand promise to delivering on what you’re selling online, and then your customer care and follow-up.
What’s key here is that you have a clear vision, clear measurable business objectives, and then you measure that through your analytics and your metrics across all of these areas so you have a whole picture of what’s going well, what’s not going well, over time, and therefore you can make adjustments in real time.
So just a quick review, why we’re all here today, and the importance of the online channel. And I won’t spend a lot of time on this, I think most of us know this, but you know in 2007, eMarketer estimated that online research alone drives in-store sales even more than it generates online sales. So the Internet generates almost $3.50 in store sales for every $1 it generates in online sales.
Now, does this hold in every area? Probably not, but what we see is that it’s not about cannibalizing other channels, it’s about actually driving traffic to them as well as making sales online. So whether your purpose in going online is to drive traffic to your partners, to your own retail stores, to sell online, or some combination of that, we think you can be successful, again, with products like Magento and some expertise.
So let’s get to the seven tips. What you’ll see is I kind of wrote these as, they’re almost like something you’d see in a fortune cookie perhaps, but we’ll explain what I mean by each of these.
So the first tip is: One weak link breaks the chain. And what I mean by that is you need to consider e-commerce holistically, because if you fail in any one area, basically the whole thing goes down. So one thing that we, as a technology partner with some of our clients, we tend to get approached from a technology perspective a lot, but what we try to help clients do is look at the overall online channel in terms of a framework with all the pieces in place and how they relate to one another.
And so you’ll see, in these six areas, we work with our clients every time regardless of how they come to us, whether it’s a strategy issue, a technology issue, maybe a merchandising issue, and say let’s make sure these things are aligned and accounted for and measured.
So I wanted to start with a scenario here that we see, and this is a composite of several clients we’ve been working with recently. And again, we’re seeing more manufacturers moving online as they consider maybe extending out from their traditional relationship with their retail partners to get direct relationships with their own consumers.
So if we have a manufacturer who’s selling to retail partners such as department stores, they want to build a direct consumer online channel. They have a good graph of their own brand and its core attributes, of their core customer segment that they’re targeting, and they have a long history of product innovation, but again, all their operations are geared to supporting their partners.
So what we’ll see is if you look at it holistically, there’s several things they have to decide as they go online. What’s my governance model? What we see a lot is people go kind of this consensus-building route because there is no existing e-commerce function, there’s no clear ownership established.
So they have to decide, are we going to all get together and kind of run this as a committee, or are we going to centralize ownership where somebody’s really driving the goal?
In terms of marketing/merchandising, are we going to put a sample of our products online and kind of test the waters, or as a manufacturer am I going to go out with my full catalogue, and what does that mean in terms of operations, the work involved to do that?
In terms of an e-commerce platform, there’s a lot of options these days, and so a lot of people are looking at this saying, do I go low-cost, and kind of try it out again and build over time, or do I get a feature-rich solution?
And then in terms of fulfillment and customer care, again, a lot of people already have warehouses, distribution centers, and such, but they may not be oriented towards a consumer model. So again, are you going to leverage existing assets and just build on those, or are you going to go all out and deliver on your brand promise in a way that replicates the in-store experience otherwise?
Well, one thing you can do is, you’re looking holistically across all these areas of your business, is I use set goals and make statements to put stakes in the ground that will help drive these decisions. So if our goal as a nationally recognized manufacturer is to build upon your strong brand equity, then that answers some of these questions and then things can fall out from that point.
So in terms of governance, you’re going to want to provide a consistent brand-appropriate customer experience in this channel and across all your channels. So again, this gets us away from the idea of I just need to get on par with my competition to say well, what’s my brand, and how am I going to represent that online?
In terms of marketing and merchandising, you’re going to want to showcase the breadth of your catalogue, again because you’re the manufacturer. That’s what your customers will expect from you. If you show only a portion of what’s online, you can’t really represent your brand to your customer base.
E-commerce platform, again, you want to emulate your brand or store experience online and get away from just dipping your toe in the water, which is what we see a lot of the time.
And then again, in terms of fulfillment, order management, and customer care, you want to pay attention to the details. Do you have high-quality branded packaging in place? Do you have knowledgeable and friendly CSRs instead of giving people a menu and expecting them to answer the phone just Monday through Friday during regular office hours?
So I think the key here that helps, it helps me at least, is to think of your channel holistically, you need to think of it from the perspective of your customers, because your brand is really like a persona to them, it’s a personality, and they expect that to be consistent across every interaction with your company.
So whether they’re on your website, they’re in a retail store, they receive a package from you that’s been shipped out of your distribution center, or they call one of your call centers, they should have that same experience. And it’s not just that you want a positive experience, you want it to be consistent so they can rely on it.
And again, if you know who they are in one channel online, you should know who they are when they call. So all those things are important so that you send the right message and you don’t have a breakdown in your overall value chain when you go online.
