Businesses start because the owners want to earn profit. There is always joy when the business breaks even and profits begin to trickle in. However, the decisions that increase profit today may not work tomorrow because of the changing nature of business. This is more significant in ecosystems like ecommerce that are still maturing.
A business is able to achieve maximized profits by increasing sales (hence higher revenues) and by cutting costs. The higher the difference between revenues and costs the higher the profit earned. Notably, ecommerce businesses find it more difficult to achieve this goal because of high operational costs. It costs more to increase revenues for such businesses due to intense and frequent advertising. In addition, ecommerce businesses have to spend a lot of money on customer relationship management to ensure that existing customers remain loyal.
Fortunately, not all is gloom when it comes to efforts to increase revenues and to maximize profits. However, it is important for entrepreneurs to understand that everything they do to maximize the profits of their business is a process that takes time for results to materialize. This calls for strategy and the patience needed for the strategy to attain its goals. We share some tips about what you can do today to maximize your profits tomorrow.
Grow your social media presence
Ecommerce is a business model that depends on visibility to generate sales. However, gaining visibility is expensive because you have to run many ad campaigns on TV and other platforms. If you do not have enough capital, there is a cheaper and more effective way of growing the visibility of your ecommerce business. Facebook, Instagram and Twitter are the biggest drivers of social commerce. Depending on the niche of your business, these platforms could work wonders for your business.
The first strategy you can use to leverage social media to grow your brand visibility is through integrating social media buttons on your site. When creating the ecommerce website, you can buttons of your favorite social media platforms, Facebook, Reddit, Instagram or Pinterest. If you do not know how to do it, you can seek the services of professional ecommerce website developers. The advantage of opting for professional developers is that you have the best solution in place.
The second strategy you utilize is to spend some money on ad campaigns on the social media platforms. Notably, the average cost of Facebook ads is $1.86 for cost-per-click or CPC. In terms of cost per mille (CPM), you are likely to pay about $11.20. This affordable compared to traditional advertising mediums like billboards of TV. Growing your social media presence will expose your business to billions of users. Further, the sharing nature of social media users could propagate your brand to many more users worldwide. Soon enough, many of these users will be your customers hence your sales volume will be high.
Nurture a unique selling point (USP)
The digital space is teeming entrepreneurs purporting to sell everything that consumers need. Interestingly, all sellers assure customers that their products are unique. If one is selling watches or gifts, the usual by-line is that all the products are original. Shock on the customers who often find out the items were knockoffs after the package arrives at the door! Because of such antics, many potential customers resort to physical shops where they can touch and feel the product by they commit their hard-earned cash.
Further, the rush to net as many customers as possible is undermining the quality of relationships that ecommerce businesses have with their customers. Seemingly, some entrepreneurs do not care about customer retention. All they want is a customer who will buy and go. If the customer returns that is up to him/her to decide, usually based on the perception of the platform and the quality of the product bought.
Investing in a unique selling point (USP) is the best thing you can do today to earn your business more profit tomorrow. Unique selling points could be many things including selling original and high quality products, robust customer relationship management and many more. Alternatively, you can commit to deliver products to customers in time. For example, one of the many USPs for Amazon is just-in-time delivery. In particular, Amazon Prime promises its customers to “get it tomorrow” once they make the order. The company ensures that it honors the promise without failure. As a result, Amazon has built a reputation of keeping its word and customers trust it will.
Build customer loyalty
As of 2019, there were approximately 1.3 billion customers in the ecommerce industry, according to figures by UNCTAD. These are many people; imagine if you had all of them to yourself? Well, you do not need all those people to buy from your business. Instead, you need a few thousand people who buy exclusively from your site. Assuming you have 1,000 loyal customers who spend a minimum of $200 per month, you are certain that your business will earn $200,000 in revenues at the end of every month.
Returning customers are the anchor that holds a business in place for a long time. Unfortunately, many ecommerce sites focus on increasing its customer base without giving a thought on whether the customers stay or not. Usually, businesses that focus on netting as many customers as possible do spend time to improve the quality of customer service. Interestingly, the quality of service is what keeps customers coming back. For instance, if you had an ecommerce website developer create a platform that prioritizes customer engagement, the number of loyal customers will increase.
As earlier argued, customers in the online market only buy from a brand they trust. Earning the trust of customer is painstaking. It includes robust systems that manage the relationship between the customer and the business. The business must have proper communication channels that are always active. This ensures that any customer that needs help can reach your sales reps faster. Specifically, never let your most valuable customers go. Have a strategy in place that keeps them engaged and blind to other brands. For example, Amazon Prime has annual offers that are accessible to Prime users only. For Amazon, Prime users are the most valuable customers because they pay an annual subscription.
Ensure product pricing is optimized
Pricing is a major challenge for ecommerce businesses particularly because they do not produce the products that they sell. As such, they are at the mercy of producer whose prices sometimes might be untenable for customers. In fact, the products get more expensive when the ecommerce businesses add service and delivery costs. This gets worse when some businesses fail to be upfront about such things as additional costs that the buyer might incur. Therefore, buyers end up abandoning the shopping cart and that costs the business revenues.
Nevertheless, there is a way around this hurdle. When contracting an ecommerce website development company to create the ecommerce website for your business, you can have them integrate a pricing strategy aimed at boosting sales. Various strategies abound, which you can use. For example, segmented pricing ensures that you sell to different types of customers depending on their price sensitivity. Distributing the price across different types segments of customers ensures that your sales volume is optimized.
Cross-selling and upselling of products
Once an ecommerce business has been in operation for a long time, you will begin to notice a buying pattern among customers. Usually, buyers will buy one product and add other related things. For example, once you realize that customers who buy trousers add belts to the shopping cart, you can begin to bundle such products together. This is called cross-selling. To be able to cross-sell, you need data. Further, you need robust data analytics strategies put in place to observe what happens and why it happens during shopping. Bundling products together based certain characteristics is something many ecommerce development companies can help you implement.
On the other hand, upselling happens when customers begin to upgrade by buying more expensive versions of the products. For example, say a customer buys a wristwatch worth $10 dollars. After some months or years, the customer realizes that they need a more expensive watch. If the customer is a loyal member of your customer base, you can recommend some good quality watches whose prices are higher than the previous one. This way, you are able to grow the revenues and hence the profits. However, you have to begin from creating a special relationship between the business and customers such that they can come back to your platform when they want to upgrade.
Ecommerce businesses depend more on trust to establish a loyal customer base. To this end, businesses must ensure that they realize and leverage their USPs. In addition, businesses need to ensure that their customer relationship management strategies are competent enough to keep customers loyal for as long as they shop online. Additionally, businesses can leverage techniques like optimization of pricing, upselling, and cross-selling to keep profits at the maximum.