Lies That eCommerce Marketers Tell Themselves part 2

Welcome to the E Commerce Growth Stories podcast. If you worry about your growth, if the business model isn't working anymore, if you're running out of ways to optimize your E Commerce, or if you're looking to get the E Commerce fundamentals right, then that's the show for you. Welcome back to a new episode of the E Commerce Growth Stories. Today I'm with Dennis, which is all the way in Las Vegas. He's on the safe side of the world. I'm here in Romania, a few hundred kilometers from the border, where we are facing this new conflict, this new challenge with the war in Ukraine. Hopefully things will turn out okay. It looks like a cycle, Dennis. You know, it's March 2020, then March 2022. I wonder what's going to happen in March 2024. The pace will continue.

Yeah. My prayers are out to my friends at Semrush who are in Ukraine. And we have a meeting at seven hours, so they're going to let us know what is going on with a lot of the developers and the other programs. So definitely a crazy world.

Yeah, indeed. And I think the things that we can do are somehow limited because we have this. I don't know, it's crazy, Dennis, to see how strange this humanity that it's optimizing for wealth and prosperity, but not for safety and, I don't know, living, you know, staying, keeping the people alive. And anyways, hopefully the next generations will learn from our mistakes, if the next generations will be aware.

Yep.

So today we are going to continue right with the. With the topic about the life that e commerce marketers tell themselves. Dennis, this time you're the first one. So what's the next.

The next lie that E commerce people tell themselves is that the agency is at fault. And this is one that I see often because, you know, it's easy to point at the agency. And usually the agency is doing one thing. They're doing the creative, they're doing, they're running the ads, they're building the website, they're doing, you know, one particular email marketing. And when we audit e commerce companies and something's gone wrong, where the sales have fallen down or somehow the ROAS is not as good. Usually, like 99% of the time, it's a strategy issue where the goals, content and targeting are not in alignment. So we had a call this morning. We were looking at one account. And what I like to say is you can't make chicken salad out of chicken shiitake. And the reason why the ads weren't Performing is because the creative was terrible. The creative look like an advertisement. This was mainly for Facebook ads. It looked like something that was not human. It was shot in landscape. And we were wondering why is it that the CPC was so high and therefore the cost per conversion is high and everything down the line is bad when the creative is bad. And because of this shift to social media, especially for those companies that are relying upon Facebook ads, if they've not shifted to mobile like real cell phone creative here, they're going to struggle. Because this company used to be able to get by with simple creatives based on the catalog, based on product images, based on things that would just almost work because they have a high enough price and not as much competition, they could get away with it. But now with the price going way up with iOS 14 data making it hard to track a lot of the conversions with micro targeting going away, you know, that detail targeting and pretty much all of that is being wiped away by Facebook, that it's now up to the creative and that's always up to the underlying client. So if you're relying upon agencies but you have not updated your creative to perform, if you have, if you give the agency the wrong creative, it doesn't matter how skillful they are, they could be Gordon Ramsay. If you give Gordon Ramsay a piece of poop and tell him to cook it and saute it and shop it and whatnot, what are you going to get? Right?

Yeah.

So the easy thing is to blame in a larger company, we see the agency being blamed and not to say the agency isn't at blame, but that we see this as a lie because it disguises a strategy problem on the client side.

Yeah, I think, Dennis, to build on what you've exposed so far, I think this is happening because the marketing narrative is not fixed. And we have a lot of companies waiting for an agency to do everything, you know, to fix their business model, to fix their data tracking, to fix their creatives, to fix the targeting and so on. But what most of the e commerce companies should understand is that the agencies are highly specialized. So if you go to an agency which is specialized into email marketing, don't expect that agency to fix your data hygiene and vice versa. So the idea is either you go to a syndicate of agencies that are doing the right things and you are just the client. Either you build internal teams which can handle the other things and you, you empower the agencies with the right creatives or with the right data tracking and with the right numbers, giving them, for instance, the right KPIs. Because if you know your cogs, if you know your margin, if you know what the roas should be, if you know your customer lifetime value, then you can empower them, you can get them to over deliver, but otherwise you give them the brief. We want you to help us with email marketing and you expect for them to do many, many other things. And I think this is happening due to the fact that E commerce managers and leaders are not learning, are not having this continuous learning approach towards what they are doing.