So if you’re going to do this holistic approach and have this value chain built out and hold strong, how do you get there? You’ve never done this before. Well, the unasked question is never answered. If you don’t know what to ask, you’re going to miss something. So the second tip I would say is to hire some e-commerce expertise.
If we have that same scenario with this manufacturer going online and we look at their typical scenario, what you’ll find is there’s going to be a loosely defined governance model. Again, we don’t have an existing VP of e-commerce, so somebody’s going to maybe step forward with the idea, and then they’re going to get it all together.
In terms of marketing and merchandising, you maybe have a small department because you’ve never done direct-to-consumer before, maybe you’re supporting your retail partners with collateral and some advertising and such, but what you really need to look at is how do I get the expertise in-house? Do I hire or do I outsource them?
In terms of the e-commerce platform, you probably don’t have one at this point, and then in terms of fulfillment, you may have a large distribution center or a series of warehouses, they’re supplying your retail partners, they’re dealing with pallets and truckloads of SKUs, not individual shipments.
Customer care, again, we deal with people that have maybe two to three reps who handle incoming calls from business partners or merchandisers not the end consumer, and they tend to keep traditional office hours.
What happens in this scenario is you have maybe sales and marketing driven by the online sales potential, they see dollar signs, whereas operations has its own goal to resolve an excess capacity issue and put people back to work and really run efficiently.
IT is focused solely on technology and perhaps the integration points into ERP systems and the like. And the CFO is, again, asking for numbers, how does this pan out?
So in our model here, what we see, again, is a scenario where someone’s assigned the project to herd the cats from all these different areas but there’s really no authority. Even on a team, and I want to focus on this, on, say, marketing and merchandising, the folks that are tasked with running this website, it’s probably their third or fourth job.
They’ve already got a day job, now this is thrown on the heap, and they’re worried about, oh my god, I’ve got all this new content to create, what am I going to do with photography and the content, while the VP of marketing is looking at dollar signs and wants to go with the whole catalogue. So even within certain departments you may have some conflicting goals and objectives.
In this kind of situation, there are two things that an expert is going to look at, if you hire somebody like Razor360 or another consultancy. We’re going to come in and look for two things right off the bat. One is, “Do you have clear ownership?” And second, “Do you have clear objectives?” Because everything flows from those.
So if you have a situation like I described, and we see this all the time, where a company new to e-commerce, sort of, gets everybody in a room and says, “We’re going to do this.” We’re going to want to say, “Who really owns us in the end? In the end, who’s going to make the decision? Who’s the single point of contact?”
Because otherwise we spend endless weeks gathering buy-ins, and what that means is delay, and you’re slow to market. Falling out in this ownership issue is disparaging objectives. If you’re trying solve internal problems with your online channels, the one thing to keep in mind, again, is flip it around and think of it from your customer’s side. And think of it from your overall business objectives and say, “What can we do to align ourselves, and clearly articulate the objectives, so that we’re all on the same panel?”
So what do you do then in terms of getting expertise? There are a couple areas where it makes sense to hire or perhaps hire and then supplement that hire with an agency like a Razor360. So you would do this in terms of your overall governance, “Who owns the channel?” I would say that one thing you would look at is borrow, steal, beg somebody else for an e-commerce executive who can own this channel and who has done it before.
Now we can often play this role by proxy for some of our clients, but they’re still going to want internal ownership over this, so that they, as a company, own the objectives and the overall approach–and how it fits with the evolving company strategy as a whole.
In terms of marketing and merchandising, again, because this is close to your core offering and your own products and solutions and online–what you’re going to put online.
You might look at one or two internal hires, again, with experience, to manage your agencies as such, until you decide whether you are going to bring all this in-house. Now, this is very important, especially as you get into things like SEO and SEM and dealing with some of the other aspects which are not like other parts of marketing in your organization.
Where you can leverage consulting partners, is when you need things to come in and do an analysis. And again, decide, “Am I going to do this myself or am I not?” So this is ideal in terms of your platform, what you’re going to use to build on, for your channel. Firms like Razor360 can come in and quickly assess what’s right for you, given your environment, your technology environment, your processes in place, and all your personnel.
And the same thing happens for somebody with customer care, we have expertise in these areas. You want to find a partner who can come in and do a GAP analysis and do some road mapping and decide, “Is outsourcing the right option? Who do I need to hire? How many people do I need to hire? What systems do I need in place?”
So we talked about taking that holistic view and getting expertise in place but once you’ve done that and you’ve kind of mapped things are and you know where you are and where you’re trying to go, it may make sense to outsource certain things.
