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Number Crunching:
Dissecting Ecommerce ROI
Principal & Founder, Something Digital
Jon Klonsky
AGENDA
• What I’m Presenting & Why
• ROI Calculation
• Where to Invest
• Conclusion
01. What I’m Presenting & Why
Purpose
• Clarify ROI calculation for ecommerce marketing
• Dissect and Demystify opportunities and costs often overlooked...
Justification
Too many merchants incorrectly perceive ecommerce as a
relatively small investment of time/knowledge/money.
02. ROI Calculation
Traditional Formula
My Recommendation
Defined
Return on Investment of the Marketing Initiative
The Revenue “Lift” from the Initiative
Cost of the Marketing Init...
Common Mistakes
• Often miscalculated, overlooked, or substituted with
something else
• Many use GROSS REVENUE instead
• M...
Same Revenue, Same Spend
Revenue = $1,000,000
Marketing plans/spends $250,000
ROI = 300%??
0
20,000
40,000
60,000
80,000
1...
Clearly, One Business Looks Healthier
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
Month ...
Revenue
In ecommerce, only 3 elements matter in your
revenue planning/forecasting:
• Traffic
• Conversion Rate
• Average O...
03. Where To Invest
The Topic Is Legit
More than 80% of ecommerce businesses fail. Top
reason is “No Real Investment.”
(Roggio, Armando, 8 Rea...
Foundational
• The Build – Minimum Viable Product (MVP)
• Magento License – If you’re serious, use Enterprise!
• Hosting –...
Smart Marketing Allocation
Smart Money …
#1 - EMAIL MARKETING
(Especially effective if you do incorporate segmentation, personalization,
and mobile o...
Smart Money …
#2 – RETARGETING
• Focused on individuals who have come to your site, know your brand,
and want to return.
•...
Smart Money …
#3 - MOBILE
• Soon (if not already) more than half of your traffic will visit via a
non-desktop device.
• At...
Smart Money …
#4 - SEO
• A #1 spot for a search term used to mean 33% of the clicks
(Chitika Study, The Value of Google Re...
Smart Money …
#5 – Paid Search
• 62% of online marketers use paid keywords. No other form is
used by more than half.
(www....
Other Considerations
• Sacrifice ROIMI in exchange for solid acquisition
campaigns (CLV)
• Consider on-page investments in...
Measure
“Investing without research is like playing stud poker and
never looking at the cards.” —Peter Lynch (Mutual Fund ...
Measure Well, Measure Often
• Most of you are marketers and merchandisers, so unless you’re
the CEO/COO/CFO, your focus is...
04. Conclusion
WHAT I HOPE YOU TAKE AWAY
• ROI Calculation
• A Need to Invest in Order to Succeed
• Smart Money Investments
Principal & Founder, Something Digital
Jon Klonsky
THANK YOU
Number Crunching: Dissecting Ecommerce ROI (Imagine Commerce 2015)
Number Crunching: Dissecting Ecommerce ROI (Imagine Commerce 2015)
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Number Crunching: Dissecting Ecommerce ROI (Imagine Commerce 2015)

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ROI analysis’ provided by marketers are often based on inaccurate numbers such as gross revenue. This presentation will give an overview of how to dissect the digital marketing ROI while accounting for the other factors such as margin, shipping, tax, etc.

This session is less about calculators and more about trends and best practice. I will draw from experience with client data and anecdotes, and I’ve also done a little research to give myself a reality check.

Too many mistakes being committed by early-stage merchants and merchants who incorrectly perceive ecommerce as a smaller time/knowledge/financial investment.

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Number Crunching: Dissecting Ecommerce ROI (Imagine Commerce 2015)