Let me give you another lie that the E commerce marketer is increasing roas but at the expense of other metrics. And I've seen this happen all the time where they go into an account and whoever's in charge of the ads, for example, will turn off all of the poorest performing campaigns that some of them are actually profitable, right? Some are, let's say the threshold is we need at least 300%, we need CPA above under $30 and they turn off everything except the one campaign that has the highest ROAS or has the very best cost of acquisition. Well, that campaign is very productive. But you have a volume and cost of acquisition curve, right? So it's very easy to be able to hit whatever roas, whatever lifetime value, whatever cost of acquisition number you want if you're willing to sacrifice volume. So there's a trade off there.

I think it's a fantastic thing because it's also related with the business modeling. You cannot stop selling certain products that you are not making a good margin. That's the approach that IKEA has as well. You know, they give this really, really cheap products that they are not having any kind of profit margin on them. They do outdoors on the streets. And then people are coming to buy whatever small things because it's a bargain and they end up changing their bed linens and whatever other things they are, they are buying. So you should take into account the volumes as well. And I think it's a great catch this one that simply shutting off products or campaigns or channels that are not working if you look at them individually is not going to help you make, make the cut and be profitable. Because revenue also helps, right? Because it's, it's covering some expenses that you, you, you have just to be to, to, to keep the lights on.

That's a great example when you look at how the channels work together. So I ran some ad campaigns for American Airlines and I thought I'm a very smart data driven marketer. So what I did was I turned off all the Campaigns that didn't meet a certain threshold in terms of selling tickets. And what I found was that people were doing research during the day, especially at lunchtime, like at their break, seeing, you know, maybe planning a trip where they want to go to Hawaii with their wife and whatnot. And so they were doing the research then, seeing what the cost of the tickets was. And then at night, they would talk to their wife or girlfriend or whatnot, and then they would buy the ticket. So we saw the ticket purchasing behavior was in the evening, but a lot of the research was during the day and especially at lunchtime. So I thought, well, all the purchases are occurring in the evening. So I'm going to turn off all the ads that we were running during the day. What do you think happened?

The overall volume went down. Yeah.

But if I'm looking at it from an ROI standpoint, I might think, well, clearly I'm wasting money running ads during the day because people are not purchasing them. But I didn't understand attribution. I didn't understand that there was a customer journey. I was so into the data and the numbers that I forgot to think about what the customer does as part of their decision to be able to buy. And when there's multiple steps. So if you have a product, let's say like a mattress. So we spent $100 million for a mattress company running ads. It was purple, if you remember them. And we realized that it would be the. I know I'm stereotyping here, but it's actually true, so don't cancel me. It was the women, the wives and the girlfriends that were doing a lot of the research that were saying, oh, we need, you know, honey, we need a new mattress and going to sleep better. But in a relationship, usually the wife will then go to the husband and say, hey, is it okay for us to spend 1500 dollars on a MA? Usually the wife or girlfriend would get in trouble if they were just to go ahead and spend fifteen hundred dollars without getting approval. Right. So we found that there is. Even though this is not a B2B thing, a mattress is not something that you need a corporation to make a decision. It's not lead gen, but it kind of was. So we started targeting our messages that were different for male or female. And we knew that often if they came in doing the research over a week or two, that often the purchasing would be delayed. Not because our creative wasn't good, not because our coupon or offer wasn't strong enough, but because there was a consideration in that purchase. So that goes back to understanding the customer life cycle and how they make decisions in buying.

Yeah. And I think that works with the wives if they don't use that technique which is ask for forgiveness, not for.

Permission or ask for a divorce. Right.

