But will it scale?
In my direct experience, in addition to some very extensive research, there are 4 key focuses that will allow you to build a fully scalable e-commerce company. If you are missing one or more of these 4, you may be able to achieve some scale, but it will eventually end up in one or more disastrous outcomes (like treading water with growth, burning through CPA networks, blowing through your cash flow, etc). Finding a balance between these 4 areas is something that I like to call “Being a Sexy Nerd”.
The 4 key areas to focus on (in no order of importance) are:
- Business Optimization
- Marketing Optimization/ Performance Marketing
- Customer/Membership experience
The image below illustrates how achieving this balance will put you in the sweet spot to scale. Number’s 1 and 2 are the nerdy aspects (focusing more on math and optimization), and numbers 3 and 4 are the sexier, more artistic elements to building a large and successful e-commerce business:
This framework comes from my personal experience in the industry and is proven every time I examine a company out there or consult for someone else’s business. I previously built 3 companies that failed to hit this mix and therefore failed to scale and survive. The lessons from these experiences allowed my latest two companies to do exceptionally well in the marketplace ($500k crowdfunding campaign and Shark Tank Appearance for Coolbox and $10M in our first year withBeard Club).
My biggest passion has always been helping entrepreneurs, and so I started to document all of the things we did to finally get some success so I could share it. In doing this, I additionally started to research how other companies were doing this right and how others were doing it wrong. I also noticed that whenever any business lets one of the 4 slip out of strategic focus, they will always see a decline in growth rate or in our bottom line profitability.
Let me backtrack a bit and explain the 4 quadrants a little deeper because I feel it will really start to hit home as you fit your business into this framework and how they all relate to one another:
This is admittedly the “nerdiest” of all of them, and is typically classified as “operations”. It’s the meat and potatoes of how your company sources/produces/stores/packages/ships your products. Depending on your product and industry, these processes and supply chains can be extremely complex or actually quite simplified.
Optimizing your business is all about creating the Standard Operating Procedures (SOP’s) and best practices that will let you scale up or down at any given moment to meet the unpredictability in demand faced by a startup. It is also about ensuring that your business can be profitable and scalable with the current cash flow/runway in the bank…because if not, you are in trouble!
I typically call this “printing money”. I know countless entrepreneurs with skin care creams, supplements, and other companies that sell millions of dollars in product every month because they are really good at math. To do this in your e-commerce business you will be building out landing pages, upsells, cross-sells, continuity packages, and buying traffic on social media and programmatic networks.
Optimizing your marketing is where you become a mathematician and dive deep into (CRO) Conversion Rate Optimization, Lifetime Value (LTV), Average Order Value (AOV). Cost Per Acquisition (CPA), etc. This is where you get really good at knowing (with relative certainty and as an example) that when you put $10 into your marketing machine, you can expect to get a $25 from a customer. This is what the VC’s in Silicon Valley and the Internet Marketers in Austin, TX all thrive on!
This is arguably the only real thing we really nailed coming out of the gates with Beard Club… building something cool that people love being associated with (and in our case this brought in 10’s of millions in revenue). You’re going to find it super hard to scale a company with a lackluster brand no matter how good you are at math.
Your brand needs to have a personality, and it needs to help your customers become the hero in their story. As Donald Miller says in one of my favorite books on branding (Building a Story Brand): “You need to be Yoda, and your customers are Luke Skywalker.” You are guiding them to become the hero on their own.
Another critically important part of the branding cornerstone is connecting with what your company is REALLY selling. As an example, Beard Club hasn’t been wildly successful because we sell beard oil (we have plenty of competitors doing the same), we have done so well because we provide a vehicle for confidence, belonging and status for our members, and most importantly, we make them feel like they are a part of something that is bigger than themselves.
As the “golden age” of media buying on social networks starts to become more complicated, I am seeing a multitude of performance marketers completely refocusing their strategy to be far more inclusive of a solid customer/membership experience. One of the most iconic performance marketers I know Babak Azad (who scaled Beach Body from $100M to $1B in sales) is making this transition in his career for example. The logic is simple: a super satisfied customer will buy more from you over time (higher LTV) and refer all of their friends when they have the same itch that you scratch (lower CPA).
There are plenty of things that go into a really great membership experience strategy, and Joey Coleman’s recent release “Never Lose a Customer” does a fantastic job of outlining 8 ways to turn your customers into an army of super fans!
Providing an incredible customer experience will turn customers into high powered brand advocates who will advertise your business and message for you, and keep purchasing your product again and again.
The “Right Combination”
Ironically, it’s really easy to overlook customer experience as a tool for greatly boosting performance for performance marketers because it seems so unrelated to being a mathematician…that’s why mathematician marketers can sell a TON of product, but they will never build a true brand that can scale and be sold as an asset to a larger firm.
It is also super common to find some amazing e-commerce companies that are running on quite a small scale with AMAZING brands. A great example is a brand I love called BlackSaw, who sell high quality, incredible products under an absolutely gorgeous brand. They have nailed brand and customer experience, and are now trying to master performance marketing and business optimization. Until they nail the other two, they can’t quite hit the scale that they deserve…but I can see it coming
Getting 2 or 3 of the 4 correct can get you quite far, but will eventually have you treading water. In my own experience, The Beard Club crushed branding, and although we started pushing hard into performance marketing, forgot about the importance of customer experience and our business operations needed some serious tightening and efficiency boosting.
We eventually found ourselves in the “churn business”, spending most of the days of each month picking up new members to replace the old ones going out. Our profitability was also suffering at that time as we tried to deliver heavy of product too frequently to customers who actually didn’t need as much as we originally had thought. These lessons (among countless others) led us to discover that you really do need a high-level focus on developing all 4 elements simultaneously in order to truly grow and scale without hitting big setbacks.
I don’t care who you are, or what you sell, or how cool your brand is. If you fail to focus on all 4 of these areas at once, a plateau is in your near future. You HAVE to be a E-commerce Rock Stars in order to grow in a scalable and sustainable mannor.
It is extremely important to also note here that there is no specific formula to just nail all 4 areas all at once forever. Tactics that have worked in scaling our performance marketing became inefficient over time and we had to adjust. Membership experience tactics we introduced took time for us to optimize and understand how to best execute them.
Each of these 4 areas will be in constant flux and evolution within your business. Much like life itself, building out these 4 areas is a journey and not a destination. There is never a “perfection” or some magical finishing point, only growth and discovery and change. Committing to developing these 4 areas simultaneously, and addressing specific weaknesses within each quadrant to work on as a strategic priority, will allow you to break through serious bottlenecks in growth and profitability. As complicated as it might sound, getting a victory in 1 area also adds value to all the others, so it is an extremely rewarding way to look at growing your business.
So…are you ready to be a E-commerce Rock Stars?