Practical Ecommerce

How to evaluate offers from ecommerce vendors

Online retailers receive offers each day from marketing and technology companies promising great improvements and returns by implementing their products and services. The majority of offers revolve around improving three metrics. The first is improving the close (conversion) ratio; the second is delivering more and relevant traffic to your website; and the third is increasing the average order value.

It is no wonder that potential vendors concentrate on those three key performance indicators, as they are the main growth drivers of online retail. Since these aspects are so critical, vendors often ask for high dollars as merchants’ willingness to pay is often high. Once an implementation is in place it is not easy to revert back or discontinue the relationship as you can’t say for sure if that might reduce revenue. Risk of loss is a very strong motivator and sometimes — with lack of data — we choose not to lose, which prevents us from discontinuing the relationship.

So how do you know what offers focus on? This article is a simple guide to help evaluate marketing and technology offers. Over the years, I have developed a list of seven steps to evaluate the offers based on my company’s needs and chances of success.

  • Establish a framework of the tools you need to accomplish your company’s goals. Integrate your vendor search to your strategic plan. During planning, companies establish short and long term goals. Adding technology or marketing vendors should flow from that plan.
  • Think like a customer. Retailers possess deep knowledge about their customers. In many cases that knowledge resides with customer service and sales people, but it is available within the organization. Some seemingly wonderful solutions and offers will not work for your company or your brand. Look at the offers from the point of view of a consumer. Would this help your visitor shop? Will your visitor have a better shopping experience? If the answer is “no,” than this is likely not the tool for you.
  • Insist on a meaningful trial. Many technology vendors offer a free trial. This is extremely important. However, the length of the test needs to be determined by you. If the implementation is time consuming and expensive, insist on a longer trial period. It is critical to take enough time for evaluation. If the period is too short, randomness can play a major roll. Do not just accept the terms; you must negotiate based on your needs.
  • Understand post-trial costs. Prior to investing in an implementation of a new offer, you must understand your cost after the free evaluation. If the cost is too high, there is no need to invest the upfront effort. You must test to know the impact on your business. In some instances, the high cost will prevent he needed return on investment. On occasion it is impossible to know this in advance since the true impact in unclear.
  • What is your evaluation criteria? Establish a clear method for evaluating the new offer, isolating the results from other activities. This is often a forgotten step and may be difficult as many online retailers work on multiple projects at once. However, developing a method for this is the only way for you to tell if this new offer really works. Have the criteria and plan prior to getting too deep into the project; this will allow for greater objectivity.
  • Understand the vendor’s motives. During the negotiation, especially with well-funded technology firms, it is critical to understand what the vendor is looking for. In many cases the vendor is under pressure to prove a concept and is not concerned about cost or revenue. The length of the trial period may not be critical. The vendor may just need to add customers. Identifying what motivates your potential vendor may allow you to attain a more favorable outcome.
  • Negotiate and research. Many of us heard since childhood “you get what you pay for.” While this may have been true at some point, it is not true now. Today you get what you negotiate and discover. When working with vendors, negotiate terms that allow you to receive the needed ROI. Remember that proximity is not proof of expertise or value. Once a new option is discovered, search the space to find multiple offers and evaluate them, too.

Merchants often evaluate new products and services, and conclude that they are the holy grail to success. That thought may put you in a disadvantage when negotiating and evaluating the offers. Follow the steps outlined here. Stay objective. Remember, you are the expert, not the vendor.


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Comment ( 1 )

  1. Andrew June 10, 2014 Reply

    Hi David,

    I must say that it is about time someone gave some thought to this. now that IRCE is here vendors are relentless and the offers are flowing everyday.

    I really liked your approach specifically with the new technology vendors, sometimes you can find great solutions that can give you a lift in performance and since they are trying to get ‘land grab’ the cost is very low if at all at least for a short while.

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