Ecommerce Growth: Proven Strategies to Accelerate Revenue and Slash Costs === [00:00:06] DARIN NEWBOLD: All right. Good day and welcome to Commerce Today. Josh, it's great to have you back and my name is Darren Newbold. I'm the host here along with my partner in crime, Josh, and we're excited to bring you some really, a really cool topic as usual, but this one's all about proven strategies to accelerate revenue and slash cost. Now that's a big, big ask here, but I don't know, Josh, can you bring it? [00:00:29] JOSHUA WARREN: I think we can do it. And specifically we're looking at e commerce growth through this eight lever mental model that I've built out really over the past goodness, like 25 years now working in e commerce. And it's a, it's a model that really helps you make sure when you're looking at a potential pro project or looking at your e commerce business as a whole, you're looking at the whole picture and you're doing so in a way that's going to help you increase your profits. And with it. Oh, go [00:00:53] DARIN NEWBOLD: a way that's going to help you increase your profits. With it, oh, go ahead Dan. Sorry, back to our regularly scheduled programming. We got the eight levers, three levels, three levers of revenue, [00:01:13] JOSHUA WARREN: I put that one in there primarily as a tongue twister to see how many times you get it wrong. So [00:01:17] DARIN NEWBOLD: tell us about the three levers [00:01:18] JOSHUA WARREN: we have three levers of revenue, five levers of expenses. I'll walk you through all of them. Darren will probably have to cut me off multiple times cause I get, I get fired up about this stuff and it's because it's about the most important part of an e commerce business and that's profitability. And I think especially right now. business environment the way it is. There's so much more of a focus on profitability and being able to really drive an increase in your profits and not just in your traffic or not just in your revenue. So, [00:01:45] DARIN NEWBOLD: And I want to bring up something real quick. Stay tuned. Cause at the end, we do have a promotion that we want to let you all know about. So definitely stay tuned. It's all about growing revenue for your site. So Josh, we got the three. Revenue levers. I'm going to get this every time revenues and it is we've got traffic conversion rate and average order value So josh, let's go in a little dive in a little deeper and talk about those levers [00:02:10] JOSHUA WARREN: so hopefully you've listened to every episode of commerce today. If you have, you have heard me say again and again, that there's a basic formula to e commerce and that is traffic times conversion rate times average order value. Equals revenue. And there's nuance and obviously, you know, there's other things like bounce rate that actually impact conversion rate, but the highest level it's those three numbers. You multiply those three numbers and you know, the exact dollar amount of revenue that that e commerce business had that month. So traffic, I think that's pretty obvious. So driving more traffic to your site, if that traffic converts and spend some money, turns into more revenue. Then conversion rate, the percentage of people that do visit your site that make a purchase, an average order value which is obviously the average order value. Um, And one thing with that, and one of the reasons I like to really encourage people to think through all the levers and not just kind of focus on the one, and I see this a lot with people that had early success with SEO, they get so fired up about traffic. They're like, Oh, I can drive so much traffic. But sometimes you don't need more traffic. You need to increase your average order value, or what if you do both? And that's where we have an example. We're going to work through and show how actually even your merchandising team and your buying team can help you increase average order value, increase your revenue. So it's important. It's a system basically is what all these levers say. [00:03:33] DARIN NEWBOLD: And they, and they all affect each other. Well, let's switch gears now to the other side of the chutes and ladders here, the expense levers. And here we have your technology costs, operating costs, fulfilling, fulfillment costs, customer acquisition costs, and then cost of goods sold. Dive into those for us, Josh. [00:03:52] JOSHUA WARREN: Yeah, and I will say depending on your CFO and your finance team, these terms may vary, but I feel like having a universal model that all brands can use and relate to is. Really important and helpful. And so that's why I break the cost down to those five levers. So those technology costs, that's going to be your platform costs, extensions, service providers, things like that. And I think sometimes on the technology costs, people get really stuck on the platform cost, but they don't look at, All the extensions that maybe a cheaper platform is going to require, and they don't always do all of the math there. So definitely a, a gotcha. I see a lot on technology costs. Operating costs are pretty much what they sound like. That's your payroll, your people, and really, All of the costs for operating the business, the e commerce business specifically that aren't covered by the other areas fulfillment costs. So obviously your cost of fulfillment this varies a lot. If you're using a third party logistics provider, or if you're using, especially Amazon and fulfillment by Amazon, you can get a very granular per item shipped cost, whereas if you have, you know, we've worked with clients that have a warehouse that's serving both e commerce orders. And actually distributing product from their stores, sometimes