Written in Partnership with Amir Bakian
When we think about e-commerce business models, we know it takes a lot of effort and money to win a customer. What does that tell us? That the opportunity to do real business is in the repurchase or retention of customers. So, how can you make the same customer who bought for the first time start to become a repeat buyer and, in addition, then recommends you to someone else?
The solution to this question lies in the growth system that Jeremy Delk identified and developed and has been implementing with different business models, among them e-commerce, to help them grow.
Delk Enterprises Inc. has funded or started over a hundred businesses for Delk and his partners. Many people admire him for his investment foresight and strong understanding of the power of the gig-economy economy. As an early investor, he saw the potential of companies like Airbnb, Uber, and 23&Me and deployed capital into them.
Founded as a small company making only a few thousand dollars in its first year, Delk Enterprises has grown to become an internationally diversified venture capital fund. More than two decades later, Delk Enterprises has grown to include companies in biotechnology and healthcare, consumer brand management, information and communications technology (ICT), building materials, and real estate development and investment.
MediVet, a company that developed stem cell technology for animals, is another well-known project of Delk. He first went public, then went private again, before selling the company to a Wisconsin-based small VC firm. Furthermore, he founded Tailor Made Compounding LLC, Inc. 500 named the 21st fastest growing company in the United States before exiting in 2020. MedAuSt, is also listed on the ASX. TMC was ranked No. 4 on Inc. 500’s list of fastest-growing healthcare companies.
Understand the market
Traditionally, when you have already invested in establishing an e-commerce business model, the next step is to attract traffic. And the first thing that comes to mind is the creation of ads, be it on Facebook, Google, YouTube, or LinkedIn; that is, more investment.
We think that an ad equals a sale and realize that all that investment does not necessarily turn into a return. There are different ways to generate income without spending only on ads, as long as we understand how the market is composed.
Only 3% of this market is ready to buy: this is the percentage of people who see an ad with real interest because it is precisely a product they were looking for.
The big problem is that we think that the entire market is in active buying mode and we send the same message to all that market when only 3% intend to buy. And what about the remaining 97%? Delk calls it an “untapped market.”
This market is divided into 3 categories:
- 17% are collecting information; you have in mind what you want to buy and compare options.
- 20% know they have a problem but are not yet in active purchasing mode. This person is not necessarily thinking about buying a product but is looking for how to solve a problem.
- 60% who are not yet aware that they have a problem but may be a good candidate for a product. This largest group comprises people who have not yet realized they have a problem to solve.
The problem with e-commerce is that they seek to impact the entire pyramid with the same message instead of aligning their messages for each stage of the unexplored market. The system we use at Impulse addresses this problem because it seeks not only to reach the 3% but to find ways to start talking with people who are in the 17%, 20%, or even 60%.
- Identify dream buyers
Many small and medium-sized companies’ strategy is focused on the products they sell and not on the buyers they want to attract. To identify the best experience you can give your buyers, you must first get to know them. We must use those insights to attract them and capture their attention.
Today it is very different to sell a product-price to sell an experience. If we want to distance ourselves from sacrificing margins, we must start understanding the drivers, emotions, fears, concerns, or what makes our buyers happy.
- Create a valuable content offer
If you want to target the bottom 60% of the pyramid, you can’t approach them with a promotion. You have to do it using a high-value content offer. It must have certain characteristics. It must “solve a stone in the shoe” of our buyer so that he catches his attention and signs up for it.
- Get subscribers using a subscription page
If you only focus on the 3%, your database will be very small. On the other hand, if you start working on the entire base of the pyramid, you will start to have more and more data and for e-commerce, having it is essential.
So, you need a way to get subscribers without committing them to buy something from you. The way to do it is with the design of a subscription page where you can request one or two pieces of information, such as email, and, from there, build a database that you will later use to educate and nurture.
- Present them with an irresistible offer
Once people have been attracted and you already have them subscribed, it is time to present them with an irresistible offer. This is one of the things that businesses take the least advantage of. Many believe that they build offers, but in reality, the ones they build are very poor compared to the others. As a result, they do not attract attention because they are not irresistible.
- Implement traffic channels combining owned, paid and third-party sources
Regardless of the type of e-commerce, good e-commerce uses one channel to generate traffic and combines several channels. They use paid channels and combine third-party channels, but above all, they create their media so as not to depend on anyone.
If Facebook goes down tomorrow, businesses relying solely on it for revenue will lose because they haven’t built another way to drive traffic. Therefore, you have to build your traffic generation sources, which are built using content.
Traffic sources are divided into three:
- Inbound traffic sources are where the user finds our content to reach us
- Paid sources: Ads and others
- Referred sources: When we have great content, other companies start referring and linking to us
One of the things you need to know to understand which source of traffic is profitable for your business is to understand these indicators:
- Average cost per customer
- Cost per click
- Cost per lead
- Acquisition cost
- Lifetime value
The ideal is always to measure each dollar invested in acquiring a client (acquisition cost) to know how much money that client is leaving me over time (Lifetime value).
Building traffic sources for each pyramid stage requires understanding what your users want in each of these stages to deliver the right content and, in this way, rise to the top of the pyramid. The pyramid can become a customer.
However, the e-commerce business does not end there. Once you have a buyer, you need to make that person have a great experience with your product and turn them into repeat customers.
But what about the people who don’t end up climbing the pyramid? Do we lose them?
- Educate prospects
In a traditional business, money will certainly be lost because you do not know what to do with those people who do not end up buying, who abandon the cart, or who only look.
From our perspective, the leads didn’t end because they didn’t want the product. Chances are, they weren’t ready to buy yet or educated enough about what they wanted to buy, and when that happens, they’re likely to keep procrastinating.
For that, we must implement an assisted nutrition technique. This technique works as follows. If you have a person who signs up because of my high-value content, the next step is to show them your irresistible offer. If you take it, it is directed to the sales mechanism, which in this case would be the checkout process. But if he does not take the offer, this person begins a process of assisted nutrition.
In this process, you want to educate the prospect about what he wants to buy but has not yet dared. Therefore, we give you the necessary information to finish convincing you to take the irresistible offer and generate the sale.
To build these nutrition processes, it must be taken into account that if people do not buy, it is because they still have a high level of skepticism; that is, they do not trust the brand or are not sure what they want to buy.
So what needs to be done is to build a mechanism to make that skepticism drop. How? Making the contents delivered in each of the stages increase their confidence.
- Convert them into customers through a simplified purchase process
One of the bottlenecks of selling products online is that there is no simplified purchasing process. People arrive at the page to buy and find a form where they are asked a thousand questions, have to fill in the information, etc. The key in e-commerce is to make this process so simple that you can do it even with a single click. This reduces friction and speeds up the checkout process.
- Measure, automate and scale
Now that you have a system up and running, it’s time to scale, measure, and automate. To do that, one of the levers we use in e-commerce is an email marketing strategy. This is one of the channels that, if used well, can generate the highest conversion rates.
For many, e-commerce is just another channel where they bombard their customers. They don’t have good results because they use email marketing to spam and saturate their customers with this kind of message.
What they have to do is a segment, automate and personalize. When you deliver the right message to the right person at the right time, this becomes your best source of return on investment.
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