There are moves that I’ve watched senior eCommerce leaders make again and again, and they always miss the mark.
This content was originally published in the No Best Practices newsletter on 9.20.2022.
There are moves that I’ve watched senior eCommerce leaders make again and again. The desired results almost never materialize. In fact, these decisions usually leave a struggling or vulnerable business in even worse shape.
And yet…I see these decisions made repeatedly, with conviction. If you have an understanding of consumer behavior and customer lifecycle dynamics, you will immediately understand why these strategies will never work.
To save you some future heartache, I’ve outlined five common eCommerce strategies that will almost always fail, and why.
Not Taking Control Of The Full Funnel
Believe it or not, some eCom professionals still don’t manage their business in terms of acquisition and retention. Instead, they set traffic goals for each marketing channel with assumed conversion rates. Will that traffic yield new or returning customers? Doesn’t matter as long as we hit ROAS!
What’s wrong with this approach? It makes managing the business and hitting sales targets a lot more opaque and risky. And that leads to stress and a lack of clear priorities, which all too often leads to unprofessional behavior.
Your sales on any given day are coming from one of two places: new customers or returning customers. You can study historical data and use some observations on consumer behavior to predict your returning customers’ likelihood to buy during a given period. Acquisition then needs to make up for the rest.
Even if you choose to ignore customer behavior and manage the business at the channel level, channels are still full of customers! If you don’t understand the levers for improving retention, or for pushing new demand into the business, you’ll eventually reach a strategic dead end.
Drastically Changing The Product Assortment To Drive Growth
This strategy comes in a few flavors. Maybe a certain product category is eliminated. Maybe prices are increased across the board. Maybe the brand brings in a new creative director and the style, fit or formulation of the product changes.
These seem like minor changes, but they will have two important impacts on demand:
- Existing customers who liked or depended on the old product, formula or price point will stop coming back, reducing demand from retention.
- The changes may no longer appeal to the existing target audience, making acquisition efforts less efficient unless the strategy is adjusted.
Unfortunately, when leaders make changes to the product assortment, it’s usually in an attempt to jumpstart growth. The assumption is usually that existing customers will love the change, or their love for the brand is so strong that they’ll endure the change. This is rarely true.
There may be valid strategic reasons for changing the product assortment like this. But if you make that decision, you need to forecast sales down or forecast marketing spend up.
“But Alex! Luxury brands like Gucci are constantly repositioning themselves, and they’re doing great!”
That’s true, but global, heritage luxury brands have a few things going for them that the average consumer brand does not. And these brands spend a ton on marketing in the years after they rebrand. I’ll cover this topic in depth in a future post.
Skunking The Customer File
Typically, the periods where you do the most sales volume are the periods when your business will do the most customer acquisition. So if you consistently do most of your volume on clearance, what do you think will happen to the customer file?
The majority of today’s demand comes from two places: (1) customers you acquire today and (2) customers you acquired in the last six months, aka recent buyers. That means the actions you take today determine how hard or easy it will be to sell in the future.
If your growth strategy is “spend more when ROAS is higher”, your business will become increasingly tilted towards clearance shoppers. Promotions reduce friction in the path to purchase, so ROAS will always be higher when you’re on sale.
If you operate this way for a few years it will become nearly impossible to sell at full price to your retained customer base. To prevent this from happening, you need to plan more of your growth into full price periods and develop strategies for driving full price customer acquisition.
Using Software To Solve A Demand Problem
Repeat after me: software does not create demand. A Shopify app will not create demand. Reducing page load times will not create demand. Replatforming will not create demand.
What software can do is reduce friction and capture more conversions from demand that already exists. But if your business has an underlying customer acquisition or product issue, that boost will not go very far.
A big mistake that I’ve seen play out repeatedly: an eCommerce leader will insist, from day one, that all the business needs to jumpstart growth is “software X”. Conveniently, “software X” helped the leader get promoted at his or her last job.
“Software X” is implemented without any digging into the deeper context of the business’ current situation. And…the results are underwhelming. The leader’s credibility is undermined.
Another frequently observed train wreck: an eCommerce leader will spend most of their career at big, successful brands where software appears to be causing growth. He or she will top out in the bigco and take a more senior role at a smaller company. The leader’s one year plan will be to implement as much software as possible to “modernize” the smaller brand. But without a national retail footprint and millions of dollars in brand marketing, the strategy will flop.
Not Speaking Up When The Problem Is Outside Your Control
There are only a handful of reasons that an eCommerce business consistently misses expectations. It’s either a demand problem, a product problem, or expectations are out of line with the resources provided to achieve them.
If you are accountable for the eCommerce P&L, but you’re not directly owning marketing, merchandising or financial planning, I have bad news for you. You have stepped into a highly matrixed, cross-functional clusterfuck. In general, do yourself a favor and avoid this.
But maybe you do have ownership of one of these three areas, say marketing. And maybe merchandising is making product decisions that make your job harder. For example, drastically changing the product assortment in an attempt to drive growth (see above). It’s your responsibility to raise the issue and explain the financial implications:
“If we kill our best selling style, we’ll lose half of our retained customers. Our cost of acquisition will increase by 30%. And our marketing budget will only go half as far as it did last year.”
A lot of eCommerce leaders fail to have these conversations. They’re either under the mistaken assumption that they operate in a vacuum, or they don’t view self-advocacy as part of their job description.
Instead, they’ll push their team to work within the bounds of the (impossible) situation and throw tactic after tactic at the wall, praying that something sticks. This almost never works and your team will hate you for it.
Why Are These Mistakes Still So Popular?
There are no bad decisions…as long as you understand the likely outcomes of your decisions, and those outcomes align with your overall goal. Sometimes brands need a repositioning. Sometimes it is necessary to revitalize the product line. And sometimes, software can help accelerate growth.
The five strategies outlined here backfire when they’re aligned with the wrong goals. And I think the root cause of this is the “power” that digital analytics granted us over the past decade. Our analytics tools give us just enough information to be dangerous. They encourage surface level, short-term thinking and reward it with the instant gratification of the quick win.
The result is that professionals see a version of these five strategies executed successfully, either at a former employer or in the press. So they associate the strategy with “winning” but don’t understand the cause and effect relationships driving the outcome.
The mission of No Best Practices is to break us out of those patterns and encourage us to ask more questions. Hopefully you’ll avoid these missteps in the future.