it gets a little bit harder to calculate the exact fulfillment costs there. And I've even seen CFOs before move to third party logistics just to make those calculations easier. So something kind of to keep an eye out for customer acquisition costs. This is something that. In the breakdown in communication that I see sometimes between marketing and e commerce and other departments, this one can be hard to calculate. Sometimes this one isn't watched as closely as it ought to be. So it's basically the, not just how much you're spending on marketing, but what's that work out to as far as the cost to acquire a new customer, to get a new customer on your site and purchasing. And then cost of goods sold is probably the most self explanatory one. But we'll see how even looking at cost of goods sold can impact big decisions you're making with your e commerce business. [00:05:52] DARIN NEWBOLD: Absolutely. Well, we've hit on the three levers of revenue and the five levers of expenses. So now let's get into, we've got three great examples that kind of, you're going to walk through all eight of the levers, what that looks like, and What kind of comes out at the end and maybe some of the decision making that can happen along the way. So first up, replatforming. [00:06:17] JOSHUA WARREN: Yeah, and I really I really encourage you and we'll have links in the show notes to all these examples because there's going to be some numbers and a lot of a lot of levers that we're going to talk about. But I really encourage you to look at this closely because the most successful e commerce directors I've worked with, what sets them apart is really making their decisions through the lens of all eight of these levers and not just getting stuck on one or two. And so with that, the example of replatforming. So there, let's say, okay, We'll start with the revenue levers. What's going to happen with my traffic when I replatform. Now, replatforming isn't a magic SEO solution that I feel like some people think it is except sometimes it is. And so there's a case study that I've been really interested in. I've mentioned a few times on LinkedIn now, but case study out of Haynes brands They replatformed onto the new Adobe Edge services with Adobe Commerce Cloud and their site performance went literally through the roof to the point that they drove substantially more organic traffic. So it's possible to increase traffic with a replatform. However, most likely with a with replatforming, you're going to increase your conversion rate, your average order value. So If you're redesigning the site when you replatform, if you're moving to a more modern user experience, that can obviously increase your conversion rate and then your average order value, you know, all the platforms have merchandising and marketing tools built in these days, but it seems like it's not till you replatform that some teams start to use them. Like they get excited about the new tools. They'll start setting up cross sells, promoted products, things like that. And that can really drive average order value up whenever you re [00:07:58] DARIN NEWBOLD: Well, doesn't it even give uh, those marketing teams the opportunity to even rethink? And maybe, refresh what has been done because they can get into that rut of, well, we've always done this. It works. It performs. I meet, I meet my personal standards and I still get my bonus every year. So don't break. What's not don't fix. What's not broken. There we go. I knew there was a saying there. [00:08:20] JOSHUA WARREN: Yeah, definitely. And I've even seen the flip side of that of, and this is a real example from a client where they were on a platform that they had really good ideas for specific promotions they wanted to do. That their current platform just literally couldn't do, like you couldn't program in this type of discount or this type of promotion. And it was pretty complex and they re-platform to a platform that gave them that power to customize their promotions and to roll out different types of promotions. So definitely rethink what's possible when you move to a new platform and don't just say, well, we've always done it this way, so we'll keep doing it that way. [00:08:58] DARIN NEWBOLD: All right. So back onto our, our example here on the replatforming, talk about our expense levers, Josh. [00:09:04] JOSHUA WARREN: so I kind of already teased on the technology costs. One thing I see a lot is people get excited about a low dollar amount on the platform expense. So for the technology costs they might say, Oh, wow, this platform is the cheapest platform out there. But they're not taking into account. Okay, I'm gonna have to buy this service. I want to buy that service. There's this extension. There's this item in their store. There's that item in their store. By the time you not only purchase all those things, but deal with the conflicts between all those things, your technology costs can actually be more expensive than a platform that just has a higher sticker price, but includes everything you need. So that's how within these levers, even sometimes there's some nuance you need to look at. So operating costs. One, one example I love, we had a company that replatform to a platform that allowed them to eliminate multiple customer service tools some of which they had to build out themselves and just use the platforms built in tools that made their customers. service team more effective, actually lowered their operating costs. So again, a replatforming project kind of, especially the finance team is just going to say, Oh no, we're spending money. It's an expense. Sometimes they miss the fact that it can lower some expenses once