What do you look for when you are looking to outsource parts of your business? Again, you don’t want to bite off too much all at once, you don’t have a lot of base lines to go on, so where would we look? And just to cut to the chase, I think what we would typically say, is that if you’re going to outsource, you’re going to look at things that defers to the ways from your core competencies and your focus.
So this would be things like fulfillment and customer care. You can outsource in terms of your governance and in terms of, again, maybe your strategy and consult with folks, agencies that specializes in e-business. You can also outsource your marketing merchandising, or parts of it.
So one thing we typically do with our clients, is we do ongoing digital marketing services and help to manage email campaigns, and perhaps help with search engine optimization, because those resources are hard to find, they’re expensive, and they’re not needed all of the time.
But as a new business going online, or if you’re trying to expand your footprint online, typically fulfillment and customer care is where you’re going to look to outsource. And there’s two reasons for this. One is it eliminates a large potential capital investment up front, with equipment, fixtures and headcount, when you don’t really know your own volumes at your business. And going with industry baselines doesn’t necessarily tell you everything you need to know.
If you outsource, and we sometimes see our clients maybe do this in say, a year or maybe two years, what it does is it lets you go ahead and establish a baseline. See what happens over time, see your traffic ramp up, and the demand, and you’re only paying for what you need. And then you can say, “Well, at this point, I understand enough, that I feel positioned–I’m going to bring that back in-house because it makes sense from a cost perspective, and I can better own the experience.”
So I want to walk-through a little checklist we would have, and again, this is some sample questions we would have and a checklist we would walk in, and again, instead of white boarding with everybody and saying, “What do you want to do online?”
Given our expertise, when we come in and evaluate people’s fulfillment and customer care options, and we’re looking at whether they’re going to handle this themselves or outsource it to somebody like us or any other partner, we want to walk through and say, “Can you confirm that these things are true in your company, with an understanding of your own costs and your own structure?”
So for example, when you’re looking at order processing, can you handle single piece consumer orders? Do you have consumer brand-friendly packaging? Can you ship within 24 hours? Again with consumer orders, and, can you split orders to multiple addresses and handle things like gifting options? And very important here, is that you know your fully-loaded cost. You can’t go on cost estimates that are based on some other kind of shipping or freight. You need to do it from a consumer basis.
Again, in terms of shipping, we have another checklist, do you already have accounts set-up with Fed-Ex and UPS and the carriers? Do you have any idea of what your default shipping is? And one very important thing is, Are you going to look at shipping and handling as a source of revenue?
We see a lot of clients that think that they can do this, but when you look at the competitive landscape in their industry, free shipping or flat rate shipping, where people are basically using this as an incentive to buy, doesn’t provide a lot of revenues.
So if your CEO is stuck on this, you’re going to want to look at this carefully and say, can we really do that? And then make sure, again, that you understand what the competitive landscape is, in terms of shipping, and how that impacts your customer’s expectations.
In terms of inventory and processing returns, again, can you say confidently that you have your own separate inventory, that you can track it electronically, and in your distribution centers? What you don’t want to do is beg, borrow, and steal products from your other retail partners or your own stores and somehow think you can cover it.
You really need a plan that has its own store and it’s own inventory, and you need a clear approach and method for handling things like “out of stock” scenarios, and merchandise the store like you would any other.
For manufacturers again, it’s very important that you have a clear idea of, are you going to show your entire product catalogue? And if you do so, how is that inventory going to be sold? Are you going to sell part of your inventory online? Are you going to handle all of it? Are you going to push certain categories of products to your partners? Maybe have drop-shipping available?
Same thing with processing returns, can you process single item consumer returns? Do you have a clear method and have you trained your personnel on how to process returned products? Including things that might be damaged, and, do you send them to your outlet store? And again, it’s very important to know your fully-loaded cost to process each return, so you can check your profitability when you’re making these decisions on whether to outsource or not.
To the customer care again, do you have adequate systems in place? Do you have adequate staffing in place? Can you account for holiday spikes and overflow? Do you have extended hours of operation available? And again, are you going to be open six days a week, seven days a week? Nine to five, or are you going to account for the whole North American operation? Do you have appropriate systems in place to track customer issues as they come into the call center? And so you can track them to completion and really understand your customer’s results over time.
It’s very important that you have an idea of what’s appropriate to your business in terms of phones, support, email support and live chat. As we go through–over time, things like chat are becoming more and more the norm instead of an expected sort of luxury.
All right so we’ve talked about holistic understanding of the value chain, asking the right questions, perhaps deciding what you’re going to outsource versus keep in-house. Now if you look at your own site, we would say, “Position your site as part of an eco-system.” We often get clients who are very focused on their own website and how branded it is because they control that environment, and that’s very important.
But of course you need to also master the web as a whole. And how customers increasingly are taking ownership of their own experience online, they’re talking to each other.