  1. 1. Number Crunching: Dissecting Ecommerce ROI
  2. 2. Principal & Founder, Something Digital Jon Klonsky
  3. 3. AGENDA • What I’m Presenting & Why • ROI Calculation • Where to Invest • Conclusion
  4. 4. 01. What I’m Presenting & Why
  5. 5. Purpose • Clarify ROI calculation for ecommerce marketing • Dissect and Demystify opportunities and costs often overlooked by new or “emerging” merchants.
  6. 6. Justification Too many merchants incorrectly perceive ecommerce as a relatively small investment of time/knowledge/money.
  7. 7. 02. ROI Calculation
  8. 8. Traditional Formula
  9. 9. My Recommendation
  10. 10. Defined Return on Investment of the Marketing Initiative The Revenue “Lift” from the Initiative Cost of the Marketing Initiative Variable Costs
  11. 11. Common Mistakes • Often miscalculated, overlooked, or substituted with something else • Many use GROSS REVENUE instead • Must factor true costs (COGS or UNIT COSTS)
  12. 12. Same Revenue, Same Spend Revenue = $1,000,000 Marketing plans/spends $250,000 ROI = 300%?? 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 2 WIDGET COMPANIES DS Mktg Spend B Mktg Spend Revenue
  13. 13. Clearly, One Business Looks Healthier 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 2 WIDGET COMPANIES DS Gross Profit B Gross Profit Revenue
  14. 14. Revenue In ecommerce, only 3 elements matter in your revenue planning/forecasting: • Traffic • Conversion Rate • Average Order Value
  15. 15. 03. Where To Invest
  16. 16. The Topic Is Legit More than 80% of ecommerce businesses fail. Top reason is “No Real Investment.” (Roggio, Armando, 8 Reasons Why Ecommerce Businesses Fail, PracticalEcommerce.com, Nov. 7, 2014)
  17. 17. Foundational • The Build – Minimum Viable Product (MVP) • Magento License – If you’re serious, use Enterprise! • Hosting – Too important to cut a corner • Ongoing Tech Support – Are you a merchant or a tech company? • Merchandising and Retail Labor** – Don’t rely on the tech guy • New Features (set-aside budget) – Grow or perish
  18. 18. Smart Marketing Allocation
  19. 19. Smart Money … #1 - EMAIL MARKETING (Especially effective if you do incorporate segmentation, personalization, and mobile optimization.) • Email is the best channel for ROI (Econsultancy’s Email Marketing Industry Census 2014) • B2C campaigns have 2-12% CTR, B2B had 5-15% (2014 Email Marketing Metrics Report from MailerMailer) • Personalization of content enhanced its click rate. (MailerMailer)
  20. 20. Smart Money … #2 – RETARGETING • Focused on individuals who have come to your site, know your brand, and want to return. • They represent a higher conversion probability. • You only pay per click. • 92% of marketers say retargeting performs the same or better than paid search and 91% say it preforms as well or better than email. (AdRoll) (Abby Callard, Marketers Spend More on Retargeting, Internet Retailer, December 16, 2014).
  21. 21. Smart Money … #3 - MOBILE • Soon (if not already) more than half of your traffic will visit via a non-desktop device. • At Q4 2014, mobile conversion rate for smartphone shoppers on mobile-optimized sites was 160% higher than for non-optimized sites. (Bill Siwicki, Mobile Shoppers Convert 160% More Often on Sites Optimized for Smartphones, Internet Retailer, Oct 1, 2014) • Don’t forget about optimizing emails for mobile too.
  22. 22. Smart Money … #4 - SEO • A #1 spot for a search term used to mean 33% of the clicks (Chitika Study, The Value of Google Result Positioning, June 7, 2013) • Great brand + feel for content = smart investment. • Competitive market + content struggles = higher cost • We encourage focusing on branded terms (e.g., “Jon’s Car Wash” instead of “Car Wash”)
  23. 23. Smart Money … #5 – Paid Search • 62% of online marketers use paid keywords. No other form is used by more than half. (www.internetretailer.com/trends/marketing/paid-search-marketing-advertising) • 85% of respondents cited SEM as one of the top three best ways to attract customers—more than 2x any other channel.
  24. 24. Other Considerations • Sacrifice ROIMI in exchange for solid acquisition campaigns (CLV) • Consider on-page investments in checkout optimization, site search, merchandise assortment, etc. • Invest in proper A/B testing
  25. 25. Measure “Investing without research is like playing stud poker and never looking at the cards.” —Peter Lynch (Mutual Fund “Legend”)
  26. 26. Measure Well, Measure Often • Most of you are marketers and merchandisers, so unless you’re the CEO/COO/CFO, your focus is revenue. • TRAFFIC – CONVERSION RATE – AVERAGE ORDER VALUE • More Specifically: Traffic (unique v return) Time one site Traffic source Page views per visit Day part monitoring Page load times Sales Cart abandonment Active email registrants Competitive pricing Market share/Market opportunity
  27. 27. 04. Conclusion
  28. 28. WHAT I HOPE YOU TAKE AWAY • ROI Calculation • A Need to Invest in Order to Succeed • Smart Money Investments
  29. 29. Principal & Founder, Something Digital Jon Klonsky THANK YOU

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