Harnessing Big Data for Small Businesses
An ecommerce merchant deals with data. There’s revenue, profit, customers, traffic, order values, Likes, followers: lots of data. One company that helps merchants sort through this data and analyze it is SumAll. Its CEO and co-founder, Dane Atkinson, recently spoke with Practical Ecommerce’s Kerry Murdock.
Practical Ecommerce: The Internet has created a lot of trackable data. “Big Data” is the term that observers call it. What is Big Data?
Dane Atkinson: “Big Data isn’t a solution; it’s the name for the problem. Ninety percent of the world’s data has been created in the last two years. The very nature of the data that’s being created is different. It’s now a river, a flowing stream, and not single, isolated numbers.
“Solutions to the Big Data problem are new technologies that crunch that massive amount of information and try to make something manageable out of it. This has been a problem for a while. Big businesses for sure have been tackling it and leveraging it to their great benefit in the last 10 years or so. Now, we’re fortunately seeing companies that help small businesses and even, in some cases, individuals makes sense of it.”
PEC: Give us some examples of the information you’re referring to, especially for small businesses.
Atkinson: “At one point, a small business had it pretty simple. A customer came to the store; the business would sell to the customer and would record all those variables in the transaction. Now, whether the business is using Magento or Shopify or Bigcommerce or simply just a website with Google Analytics, every interaction the customer has with it is recorded in the cloud. All those guys take special notes of customer profiles, their location, the time they spent on your site, all the things that they’ve done. Big companies have known there’s value in that.
“Small companies can do the same. Even if you’re only selling $10,000 a year, you probably created a massive amount of information that you don’t see. If you can get your hands on information, if you can start to understand what are the patterns from your customers, to get more value, you can excite them and service them better. You can see a really big shift in your business.
“That analysis isn’t really well served using an Excel spreadsheet or simply keeping notes. You need to take advantage of the technology that can actually handle this massive amount of data and make sense of it.”
PEC: Say I’m a merchant with a Shopify store and I also sell on marketplaces, such as Amazon. Perhaps I maintain two or three social media presences. What sorts of data should I be looking at?
Atkinson: “The key is finding correlations amongst all that data. The person selling at Shopify likely has a product he’s selling in some other marketplaces. He’s likely tracking the traffic on that site using Google Analytics. He may have a YouTube page and Instagram campaign and Pinterest campaign. Tons of other environments. He’s using MailChimp to drive traffic from their older customers. He’s using SEOmoz to keep track of the SEO behavior.
“There tools out there now that let you put all that into one place. What we advise our customers, and I think it’s definitely the trend, is to start to draw correlations, and understand when you see a change in social media attention. Does that actually change your revenue or are you getting a false indicator?”
PEC: You co-founded SumAll, which tracks and monitors this data. Describe SumAll’s services to us.
Atkinson: “Our tool is very focused on making sure you can see the data you’re creating across many different services in one place, and you can easily look for those correlations. It’s a very simple, silent process. We know that it’s tough for any entrepreneur to get the time to use all the separate platforms, so we simply require the use of password to, say, your Shopify account and the use of a password to Google Analytics account and to your MailChimp account and to your YouTube account. After you put those in, you’ll see all your data in one experience nicely normalized against each other, and it makes it a lot easier to hunt for patterns.
“We take that simplified data and we try to give you conclusions that you don’t see from within Shopify, like your new and returning customer behavior. We also try to eliminate correlations between your marketing data or other data and what we think are your key indicators, which is usually revenue. We show the activities on one social platform versus another, by giving you a way to look across the whole spectrum of your data.
“Pricing related, our product is free for most fundamental uses. You can see all your data. We intend to charge $20 to $50 a month for some of our higher end services, which give you modeling of your inventory in the future or your sales in the future, sort of a higher level calculation.”
PEC: Let’s say I sell running shoes online. I’ve got an online store and a blog tied to that store. I’m using Google Analytics. I’m on Shopify. I’ve got an active Facebook page. I may have some videos on YouTube. Perhaps I’d keep a stream of tweets going. Under that scenario, what are correlations and patterns that I may not be thinking about?
Atkinson: “There is data inside the cloud you’re not getting at. You’re selling sneakers. You probably don’t understand how much of your sales comes from returning customers and what the full value or, let’s say, the lifetime value of a customer is. That’s a key, single indicator you can get from even just having your cart linked to us. There’s also a tremendous investment you’re making in your different social activities. You said that you have a blog, and so there’s a cost for doing posts and trying to make that community engaged, and you have a Facebook page where you’re putting in energy.
“The correlation that is really important for you to understand is to look at what activities are really changing into revenue when you see spikes on your blog that you’ve done a great article and you create a lot of traffic. Is that actually turning into a visit on to your web page? Is that turning into sales of your product? Or is that more of just a way to get some attention that might be a longer indicator?”
PEC: Can you think of ecommerce merchants that have altered business practices based on data analysis that you’re describing?
Atkinson: “We have 30,000 merchants in our first year, so we have a lot to draw on. We have top companies, as well as people selling 10 bucks in their lifetime. One of our customers that we can talk about is Diamond Candles. They sell candles with a diamond ring in them. In the first three years they’ve gone from zero to a $12 million in sales.
“They have, in many points in their life, noted the behavior change due to our product that’s helped them get there. At the very beginning, when I first met them a couple of years ago, they didn’t really understand the difference between the two cohorts: a new and returning customer. They were spending blind against their total customer base, and once they could separate them, they got much smarter and now they spend their marketing dollars and their marketing energy to try to drive both segments higher.”
PEC: What did that company, Diamond Candles, do differently for returning customers versus new ones?
Atkinson: “The essential component in large companies is their understanding of how valuable returning customers are. The first big mindset is to split your marketing budget into categories. You have new acquisition, which should be anywhere from 70 to 75 percent of the total. That’s just getting new people in the door.
“There are certain stats around that behavior that are really interesting. We found that returning customers are usually 2.6 times as valuable as a single new customer in the first two years. Returning customers have a higher virality rate, higher referral rate. We would encourage really investing in the returning customer group whether that’s in sending out simple gifts or doing phone calls to them or follow-up product offerings or coupons.”
PEC: Do returning customers engage more or less on social media channels?
Atkinson: “They engage a lot more. They engage in the right way. Some engagements are worth a lot; some are worth very little. Returning customers actually contribute. They comment. They repost their own content. They do those activities, yielding massively higher returns.”
PEC: Anything else?
Atkinson: “The perceived value of our kind of tool is lower than its actual impact. The market understands that data is really useful. I encourage any small business that’s trying to grow to look not just at us, but all of these kinds of tools. Big companies are using them very heavily.”