Yeah. All right, so another lie that I think we can, we can address today, Dennis. It's, it's about the fact that attribution can be nailed perfectly. And I think that's, that's, that's a lie. Nowadays I've been seeing different, different models. I've been looking at some data for instance where channel in four different attribution models with Google Analytics, with an AI tool with post purchase surveys and we with another built in analytics tool. And I've seen that the direct channel counted from 50% to 8% of the total conversions depending on the tracking. And what I think it's interesting is that if you are over reliant on things like attribution, you discount things like recommended from a friend. So many, many customers are buying because they are influenced by their peers, their colleagues, their family, their friends. And with the pure quantitative approach and with this type of tracking, you are not taking that into consideration as well. So all you are doing, you are trapped into this model and all you are doing is you're focusing channels not on getting amplification through the existing customers that, that you have. And because you don't see any kind of roas is no, you can't see it in Google Analytics. You don't see this channel anywhere, however this exists. And if you use post purchase surveys you will find out that a significant amount of customers, if they are being asked where have you heard about us? They are saying recommended from a, heard from a friend or something like that.

And you can't pixel your friend that's in Starbucks, right? You can't pixel when you're around the kitchen table and someone tells you something or inside a Facebook group when people are chatting about something. If you've got a product that is inherently social, where people can make recommendations about it, then that naturally is going to create unattributed. So that's what we call brand. The power of the brand is even if you do zero marketing and zero ads and zero email and your website doesn't even work, then people who are your loyal fans will still buy from you. There are people that will still buy even if your market is completely terrible. And that is the baseline that we believe for if you have multiple different channels, like someone's in charge of SEO or someone's in charge of PPC or someone's in charge of Facebook ads or whatnot. Those channels cannot take credit for that because the pass along effect of the brand and word of mouth is the base kind of marketing that will continue to run and drive sales even if you have no marketing at all. Right. And in our first episode talking about the lies that e commerce marketers tell themselves, we said there's a total amount of sales, but you can only give yourself credit for the incremental sales because if you turn marketing off, you have this base level. You know, your sales go down, but it settles down at a base level. So we can only take credit for things above that base level. The question is, what is that base level? And the only way to truly know that is to turn everything off and be able to do some kind of split test or Taguchi test or some kind of modeling where you can see what the incremental impact is of a particular channel or a campaign.

Yeah, if you afford the cost of testing, that's fantastic. If you don't afford the cost of testing, then you will simply pour money into this and you need to ponder in what's more important for you to find out what is the baseline and then build on top of that accordingly or to continue to get revenue each day. I mean, to maximize the revenue that you're getting. All right, so let's move on. Dennis, do you have another lie that we can focus at?

Using coupons to drive sales and it's easy to spike sales when you have a discount, but when you over discount, you then ruin the brand because then that changes the price. So one of my favorite products is $70 and they ran a special that was for $20 off, but it was so good that they continued to run the $20 coupon and now the price is $50 and people won't buy if it's above that because they know they're going to get the coupon and when they ask for support, support will hand out the coupon for $20. So always look at the cost of incremental revenue that comes from things that are artificial or temporary, which is the difference between having a coupon that's a flash sale versus a loyalty discount because you're rewarding them for being a customer as opposed to penalizing your existing customers and giving new customers a discount.

Yeah, I think that's a great example. And many e commerce companies are falling into this trap. What I think it's say doable and it's okay is at the beginning of a relationship with a new customer. If you know that your purchase frequency is justifying this, you can test out, test if it's more profitable down the line to give an initial a one time discount at the first order so that you can capture the email address and then do remarketing and improve the conversion rate and so that you can also improve the initial revenue per visitor after that. So if you position this discount as a one off the first order and whatever, so make sure that you're not making them falling into the trap of believing that that's the standard price from now onwards. Yeah. Because after that you will make up for the gross margin. But do this only if it's tested and you have the traffic to support such a strategy. Because this kind of strategy works to also increase the number of email subscribers that you have. The downside of the approach that you've said you've touched, Dennis as well is that the brand is going to be devalued and every time you're going to be incentivized, prompted through ads or whatever type of campaigns, the customers will have this, you know, they will refrain from buying because they feel like they are missing out because they knew that you had a lower price and they will expect, they will postpone until they will get the standard price because the value is there for them. It is not $70 anymore, it's 50. And that's their baseline. That's what they think it worth paying for that product.

