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Take Your Online Store from Average to Elite with Retention Marketing

March 08, 2016
Aaron Polmeer

By Alex McEachern

Drive more revenue by acquiring and retaining more high value ecommerce customers with this on demand webinar series.

Gone are the days when you could simply set up an online store, run a few ads, and start watching the money roll in. Today’s ecommerce landscape is a battlefield and the majority of stores are slugging it out to be average. However, there are stores that have figured out how to rise from mediocrity and into the ecommerce elite. These stores know how to use retention marketing!

Today’s Average Store

Stores are different across industries, markets, and countries, so we’re going to work with averages from different studies to help create our baseline.

Average Ecommerce Store’s Order Value: $78.00

Recently, there has been a huge focus on growing an ecommerce store’s revenue. While this looks good on paper, you need to dig deeper than just revenue numbers. You need to look at the profit you are keeping from each sale. You may be saying “This is pretty obvious!” yet big companies fall into this trap of chasing revenue without regards to profit all the time.

Average Ecommerce Store’s Profit Margin: 35%

According to a study from MarketingSherpa, the average American ecommerce site has an average profit margin of 35%. In this benchmark situation, that means that the average store is profiting $27.30 per order. Not bad.

Average Profit Per Order: $27.30

However, there is one pesky cost that will always eat away at your profits. That is your customer acquisition cost. It is not cheap to attract someone to your online store (which you surely know!). One study has the median acquisition cost at $12.00. This seems a little low, but let’s use it for argument’s sake.

Average Cost to Acquire a Customer: $12.00

This is the thorn in the side of every ecommerce merchant, trying to keep profit margins up and acquisition costs down. And, the cost to acquire a customer is also on the rise. As acquisition costs rise, traditional thinking in ecommerce starts to become less sustainable.

Profit to the Merchant: $15.30

In the current landscape (our baseline) this ecommerce store would make $15.30 on every order. This number is after accounting for the price paid for acquisition. Again, this is a hypothetical situation, but this merchant has made $15.30 on a $78.00 order. That is 20% of the sale price, and you haven’t even shipped it yet!

Depending on your shipping costs, this scenario can get you caught in a rat race.

Growing Your Store

The above scenario is a bit like treading water. You’re likely doing OK and making a couple of dollars per order, but if your costs vary significantly, you could be losing money. Even so, no one wants to spend 90 cents to make a dollar.

Many stores make the mistake of continuing like this while they grow a following and customer base. The problem: many stores continue in this mindset forever and never truly scale. …read more

Source:: HubSpot Blog