At Stenik, we always strive to deliver practical presentations that provide real, applicable knowledge, ready to be used immediately after leaving the event. At the Digital4Sofia - Online Advertising Conference 2024, held in June, we did something different—we shared a more abstract topic.
In recent months, conversations with many businesses confirmed Bill Gates' thought: people overestimate what will happen in the next 1-2 years and underestimate what will happen in the next 10. That’s why we created a presentation aimed at encouraging marketers to think about the long-term game they’re playing and to revisit their strategy—not just their tactics.
Did we succeed? Based on feedback, personal messages, and numerous comments across various communication channels, we believe the answer is yes. This inspired us to share this presentation with a broader audience on our blog to reach more people.
The topic of the presentation is: "From Costs to Investments for Increased eCommerce Sales," where we focus on the bigger picture that often escapes marketers due to the rapidly changing environment and shifting priorities.
In the following lines, we will address the problem of the lack of awareness around costs and investments, which leads to a development spiral that is not always right.
Common Challenges for eCommerce Traders
The issues we often hear from online traders are:
- We can’t compete with the big marketplaces. You've heard this. You might even be in such a position.
- Competitors spend more on advertising than we do. We don’t know how they do it.
- Our customers started shopping on foreign websites.
- Advertising has become very expensive.
- Chinese websites are killing the business. At Stenik, we’ve been hearing this for over 10 years.
- Our niche is the toughest and most competitive.
- If Facebook (Meta) stops, my sales stop. I don’t know what to do. I’m 100% dependent on them.
- Courier services have become very poor.
- Do we need to be on TikTok? Everyone is there. Is it suitable for us? We think we must be there—we’re missing something.
- Monthly expenses for the online store have reached six-figure sums, depending on the scale of the business.
These concerns and fears are not new to us. We’ve been hearing them not only now but also 1, 2, or even more years ago. In fact, we’ve been hearing them for over a decade. The overarching issue is a lack of information.
Lack of Awareness
There is a significant lack of awareness among traders, which leads to a development spiral that isn’t always correct. To quote Warren Buffett: "Risk comes from not knowing what you’re doing." In other words, there’s a lack of information.
When it comes to online spending, many traders would say, "I’m investing!" However, not every dollar spent on online marketing is a true investment. To understand the difference, we must distinguish between costs and investments:
Costs vs. Investments
Costs:
- Renting a SaaS platform
- Performance marketing
- Social media
- Influencers
- Messaging
Everyone selling online incurs the costs listed above—80, 90, or 100%. Right? The question then is: "Okay, I’m doing all of this. Is there anything else I can invest in?" The truth is that, in our opinion, these are costs. But where are the investments?
Investments:
- Own platform
- Brand. Jeff Bezos says, "Your brand is what people say about you when you're not in the room."
- Loyalty programs
- On-site search
These are not all possible investments. By having your own platform, you can invest in custom UX/UI, A/B testing, mobile applications, customer service, and an e-commerce team. What percentage and when should investments be made? To answer this question, we return to awareness. It’s crucial to identify and understand the stage of your business development to make the right investments.
Stages of Business Development
1. Start-up Business: At this stage, the business is in its infancy. You’ve started offering a product or service and are trying to establish a market presence.
Main Costs:
- Renting a SaaS platform
- Social Media and Influencer Marketing
- Performance Marketing on platforms like Meta (Facebook) and Instagram
Initial Investments:
- Customer Service. Who doesn’t want adequate support on the other end? Regardless of what you’re buying, does it matter to you if the service is adequate or not? We’ll leave the answer to you.
- eCommerce Team: Building a competent eCommerce team is key. Many traders don’t realize the need for such a team or even the possibility of creating one.
2. Growing Business: The business model is established and working successfully. Sales are growing, and you’ve found the right pace and market fit.
Costs:
Costs from the start-up stage remain the same but now need to adapt to a growing customer base and evolving consumer needs.
Investments:
- Own platform: Investing in developing your own platform, as off-the-shelf solutions limit growth and development.
- Messaging strategies: Communicating with customers via email, SMS, Viber, and other channels to strengthen customer relationships.
- Branding: The hardest investment. As mentioned earlier, a brand is like a reputation. Competitors who seem to spend more on advertising might not actually spend more—they might simply have a better brand, which makes their advertising more cost-effective.
- SEO optimization: A crucial long-term investment, even though many traders overlook its importance due to its extended timeline. The earlier you start, the better.
3. Mature Business: The business is in a mature stage and has reached a stable level of development.
Costs:
Ongoing costs remain stable as they are the necessary expenses to maintain the business.
Investments:
- On-site search
- Brand: Building a strong brand, which is an investment in the company’s reputation.
- Loyalty programs: Develop loyalty programs to retain customers and increase repeat purchases.
- A/B testing to improve results.
- SEO: A long-term investment that, if started earlier, can yield significant results over time.
- Mobile applications: An additional investment a top other priorities. If foundational investments listed above are not realized first, the likelihood of utilizing mobile applications effectively is much lower.
Satya Nadella, the current CEO of Microsoft, says that today, every company is a software company and must think like a software company regarding digitalization. It’s not just about having some software—it’s about having many software solutions that work together.
But how can we ensure that our expenses are viewed as investments? It’s too frustrating to simply spend money without clear returns. It’s important to track certain metrics.
Metrics for Evaluating Investments
Typically, when discussing metrics, we focus on conversion rate, revenue, and ROI (Return on Investment). These are useful for performance marketing specialists and are part of why we love online marketing. However, to view every dollar spent on performance marketing as an investment, we must start analyzing metrics like Customer Lifetime Value—how much money, on average, a customer brings us throughout their relationship with our business. Additionally, we should track:
- Customer Retention: How successfully we retain customers and encourage repeat purchases.
- Customer Loyalty: The loyalty of our customers.
- Churn Rate: The percentage of customers who stop purchasing from us.
By doing so, even when increasing spending on performance marketing or other costs, we as businesses can rest assured that we’re not just spending money but are thinking long-term. Beyond mandatory investments, we feel confident in our expenses.
Conclusion
We conclude with one of our quotes:
In the long run, the difference between a successful and an unsuccessful trader, all other things being equal, often lies in the investments they make or don’t makecompared to their competitors. Dimitar Dimitrov, Partner at Stenik