You need to be part of that conversation outside of your own website and have an understanding, again, through some expertise, of how each of these components, whether it’s video, networking sites like Facebook and MySpace, blogs, customer product review sites, how all these things impact your customer’s ongoing view of your brand, how they interact with your website, how that impacts how they shop and buy products, and then get support.
Increasingly you cannot control these things, so much as participate in the discussion. And again we would encourage you to get expertise in house or through a partner that allows you to understand how this all plays together, especially for your types of consumers in your space.
Just to illustrate this, and I won’t spend a lot of time on this slide, but again, the overall purchase process, you can’t just track this on your own website. You need to understand that when people come to your site they’ve already had experiences with your brand, they perhaps used their phone, they’ve been to retail outlets, they’ve talked to other people online. And they’re going to have an impression of your brand over all these different touch points.
They may come in and visit your site. You may understand a little bit about them and then later on that gives you the ability to do things like spur them to action by sending them an email offer, some special promotion. But again, how are you able to track all of this?
Increasingly again we see things like picking up products in your stores instead of having shipping, as well as returning goods and products to your stores, having things like kiosks.
And so as you build out your capabilities over time and you road map your online channels, you need to keep all of these things in mind and begin to track them and come to understand your consumer’s behavior both on your site and in other touch points.
One thing we do see again from customers is a tendency to, without a clear strategy up front, you’ve never done this before, you go look and compare yourself to other people. And we all do this since it’s an easy way to frame where we are in comparison to other folks.
But because everyone else is doing something online is not really a strategy. What we would say is map everything you’re doing to a well defined objective.
So again, we have a little different scenario here. And this is based on some frequent client visits where somebody will come in, they’re meeting with us for the first time, they want to share their excitement about the channel. And what they come armed with is not a business strategy so much as a list of site requirements or features.
So we’ll meet a CMO and he’ll come in and he’s all excited because he saw some new kind of rollover or quick view on somebody else’s site, or maybe a 360 spinning product view on somebody else’s page. He loves ratings and reviews and he wants color swatches, and it’s just an endless list or features.
Now there’s nothing wrong with these features, and in fact you’ll see them on many sites that we build as well. But when somebody comes in and shows me their feature list and says, “What else do we need?” we’re going to reframe that question because “What features should my site have?” ends up with the same unhelpful answer which is, “That depends.”
So instead of asking yourself what features you need from the get go, we need to start with what’s the purpose of your site and what are your objectives online. Are you generating direct sales? Are you driving traffic to your partner sites? Are you trying to get qualified sales leads or get people to sign up for newsletters? Are you lowering your support costs?
And again, you may have some combination of all of these. But once you set that purpose and set your objectives, then you go to strategies and tactics and feature lists. And based on that, then you say, “OK, if I’m trying to drive sales, what does that look like? What are my measures of success? How do know when I’m done and I’m successful? And then how do I measure progress over time?”
I don’t want to spend a lot of time on this and I’ll point to this book. There’s many like it so I just picked this one I use frequently called “Actionable Web Analytics.” And it’s a simple process whereby you’re going to build a data driven culture for your web presence.
Again, you don’t want to have the big dog syndrome where whoever has the highest title in the room is making decisions about design-because they love green, our site is going to be green. Or because somebody complained to them last week about the way the product was shown, now you have a new initiative on your list.
Instead we want to do this all through data and finding key indices of success. Not too many but again, look at revenue indices like ROI, look at cost indices like cost per acquisition. Start with the basics, piggyback on your other management reporting cycles and keep it simple.
This also allows you to get executive buy in because there’s nothing executives understand more than ROI and figures. So if you can tie what you’re doing online to this it helps everybody.
But the trick is not to just identify indices, it’s to benchmark what you’re doing in measure. And the wonderful thing about tools like Magento and other online tools is you can actually track what’s happening over time, down to the specific customer level and the segment level.
So you want to measure all marketing initiatives to the extent you can, whether that’s email, pay per click, affiliate programs and social media, and decide what’s the payoff there. Same thing online, you want to have an analytics package in place where you can measure online sales, your sales funnels, lead generation or whatever else that you’re tracking, and say how successful is that.
And then when your budget cycle comes around you can look at your base lines, look at your performance and see where your money is best spent, and change the marketing mix accordingly.
And like with anything else you want to rinse and repeat. You want to build this into a cycle that you get into and where it’s a habit to go to the data for decisions.
The one thing I would say here that’s key is letter D there. You want to tie performance reviews to metrics. If you have any commerce team, everybody should be tied to metrics and how their job directly impacts the bottom line, whether that’s generating revenue or saving costs or building your brand.
Here’s a little simple metric configuration we do with clients that are just starting out to emphasize that you want to keep it simple again, but you can have a dramatic impact on your business if you really look at these numbers.
So traffic volume times conversion rate times average order value. Any increase in any of these areas can have a real big impact on your bottom line. And I would kind of start from the top and go down.