Yeah. That's why Apple doesn't have sales, Right. Maybe it'll be the biggest version of a sale will be back to school where if you buy a MacBook Pro they'll give you a free pair of headphones, right? Yeah, but they're not going to run the Christmas sale 20% off. They don't do these crazy, you know, buy by Friday and we give 50% off those kinds of things. So be careful about devaluing the brand. A related lie that E commerce marketers tell themselves is the affiliate channel is driving incremental sales. A lot of the times the affiliates are cannibalizing sales that already would have happened because they're using a coupon that you already have. Like all the coupon sites that are out there. Right. So if you guys have a lot of coupons out there and there's coupon sites that are using this and they're really affiliates of yours, then they're really just robbing traffic that you would have already had anyway. Especially if you have the same, if you're using email marketing or you have a Lot of brand search. So in most affiliate programs there's a clause where they can't bid on your keyword, they can't bid on your name. But even though you might have those rules saying, oh, you're not allowed to bid on OmniConvert or the name of the product, they still do it because there's only three ways that the affiliates can drive traffic. They can run search, they can do social, or they can and search is organic and paid run social or they can use their list, which is email marketing or another kind of like group or whatnot. So when you're running, when you allow the affiliate channel to be able to get commissions for driving sales, be careful which of the three you allow and if you don't know what you're doing, don't allow them to run paid search because that one could hurt you. The easiest thing for affiliates is to allow them to start with messaging their list only. So you know that's incremental sales and it ties with the audience that they have a connection with. Because if they're just doing paid social or they're doing paid search, odds are they're going to be competing with your own group and if they're getting last click attribution, they're going to be stealing from your own team. We had the same thing when we did this for Yahoo Personals, which is the big dating website on our analysis showed that 70% of the commissions that we paid out to affiliates and we were paying out a lot of money, a few hundred thousand dollars every month as affiliate commission. So Commission Junction and these guys are very, very happy about the commissions we were paying. But 70% of the affiliates of the sales that we were paying commissions on, we already had acquired via they'd already come to the website, they had already created a profile because they were basically bidding on different variations of our name.

Yeah. And the trap here is that they are also increasing your cost of acquisition because the more bidders, the higher the price per click goes.

Yeah, they would use even the same ad. So you think, oh, that's my ad there. But it actually went gave credit to their account if you follow the link tracking URL all the way through. And another hidden secret or penalty is that some affiliates because they're paid only on the sale and a lot of e commerce marketers say, yeah, I really like affiliates because they're not like an agency that's gonna charge me all this. I pay only when there's a sale. So I have great roi. Be careful of the ads that they use because they make certain kinds of promises about something being free or about your product being able to do things that it's not able to do. And so you're going to tarnish the brand because of the promises that they make that can often get you in trouble and lead to a higher refund rate and all this. We see a lot of affiliates that will say, like, you know, free this or free that, or they'll use copy that maybe worked before but is no longer true about the product. So be very careful about the messaging because they don't care about your brand generally. They just want to make a sale.

That's true. I think we can go on to another lie, which is one of my favorite because I've been falling into this trap as well for a lot of years when I was running my own E Commerce. It's like this. I think I know what I have to do or I know what I have to do because that is very dangerous because it's stealing. Any kind of exploration, right? Marketing is about curiosity, is about analyzing things. It's about going deeper into the data and finding out patterns and anomalies. And if all you are doing is just changing bids and building some boring creatives and just, I don't know, spending the company's money, then you don't know what you're doing. So Mark, a real E Commerce marketer, is spending a lot of his time researching and analyzing things. And I think you need the skill of continuous learning, you need the skill of data analysis. So you should be technical, you should be understanding how data works and how to collect the right data. And also you need to be a very good storyteller. So those are some things that you need to take care about. And if you are not changing, if you are not doing experiments, then you're not a marketer. So if the only experiment that you have done was, I don't know, six, nine months ago, then you're not doing marketing. You should always test other things because you need to innovate into this highly competitive market.