it's done. [00:10:13] DARIN NEWBOLD: it can definitely, definitely help and improve fulfillment costs as well. I mean, better management of the inventory and how that's handled with a new platform. And how about customer acquisition costs? [00:10:25] JOSHUA WARREN: Yeah. So on customer acquisition costs, if it integrates better with your marketing tools for instance, if it can pull in data faster or just more data about the source of traffic and type of traffic and the personalization around, The traffic that you're acquiring that can actually tie back in to lowering your customer acquisition costs by targeting your marketing better. And then cost of goods sold, probably not greatly impacted by replatforming. I'm sure there's an example out there. I'd love someone to stump me and share that one with me. But yeah, we're actually going to talk about an example next, though, that does talk about it does impact. [00:10:59] DARIN NEWBOLD: exactly. We definitely look forward to that and want to remind you, stay tuned, a special code at the end for a discount on some services with that. Let's talk about adding new products to your lineup and the effect of the eight levers there. [00:11:14] JOSHUA WARREN: Yeah, and so this is one where I'm going to dive into a specific example. Because I think it's more fun. So with this one, let's say you are a gardening business or maybe a home and garden business, and you're looking at two possible product lines you can add. So you've got a, a very premium plant food. It's totally unlike anything you've sold before, but it's very high price, high MSRP, but actually relatively low cost. So there's a nice high markup on it. And then you have cheap. Well, budget friendly gardening tools. And I think so many people might at first glance say, okay, wow. This, this premium plant food, like especially a buyer, he gets so excited talking to somebody at market and say, wow, you know, we can sell this thing for twice or three times a profit margin. We're getting on our, our other products. Let's do it. But then as you dig into it, well, the plant food. Might increase your average order value so it can improve that lever But it's such a niche product that it may not actually appeal to your current customers So it may not have as high of a conversion rate as the products you already have. Also product like that may require some special storage conditions So it's going to increase your fulfillment costs and then you're going to really need to educate your customers better about it And so suddenly your marketing campaigns are a little more complex. Maybe they're a little bit longer, a few more layers to them. You're increasing your customer acquisition costs. [00:12:35] DARIN NEWBOLD: You may even have to train people in store and have more training there just so they know how to speak about it and be able to sell it or at least educate the customers about it. [00:12:46] JOSHUA WARREN: Definitely. But then let's look at those budget friendly tools. So again, they have a lower profit margin per unit sold, but they might actually appeal to a broader customer base. So not only could they appeal to all of your current customers, but they might open up new keyword opportunities for your organic campaigns, your SEO work, bringing in more traffic, more customers. Kind of an interesting gotcha here that I see lots of times that happens when people only focus on one of the revenue levers is someone might say, Oh, it's going to lower my average order value because it's a cheaper product. So suddenly my AOV is going down. Well, what if it in a greater percentage increases your conversion rate because more people want this product? Well, suddenly it's actually having a positive impact on your revenue, even though it lowered your AOV. So that's where you really have to work through all these levers. And then again might be or would be probably easier to store and ship than the plant food. So it's going to have a lower fulfillment costs and it could align with your existing customer base. So you're not spending as much to acquire new customers. [00:13:45] DARIN NEWBOLD: and there's even the option you might have more customers because you might hit a broader market. And, Definitely can help you out. There was another piece I had, but it's, it slipped my mind. So I guess we'll kind of move on our last example there, Josh, choosing the, or influencer marketing strategy. [00:14:01] JOSHUA WARREN: Yeah, so I feel like everyone's super excited about influencer marketing lately. Majority of y'all that I've been talking with on LinkedIn, this is actually the biggest initiative you have going right now is using influencer marketing to drive more traffic and more business to your e commerce store. And I think a lot of brands are excited about it because it seems like a way without. a ton of money and without a ton of time to suddenly increase your traffic, therefore, make lots more money. However there's some gotchas in the levers with this one too. And it's mainly around people, especially new to influencer marketing. They will jump straight to who's the biggest influencer we can afford. And sometimes that's actually not a good fit. Sometimes when you look through these eight levers, you're going to want to go with either a smaller influencer or multiple smaller influencers. [00:14:47] DARIN NEWBOLD: Well, and then you got to, you definitely have to consider the conversion rate of that influencer, their credibility and how well that they're going to be able to influence, influence their market and their followers there and to cause them to buy the product. Is it a great fit? [00:15:03] JOSHUA WARREN: Yeah. And that's