So when you first launch an e-commerce presence or you’re really going out there again aggressively with a remade channel, you want to focus on driving as much traffic as possible to this new website and to your site in general.
There are many ways to this. Again, you focus on natural search, affiliate marketing programs and email. But the thing is, without foot traffic, just like any other store, you’re not going to get sales. Once you get people there you’re going to focus on conversion rate which is the ratio of visitors to buyers.
We’ve been recently working with clients. In the industry the typical conversion rates are around two percent. That may sound low, but again if you’re going to be dealing with millions of visits per month, that adds up very quickly.
Well we’ve seen those even in a lower economy last year where people weren’t necessarily going online as much. Some of these folks in this space raised their conversion rate from two percent to four percent, and while that doesn’t sound like a lot, that’s actually 100 percent improvement.
And so they showed year over year growth even in a tough economy online by really focusing on removing any impediments to conversion on their website, whether that’s simplifying the checkout process, whether that’s putting the right product in place in using better personalization and merchandising. By focusing on that area alone they really raised the bar.
Average order value is also important because you want to maximize each trip, have as much in the cart as possible. And you see this when you’re successful at average order value, often this means that you have returning loyal customers. They tend to buy more and they tend to buy larger ticket items than newbies.
Some other KVIs, and again, I won’t go through this too much, but look at your purchase funnel dissection. Any kind of funnel where you have an end goal defined and you have say a four or eight step process, you want to know where people are dropping out of that process so you can really identify and hone in on any kind of leakage on your site and fix that immediately.
This also helps if you’re tracking it over time so you know is this a historical issue or is this something I’ve introduced within my latest release.
Step number six, it’s like any other store but on steroids. What do we mean by this? Over and over again we see people who want to dip their toe in the water, but you must be fully committed to e-commerce. And you can learn from how people go to business in their brick and mortar stores, by looking at your e-commerce store.
Just like any other store, you want to have a clear work structure, that’s managed by standard KPI. Any terms managed on terms of how success product mix I have in here, how much is walking out the door each day in terms of sales. It’s real numbers driven, and you want the same thing online.
Again with inventory, you want dedicated inventory that’s dedicated to this store. You want to be fully stocked. And you want to reflect seasonality, so your store looks like it’s being active managed, and it’s appropriate. You want full coverage in each department.
Again, if your store has all kinds of categories, you want people who are experts in those categories. Merchandising it, staffing it, and answering questions that come in. You want to carefully plan your merchandising, you want to highlight the most profitable products, and you want your merchandising design to maximize that cart value, again. All your marketing efforts online, just like any other store, should be focused on driving traffic to the store.
However, of course there are aspects to the online channel that are really different, that you can leverage to your benefit. So we want to focus here on the virtual store, where can you can be everywhere as long as someone has access to a device, and has the bandwidth.
You’re open all the time. You tend to have less of restriction problem. So again, when I go to the mall sometimes I try to buy a pair of shoes, they’re not they, they don’t have my size. They get a call, I’ve got to drive somewhere else. What generally happens is someone going to go onto the site now, and see if they can get it right then. Again, they’re going to want the same price or better.
But you can have also, a broader selection. So again we talked about this with manufacturers. Instead of a store where you have a very limit range because you have limited shelf space, here you can offer things for the big and tall fellow. He can’t find it in a store, but you’re not limited by the same constrictions as a physical store.
Another important thing is a physical store is limited, and it’s fixed in terms of its layout and it’s offering for each customer that walks in. Your store can be more dynamic than that, and you can actually configure the store, and the tonality, and the offers to each person coming ion using personalization with a tool like Magento.
The key take-aways here is that your online store is likely to become your largest store, and in fact it may generate as much revenue as several stores put together. So it needs to be treated with that respect, and that attention. Just like you wouldn’t build up half of a retail store, or dip your toe in the water by hanging up clothes in half of the store, and there are keeps in the other part of the store.
You need to build up a channel all the way down, and figure out all the nice detail, where the lighting is, what’s upfront, what’s by the cash register. If you a success, you’re going to build the online channel with that attention to detail, and you are going to do it all the way down. This is not a hobby or a side business, and it’s can’t be your employees’ night job, or something they do in their spare time.
Just like any other business e-business is driven by good business practices. It’s the same thing that we would emphasize in any other channel. Anything you do, any initiative, any program, any tool set needs to pay for itself by lowering cost, building brands, generating revenue. Because this is really business that you’re doing, you need to measure performance against clear objectives.
You need to focus relentlessly on your customers, understand them better, meet what they expect and what they need. Adjust you spin, and your mix, in terms of marketing, for optimum results. And as always, hire the right people for the job.