Amen. And I find myself guilty of that too. And especially people like me who have got a lot of experience. We think we know better. We think that we can override the data. We think we know what the customer wants. We think you know what, we know what the key messages are to be able to deliver to each of these different segments. But I find I'm wrong 99% of the time.

Yeah, that's guilty as charge as well. All right, what other light? Let's Wrap it up, Dennis. That's the last slide that we're going to cover to get today.

All right, so our last lie is that everyone on the team is oriented towards performance. Everyone on the team wants to drive ROI just as much as the owner of the company. Right? But the truth is that employees who work for you or agencies or people who are not owners, they don't care. And so if you don't set up clear metrics that make it where you could measure what their incremental contribution is, then they're just going to spend your money, right? They're going to keep charging you every month, just like the employees. There's nothing wrong with having employees. But employees are not optimizing towards your business's health. Employees are optimizing towards their well being and their ability to continue to collect the salary, which, and there's all kinds of tricks that happen when whoever is working at the company as an employee versus an owner, right? They're not going to have the same incentives and they're not going to behave the same. I see a lot of folks where they work very, very hard to get there. You know, you started the company and it was your product and it's your life savings and everything's behind this. And you care so much about taking care of the customer and the quality of the product. And then you hire these other employees, maybe they're in support and it's not like they're bad people, but they don't really care. So there's mistakes that happen and they allow it to continue to persist. I was at dinner with a friend of mine and he has 50 people that run support for his company. And nothing doesn't mean that they're vas or they're bad people. But he did an audit of what these 50 people were doing and he found that most of them were doing nothing. And not only that, they were just allowing things like customer tickets to just be able to expire. It was just mind blowing. It made him so mad that he was spending all this money that was being wasted on these 50 people and that these people didn't even care about the company like he did. Because he's the founder, right? How often do you see that as a founder? And I see this all the time. The founder is constantly frustrated about, well, why is it that I gave this project to this marketing person and they sat on it, they took too long or they don't really care, right? Why didn't they take the initiative? It's because they don't own the company and you didn't set up a structure where if their campaign's performing, then they're going to get some kind of bonus or some kind of other piece. So that goes back to proper measurement, proper accountability, having the highest quality players on the team so that they can feel like their employee, feel like they're owners. And so when you start to treat them like owners, where there's some component of bonus, then ultimately everybody is an affiliate.

Yeah, that's right, Dennis. And I think that that's happening due to the fact that there is not a healthy framework that is setting in place for those particular roles. Right. Because if you make sure that that role is contributing to the overall objective of the department and the objective of the department is contributing to the objective of the company down the line, and if you know for sure that this is the game plan and you have a structured approach where you can measure the performance, then the employees will be, let's somehow it's not forced. They will behave to the design that you've made for that particular role. Because at the end of the day is about job descriptions and performance indicators and measuring them down the line and helping them make progress. Because if you don't, if you only ask, do this, get this metric from 8 to 12 in two weeks and you're not helping them make progress, then you, you're not going to help them and they are not going to help you. But if you help them make progress in their careers, they will not stay forever. Right. The 10 year times are not going to be 15 or 20 years anymore. They will be like one, two years at most. Right. So, but because the pace of the realities is so high, but you need to take care about the company journey and employee journey and as long as those two are convergent, then you hit the nail.

Amen. Well, I hope you guys enjoyed the lies that E Commerce marketers tell themselves.

Yep. So that's a wrap for today. Thanks a lot, Dennis. Thanks everyone for listening and watching us and we'll see in the next episode. Until then, stay safe and support Ukraine as much as you can.