Practical Ecommerce

Is Marketing Killing Your Ecommerce Business?

Editor’s Note: We welcome Shirley Tan as our newest contributor. She is a seasoned ecommerce owner, having founded, built, and then sold AmericanBridal.com, a leading wedding-goods supplier. She now consults with ecommerce merchants on improving the operational aspects of their businesses, via Ecommerce Systems, her consulting firm. Her first piece, below, addresses the operational risks of a poorly planned marketing campaign.

You’ve heard the phrase, “If it’s too good to be true, then it must be.” While those weekend sales may be good for shoppers, well-intentioned marketing campaigns designed to drive sales with ridiculous discounts can sometimes backfire. This phenomenon can afflict and undermine online and brick-and-mortar businesses alike. If you’ve ever been to a Macy’s White Flower Sale, you’ve experienced the weekend crowds, understaffed departments, unkempt fitting rooms, and long lines at the register — you get the picture.

Online deals are not exempt. Consider the “Groupon effect,” in which demand is put into overdrive by aggressive marketing campaigns launched without adequate preparation or management of expectations, for both the consumer and business owner. Not uncommon is the story of a local shop whose staff was overwhelmed and underprepared to accommodate the sudden deluge of customers coming in to redeem a group coupon offer. The not-so-happy ending to this story is that the business gets poor online reviews instead of a boost in sales and increased awareness and brand recognition.

When a company’s primary focus is to grow sales at the expense of
operational harmony, a few undesired outcomes may be lurking that can quickly unravel your business.

  • Undue strain and stress on the organization as employees scramble to meet demands.
  • Production suffers due to inadequate resources, outdated equipment unable to keep up with demand.
  • Increased waste from disposal of damaged goods resulting from rushed production.
  • Delays in order fulfillment due to backorders or back logs.
  • Increase in customer complaint calls resulting from order delays and damaged merchandise.
  • Tired, overworked and unhappy staff.
  • Brand tarnished as quality control and customer service ratings drop.
  • Negative reviews for the company and product.
  • More time and money spent on public relations and reputation management.

However, there are some commonsense and not-so-intuitive solutions to avoid this downward spiral.

An Ounce of Planning

Coordinate with colleagues in other departments to ensure that promotions are scheduled in advance, on a shared marketing calendar. On the backend, that means addressing inventory, production, order fulfillment, shipping, returns, website performance, customer service.

Done right, a successful promotion should generate more overall activity and, if necessary, require a temporary ramp up of staff. Expect to receive more calls to customer service, increased production capacity, and heavier shipping activity. Even pure drop-ship players need to coordinate with vendors to ensure that their operations can support their marketing campaigns. Think about the way you would prepare your business for busier seasons. The key to avoiding mishaps, when operations should be in peak performance mode, is preparation.

Although a simple concept, good planning can often go overlooked, leaving its victims scratching their heads wondering why operations personnel are always scrambling during weekend sales or big promotions. These bad habits are detrimental to the overall, long-term health of the business.

Differentiate

Most businesses don’t consider their cost structures when pricing merchandise. All too often, they base pricing on what the competition is doing. But what it costs your competition to make a widget will likely differ. Perhaps you should determine how to make your product more unique, so that it will fetch the higher price you’re asking. What would that look like? What kind of value can you add that your customers would not only appreciate but be willing to pay for?

Market Segmentation

Thanks to the Internet, there is no shortage of ways to glean information about your customers. Having thorough shopper profiles in a customer relationship management system gives you a powerful way to manage sales and promotions that are tailored to your customer’s preferences.

Here’s an example of what not to do. I just received an offer to upgrade my credit card from a free plan to a paying $95.00 annually. Unfortunately, there is little incentive for me to switch because the “extra benefits” such as getting an additional point for meals doesn’t resonate with me since I usually pay cash when dining out. Without understanding my purchasing history, the credit card company is offering a benefit that has no value to me. It takes a small investment of time and energy to figure out what your customer values. If you don’t know, just ask them. Offer a small discount for completing a short questionnaire to get to know your customers better. You might just be surprised by what you learn.

Just as you might be surprised by customer preferences, don’t underestimate the likelihood that customers will want to buy products you don’t have, are low on stock, or unable to source. The opportunity cost of having to decline an order, or to “save” the order, and the time and effort to communicate with the customer by email or phone is wasted.

Another way to control the flow of orders coming in is to offer incentives for off-peak shopping. If you have customers that typically shop on weekends, why not run specials during the week, when business is slower — such as on a Tuesday?

Summary

Successful marketing campaigns should not be measured on sales figures alone. Be sure to account for extra expenses, such as staffing, production bottlenecks, returns, and additional customer service calls. Don’t operate in feast or famine mode. It affects your employees and equipment. Sometimes, due to a campaign going viral or some positive publicity, you get too much business at one time. So be prepared. Lastly, mine your customer database for creative ways to incent customers to shop during slow periods.

Shirley Tan

Shirley Tan

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  1. Michael Sinsheimer August 23, 2012 Reply

    We are creating a deal platform at flashpurchase.com that enables merchants to create their own deals that meet their own specifications which will enable them to plan better than some of the examples you site above. We are doing this at flashpurchase.com and transaction fees will be low. Merchants will also be able to bid on deals that have been created by consumers and joined by like minded forming large purchasing groups.