OK. So we came here, it’s a Magento webinar. You’ve been trough all of this, and you’ve asked yourself all the right questions. You’ve identified where you are, what you need to do. Where do you get started, what kind of platform do you do?
Well again, we looked at this before. Do I go low cost? Do I get a feature-rich solution? Well, we think that’s a trick question. With Magento you can avoid e-commerce growing pains. With a tool like Magento, especially Magento enterprise, which is ideal for clients small, medium or branching out onto a new platform. Because it is both low cost and feature-rich.
The average deployment cost, for even Magento Enterprise with all that support, is only about $11,000. Or course the community edition is free. However your not paying for some low-rent tool, the is a very robust tool with all the bells and whistles.
The other thing we like about Magento, with clients that are getting started, we can kind of leapfrog several stages we would normally go through if this was more of a costume solution. Deployment of Magento typically involves configuration, much of which can be handled by business users instead of IT.
So there’s less of an emphasis on code development, or a lot of excessive customization. It’s got a lot of things built in that you need. You can still make it fit your company, you can skin the site to look just like your brand, but it’s got all those things kind of baked in.
The other nice thing is it has multi-site and multi-catalog capability with a single license. So you can make yourself look very big, you can serve all kinds of audiences. You can even have different languages available online, all for a low cost.
The other beautiful thing, Scott mentioned this at the beginning of the presentation, is that Magento Connect has a very large community of other practitioners, other people using Magento. It offers thousands of extensions, at free or very low cost.
We see, for our own clients, and for our own use, you can get thing for under $200 that are very good in terms of rich imagery, aligning with media integration points, all kind of functions and features that you can plug in and work from day one. Again, you’re not doing a lot of coding yourself.
The other nice thing, because it is open source, when you do need development resources, they are readily available, and very affordable. You’re not dealing with a proprietary platform here.
So we talked about low cost, it’s also feature rich. The one thing we’re really excited about at RAZOR 360 is some of thing new things that were announced recently with Magento Enterprise, in terms of the rich merchandising suites. Basically, all the business that are getting started need, and beyond, to merchandise effectively and personalize content.
Give people promotions and coupons that are going to drive, again, that conversion rate, and the average order value. Enhanced content management really plugged a hole there, and we think now with content staging, content merging, you’ve got rollback conversion capabilities. You can manage non-cataloged products much more easily. This is a very well-rounded solution.
Again, private sales, restricted catalogs, all the kind of gift and promotion things you would want. Rich connect is another exciting new module we’re very happy with in terms of integration with back end, ERP, and accounting systems. That’s all offered to you there, as part of your package. Again, this very nice to use GUI administrative interface. Plus all the roles and permission you need to keep people out of where they don’t need to be, and all the reporting you would need.
So when we’re looking at advising clients in terms of “What is the best solution for you?” we get a lot of folks who are investigating things like revenue share, or traditional licensed software. The problem with something like revenue share is it’s really only ideal when you’re getting started out, of if you don’t have a big growth curve with you channel.
So if you’re a smaller company, you want to get there at a very low investment and see how it goes, this might be an option. But again, what we hear is as clients grow rapidly, and they become successful online, it really shackles them in terms of their lack of control, escalating cost, and they’re tied into the long term contracts. Plus the platform is very difficult to customize.
Traditional licensed software is a good option, in that it has a lot of features, and abroad portfolio of additional applications like business intelligence. You can even modules that plug in that run your whole call center. Again, maybe you have a ton of spaghetti ware, and you have a high degree of customization that you need, these can be a good answer for you.
But again, there’s a little higher upfront cost, and sometimes they’re a little bit longer to develop. Because again, there’s all this customization involved.
What we like about Magento, Enterprise especially, is that companies seeking a robust, low cost platform, but still want all those bells and whistles, and a rich feature set. All that merchandising and content management, the simple integration points with their ERP systems. You can get up to speed very quickly, at a low cost, and low ongoing cost, and still enjoy all those benefits. Including the rich community, enterprise SLAs in terms of support, and again, a minimal IT footprint.
I blew that very quickly, I’m want to leave about 15 minutes for Q and A. I’ve got some other folks on the room with me, and Scott, I’ll turn it back over to you guys.
Scott Dahlgren: Hey great, Doug. Thank you very much, that was very interesting. So we’re moving into Q and A, and I’ve got some other folks here in the room with me, and, Scott, I’ll turn it back over to you guys.
Scott Dahlgren: Hey, great, Doug, thank you very much. That was very interesting. So, we’re moving into Q and A? For those who have a question, please enter it or submit it using the interface usually located on the right side of your screen. I’ve got a lot of questions that have come in already, so why don’t we get started. We have about 15 minutes left. So, I’ll try to direct these to the right people. I guess, let me start with one that has been asked a lot, which is just, “Is this going to be recorded and available?” The question…or the answer is, “Yes, it will be.” It will be on our site where we have recorded webinars. And you can also look at any other ones as well.