where, I mean, really your traffic, your conversion rate, your AOV, all three, the, the product to influence or fit influences so much. Example I like to give is let's say you sell performance gasoline additives and you are marketing this through a very green eco conscious, save the earth, EV driving influencer. Well, even if they're the biggest influencer out there, their audience is probably going to be kind of surprised that this influencer is promoting your product. They're probably not going to be that interested in it. Your conversion rate's going to be terrible. If they do buy anything, your AOV is going to be lower, and you might not even get that much traffic off of the campaign. [00:15:43] DARIN NEWBOLD: Yeah, that's a pretty, pretty radical example. I'm not sure that would actually play off, but [00:15:48] JOSHUA WARREN: You would be surprised. I have seen some people that just get so excited about, I have found the biggest influencer we can afford, and that is how big, you know, I'm changing some of the details to protect the [00:15:58] DARIN NEWBOLD: the innocent. [00:15:59] JOSHUA WARREN: but yeah, that's how big of a gap I've seen before. [00:16:02] DARIN NEWBOLD: is quite interesting. Well, the, the, the other piece, or the last piece I think you talk about a little bit is a OV on this. The being able to create a special packaged piece just for your influencer. And that's one of the ways you can really maximize this opportunity is so that that influencer has, you know, influencer package that is, is being sold. [00:16:25] JOSHUA WARREN: Yeah, definitely. So, and this is where, again, working with multiple smaller influencers that you get to know and really will spend the time with you to know and understand your product can work so much better than one big influencer. Because I've seen some very successful campaigns where the brands go out there and they say, okay, influencer, what's the Three products you like the best. Like I see this a lot in um, beauty is the simplest example is like, what is your skincare regime using our products, put that together as a custom bundle, put that influencer's name on it, have them promote it. And suddenly your AOV off of that traffic is going to be so much higher than it otherwise would be. let's, [00:17:02] DARIN NEWBOLD: let's hit the expense levers here and uh, and see if we can land this plane. [00:17:06] JOSHUA WARREN: All right. So customer acquisition cost. Again, it can be really tempting to say, okay, what's the cost going to be to acquire these customers just out of the gate? But I really encourage you to consider are these customers that are likely to come back and to repeat and actually lower your customer acquisition cost. Operating costs. This is the biggest one I see marketing directors kind of forgetting about is someone's gonna have to manage that influencer in that relationship, and it's either going to be one of your employees or your agency. That's going to take time. That's going to increase your operating costs. Technology costs right now. There's not one influencer marketing platform to rule them all. There's like two or three tools you have to cobble together. So there are some technology costs that can be involved. And then um, COGS, cost of goods sold and fulfillment expenses probably don't change in your influencer marketing campaigns, unless you suddenly hit a huge spike and you're working, especially with a third party logistics provider. Where you're on like a tiered basis and you pop into a more expensive tier that could actually make your campaign not as profitable as you originally thought. [00:18:11] DARIN NEWBOLD: be a big thing and, and something we ought to talk about at another episode is about spikes and handling that and what that all looks like. Well, as we kind of bring this episode to a close. We've uh, we've really hit on those eight levers and we've walked through them with three different options. You're going to be able to see those in the show notes. And now kind of without any further ado Josh, why don't you close us out here with with our [00:18:36] JOSHUA WARREN: Yeah. So I've heard from a lot of e commerce directors and e commerce teams that getting budget approved this year is hard, especially for big projects. And so you're having a hard time moving some of these levers. And so we've actually put together Some prepackaged revenue accelerator services that focus in on very small, specific areas. They start at literally just 500 bucks. So, it's a way that you can try out our services, work to influence some of these levers and not have to go through as big of a process to purchase them. You can actually just go to creatuity. com slash store. Buy them with a credit card right now. If you'd like we have a performance audit, accessibility audit an e commerce strategy review, and a few others, including influencer marketing review, as we have talked about a lot. And even some basic essential maintenance services. And if you hear this, see this and buy one of these before July 15th, enter the code commerce today, all one word at checkout. We're giving our podcast listeners and viewers. 20 percent off. If you enter that code before the 15th, [00:19:36] DARIN NEWBOLD: is awesome. And again, that's 20 percent off with commerce today all one word At at our creativity. com Slash store and any of those accelerator services Well as we as we close this out a quick tidbit. This is an episode that did not Have any AI in it. Got to love it. Thank you [00:19:57] JOSHUA WARREN: One more thing. [00:19:58] DARIN NEWBOLD: Uh, Thank you for listening and we appreciate it. We'll see you next time at commerce today. Thanks. ​