For E-Commerce Businesses:
How we developed a high-scale profit machine out of an e-commerce store?
Transitioning to a profit machine.
The usual e-commerce store with 100s of different product lineups used to work very well for businesses about 10 years back. But then competition increases, markets shift, and there are a plethora of other changes that result in something that used to work not working anymore.
The important thing to know is that when it comes to e-commerce, the only metric that matters is profit.
We've seen the dashboards of 1000's of e-commerce businesses, and seen that their revenues are soaring high, while the profit margins are unbelievably low. That's the truth behind the huge numbers of e-commerce revenues. This could be because of Amazon commission fees, or influencer marketing charges, or the huge product costs(both fixed inventory & variable fulfiment costs).
That's why we aim to shift to a profit machine. A single machine that solves a single problem for a single customer niche, while delivering high efficiency & margins to the business.
Developing the machine.
We started by creating a simple process map of the font-end & back-end operations of the business model.
We created a simple initial front-end offer(IFO) that baited prospects to take a lower-commitment purchase action with the company. This front-end offer was priced at $8 where the company wouldn't make any profit on these sales, the sole purpose is just to cover the advertising costs to acquire new customers.
After making a commitment to purchasing a product, we present the prospect with a personalized sequence of upsells of higher-priced products. All these products are complementary to solving the problem for the prospect and don't replace the initial front-end product's deliverables.
Think of it as McDonald's asking if you want Fries & Coke after ordering a single burger... The objective is to increase the average cart value of a customer, which results in you getting way more revenue(monetary value) from a customer which allows you to spend more in advertising to acquire customers.
Tracking the right metrics efficiently.
Throughout the operations of this machine, our major focus was to make sure that certain metrics play out as per the objectives.
With usual e-commerce stores, they track dozens of metrics which don't even get them close to the objective. With this, however, we only need to track 4-6 metrics:
The lifetime value of a customer
Cost per acquisition
Earnings per lead
Cost per lead
Earnings per click(optional)
Cost per click(optional)
Advertising becomes an investment.
Tracking these 4-6 metrics results in advertising becoming an investment, not an expense, for the business. All that has to happen is:
The lifetime value of a customer > Cost per acquisition
Earnings per lead > Cost per lead
Once these numbers play out through each & every advertising effort, we were able to scale it up to reach thousands of new customers in the first 6 months of the system going live. Simply because we knew that every dollar put into advertising was getting us back four times of that, we just had to keep inserting capital and multiplying it every single month like clockwork.
Within the first month of the system going live, we got more than a 400% return on advertising spend, acquired 1,000 new customers, and we're not even including the numbers we would reach through these 1,000 customers itself from repeat purchases & referrals.