So, first question. I think it goes to you, Doug. Question is, “Is there some trigger indicator that means that it’s time to begin with social media?”
Doug Hollinger: A trigger indicator.
Scott Dahlgren: I guess, when’s the right timing? Yes, when’s the right timing when someone should be thinking about social media?
Doug Hollinger: Well, I think, again, what you want to look at is all the options available to you, and some people want to start with things like video, so you can kind of get, in terms of sharing expertise with your company. How do you use your product? How do you configure it? Things like this, where it’s really an extension of your support function. But, again, it depends on your industry. We’re dealing with clients, again, in certain industries where there’s very much a lifestyle component, whether it’s something like yoga, or hunting and fishing, or whatever, where people are very passionate about the activity that surrounds your product and your offering.
And that’s an ideal time to dive headfirst into social media, because people are all ready to share, and if nothing else, you can facilitate the sharing of ideas and listen in and get a lot of good ideas. And if you already have experts in your company, either at the store level, or in the region, or whatever, that’s a good way to start leveraging your expertise, because people respond to that, because you have value add to give.
I think where you start, though, is looking at the overall mix, look at what your assets are that you might share, and then, again, bring in an expert to sort of do a quick evaluation of matching your customer base and your overall e-commerce goals to the mix, because you don’t want to do everything at once, either.
What we do see is sometimes people read an article about blogging, or they read an article about Facebook and immediately you got a page, but what you don’t want to do is go out there and create something that looks too amateur or it’s not targeted at your audience, and then people ignore it.
So, again, I think just look for applets you already have available that are low-cost, that maybe, either expertise, or getting started slowly and build on that success and sort of see what the results are and then move forward. If you want to jumpstart it because you think you’ve got some real opportunities there, then, again, I’d find an expert partner to advise you on how to proceed.
Scott Dahlgren: OK, thanks, Doug. So, here’s another question that kind of taps into your experience, and it asks, “What usual conversion rates do you see for sports fashion wear?”
Doug Hollinger: That’s a good question. I think we’re going to see something, again, and it depends on the job people do, so it’s kind of a tricky question. I would say it’s going to be two, four, six, eight percent, somewhere in there. You know, the highest conversion rates in the industry are for specialized things like flowers, because people only go there to look at flowers when they’re ready to buy, because you have an anniversary, or it’s your mother-in-law’s birthday, or what have you. And so, people go there, and they convert.
If you have an ongoing site where people might come back and visit a lot, even a low conversion rate is not necessarily a bad thing if you’re getting them repeat visits so that they’re executing on your site. But, again, we’ve been dealing recently with some apparel companies, and I think we’re looking at what, Bob, like, five, six, eight percent, something like that?
Bob: Yes, it really varies a lot depending on the affinity that there is in the marketplace for the specific product or for what that product’s related to. So, in the sporting area, you may be able to get that conversion rate up higher if you can relate it back to some affinity group.
Doug Hollinger: Right.
Scott Dahlgren: OK. Let’s see, I think…go ahead, Doug.
Doug Hollinger: I’ve got Bob Farrier here with me, and he runs our delivery services, so he was helping me out with a couple answers here if you hear him pipe up.
Scott Dahlgren: OK. Let’s see, another question here. “What social media can one go to when marketing to healthcare professionals, not consumers?”
Doug Hollinger: Healthcare professionals. I don’t know that I have any direst experience with this in terms of that healthcare professional industry. I would say, again, look at where these people are. Where do they go for advice? Where do they go for peer support? Because, folks in that kind of specialized industry, they’re not going to take your word for it because you’re a manufacturer, or you’re some kind of TGB brand or whatever. They’re going to look for where the other healthcare providers are hanging out, so whether that’s LinkedIn, or…I don’t know what that would be, but again, you’re going to want to look for those opportunities. And maybe build some professional events that you can sponsor that then would lead into ongoing sharing of things like, “Here’s photos from the event.”
Things like webinars like this, where you can actually have experts talk are good ways to start in social media I would think with that kind of audience that’s more professional and kind of a closed community.
Scott Dahlgren: OK, great. Another one for you, Doug…question is, “Is it best to have a lot of products in a store or to segregate those into more targeted stores?”
Doug Hollinger: Well, again, you see different things, so for awhile, you notice somebody like Nike had basically a store or an offering for every kind of sport, because they felt like that was…the audience was fully segregated and wanted to look at all things football, for example. So, I think, again, you look at your segmentation and the kind of audiences you’re looking for, and what we would generally say is, “Is this something where you want people to see your whole offering because you think that there’s some affinity there?”
Perhaps you even do something like have a full offering and then you have another site that’s specialized by a certain affinity group like, again, people that do yoga, maybe they want to talk, and you can leverage some of your other content as well as your selling of certain yoga products.
