Building Marketing Strategy for Online Businesses
FactsE-Commerce in India plays on the Inefficiencies in Offline Retail. A few examples: – Accessibility of Goods – Price of Goods – Payment Terms
Q. How to identify the right marketing budget for your online business?
The MathOffline Female Apparels StoreCost Head Expense Revenue HeadRental 600Sqft Shop INR 75,000 per month # Transactions/ Day 70Overhead Bills INR 20,000 per month Avg Cart Value INR 600Local Promotion INR 0 Total days working 26Salary Cost INR 50,000 per month Total Sales INR 10,92,000 per monthTotal Expenses INR 1.45 L per month Total Revenue @ 25% INR 2.73 L Per monthIf it takes 6 months for shop to reach 70 transactions per day run rate ??6 * 1.45L = 8.7 L amount is upfront investment and which will get recovered over next15 months to achieve breakeven
Q. How to convert marketing goals into measurable Metrics?
E-Commerce Marketing Team GoalsGoals Acquire First Time Customers from Paid Media to do transaction on site Breakeven on Cost of acquisition of customer within gross margin earned on sale driven Have higher ratio of Prepaid Customers Zero Cancellation or Order ReturnsMeasurable Metrics First Buyer to Repeat Transaction Ratio Gross Margin earned on each transaction % of Credit Card to COD Order driven Cancellation/Returns Ratio post call Centre Order Verification
Q. How to Identify Price Point for acquiring Customers?
FormulaLife time value of customer = Gross Revenue X # of repeat purchases customer will do over 12month period** = Cost to pay for acquisition of customerEg Branded ShoesMRP of Shoe = INR 2000Cost at which shoe sourced = INR 800Cost at which shoe being offered to customer = INR 1200Gross Revenue on shoe = INR 300Depending on depth of catalog, if average buys expected in 12 month period = 3As a retailer you should be comfortable paying Life time value of customer as cost ofcustomer acquisition** Period defined should be basis category and in analogy of offline business, howmuch time will it take for business to breakeven eg Fashion apparel case 1 buy percustomer in 6 months period means INR 150 cost per customer acquisition
Largest Online Electronic Retailer Case Study-Heavy discounting on Books as a category- Brand perception: Value Store- Customer experience and credibility established via non differentiated productLearnings Few Facts• Replicate need where entry barrier to acquire - 45% transactions now outsidecustomer is low but competition is scarce eg Test books categorypreparation books/literature book title keywords onsearch long tail - 60% of non books category transactions come from repeat• Use life time value to fund customer discount and customersremaining margin to acquire customers on pertransaction level than life time value on other channel - Not a price warrior in market
2nd Largest Fashion Retailer Case Study• Late entrant in the market (in a category) with 5 other well funded companies, took the approach ofbrand building but with performance goals• Spending on an average 1Cr Per month on Digital Media• Undertaken large TV advertising spends twice in the last 12 months for brand buildingLearnings• Created a Voucher Distribution CRM Program which enabled them to acquire prospective customer intheir CRM with a % cap to acquire information in DB on Life time value of customer• Over 6 months period using the CRM program they were able to bring down their CPT <50% andincrease scale by 3X• The traffic brought into to convert onsite for voucher bought high brand exposure and led to lowertransaction acquisition cost on search due to higher brand recall and volumes generated on brandkeywords• Abandoned footfalls for tracked and converted via re-targeting leads to further increase in scale vs.money spent