But, again, this is something we would have to look at your own situation, what the norm is, and what the purpose would be for splitting that product out. Do we think we want to keep them from tripping over each other? Maybe we have some brand crossover issues here, or do we want people to see the breadth of our offering? So, this might depend on whether you’re a retailer, whether you’re a manufacturer, and again, what kind of users we’re talking about.
Scott Dahlgren: Great. Another question for you, Doug. A lot of questions really coming in that are interested in, I think, the purpose for this presentation, which was, “How do we evolve and mature your e-business strategy?” So, here’s a good one. “How do you get the business leaders off the idea of, “Neat feature I saw, ” and on to something more holistic? How do I avoid the “whiz-bang’ feature factor and get them focused on the big picture?”
Doug Hollinger: Yes, that’s a very good question, and we try to harp on this a lot, because we see it all the time, and it’s very difficult sometimes to manage upstream here when someone’s got an idea in their head. I think the only way to do it is, again, to buy into that data-driven culture and start to collect metrics, and whether those metrics are sort of subjective in terms of you do some usability testing, you can show them some video of people actually using the site, whether you can show actual numbers in terms of we tried that, and we tried this, and here’s what happened.
One thing you can do, again, not necessarily at the feature level, but in terms of your merchandising and marketing, if you’re using AB testing or multivariate situations where you can show, “Hey, let’s go test these two things, ” or these three approaches, and see which one works.” Then you really have data and it’s hard to argue with it.
If you’re just going on gut or I don’t think that’s going to work, and you can’t tie it back to a strategy or objective, then it’s a losing battle. But, again, most people have limited spend, so what you want to do is to be able to build up models where you can say, “This is why I’m doing this.” If you can’t articulate why you’re going to add a feature to your site, except that it’s cool or your competitors have it, then you need to say, “Wait, what objective am I going for here?”
So that if I do implement this, Mr. CEO, I can actually go back and prove the ROI on this case. And then, in the future again, it gives you more ammunition, if you can talk in terms of data and objectives, to go and drive that conversation more, because you can prove out, this did or did not work and we have the numbers to show it.
Scott Dahlgren: Excellent. Next question. I think I’m going to pose to you, Chris, Chris Marshall. The question is how difficult is it to add a mobile site of Magento, if you already have a Magento website running?
Chris Marshall: It’s quite easy. We have our mobile-ready theme available on Magento Connect, which is our extension marketplace there. That’s one of our, I believe, 1400 extensions available now. And you can actually set that up to either use the exact same catalog, so categories and the products that are available on your main site. Or you can set it up as its own website in Magento and can have a separate category structure, perhaps a more limited selection of products, that are more tailored to the mobile customer, the customer browsing on a mobile device. It’s quite easy. That extension’s available and again also providing that flexibility in how you set it up.
Scott Dahlgren: Thanks, Chris. Question here for you, Doug. What’s the best way to increase conversion rates, lower prices, better offer, something else?
Doug Hollinger: Again, that depends. There’s several things to look at. Obviously, to your point, you’ve got to look at your pricing. You could look at what products are you getting front and center? So are you doing a good job with sort of personalizing products to the right segments? And, again, this implies that you are tracking and segmenting your customers and you are trying different offers. So this is again why we would suggest you do something like A/B or multi-variant testing, so you can see which thing works best.
You can also try, a lot of people put barriers to the check out process. Do you offer guest check out? Do you do things like one page check out? And at least look at the possibility of it, so you’re not having people… As much as you can remove anything that would give them the excuse to stop, or it takes too long, or they think they’re giving you too much information, or they, frankly, just don’t know how long this is going to take, I think you want to remove all those obstacles.
So, again, focus on your promotions, focus your campaigns. You might experiment with things like free shipping, if that’s a standard thing that your customers expect, but then you’re charging $14 shipping and handling for a little widget. That’s going to hurt you, so you’ve got to be aware of what your environment is, in terms of your competition.
And then, you’ve got to remove any kinds of complications, in terms of poor wording, poor visuals, things that break, when you upload a new code set, whatever it is. And really focus again on that conversion funnel and look at where you’re dropping people, because that’s usually the page where you’re having issues.
Then do testing over time and make sure you know what your base lines are. Then, again, you can make incremental changes over time, as you get to know your customers, and you get more familiar with how to do campaigns and promotions.
Scott Dahlgren: OK. Doug, question is what advice can you give for merging a social engine like Elve with Magento to create a social shopping experience?
Doug Hollinger: Well, I don’t really know how to answer that question. I’d have to think about that actually and get back to you.
Scott Dahlgren: OK.
Doug Hollinger: Do you have any advice there, Paul?
Paul: I would say it sounds like a pretty big project to discuss on a conference call, but it sounds pretty interesting, though.