The Ultimate eCommerce Sales Funnel (Improve Your Growth Curve)
July 16, 2021
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Wednesday, August 18, 2021
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Monday, August 16, 2021
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Wednesday, August 11, 2021
Jeremy here. In today’s blog, I’m going to be talking to you specifically about e-commerce and e-commerce funnels and specifically about a sales funnel that will improve your business’s growth.
Now, we get a lot of feedback, people saying, “Hey Jeremy, you’re always talking about lead generation and service-based businesses and generating leads", that’s because that’s what the bulk of our business clientele is made up. However, we do want to give some love to the e-commerce folks. Now, what we see in the eCommerce industry is that it’s very black and white. With eCommerce, it’s one of those things where you have nowhere to hide. You spend money in getting people to your store or your learning page or your presale pages, and you get feedback from the market very quickly. Whether or not people are liking this offer in the form of them pulling out their credit card and buying, right?
It’s a very unforgiving space to get into. However, when you do crack it and you do get it to work, you can scale this thing to the moon. Because unlike with lead generation, if you're putting an offer on a landing page, a webinar, a video sales letter, or whatever it might be, you’re sending traffic to those pages and then you’re getting leads. But then there’s this whole other mechanism, which is you getting on the telephone and trying to convert those leads into paying customers, and that’s a lot more difficult and the waters get a lot muddier with being able to specifically find out if this is going to be effective or if it is being effective.
Gone are the days in eCommerce where you could just go out there on Google or Facebook and spend money, bring people to a product page and then have them buy that product at a high enough rate to actually have the numbers make sense in terms of if you’re actually making money on the front end and if you’re liquidating those traffic costs. Then you’re paying for your overheads, your commerce business, and your fulfillment costs, and then you still got enough money left over to buy candy bars, comic books, coffee, protein shakes, and all the things that you want to do with that money.
Now, what it actually requires is a much more advanced strategy in order to really turn that traffic into profit, and because you get these people like the Amazon’s and the ASOS’s and these big huge companies that have just gone into all these spaces and just start completely eradicating all of the competition. They don’t need to make money on the front end, they have a very firm grip of the numbers in their business and the unit economics. And they’re happy, not only breaking money on the front end, on actually turning that traffic into customers and into revenue for their business. They’re actually willing to go in the hole, right? They’ve got very huge payback periods in terms of being able to burden the loss on the front end. So they sell it like $180 product or the average cart value is $180 and they’ve got people coming into the business and it’s costing them $180 to get a customer, but that’s how much they make in actual revenue of that customer. That’s because they are willing to sustain those losses and bring those customers in at a loss. They understand that either the customer comes through and buys $180 worth of goods on the front end, that person will repeat purchase maybe twice or three times a year and they’re making all the money on the backend.
But for a small to medium-size business, who’s just kind of getting started and they’re like "let me take my products online or let me go out there and start this eCommerce business". They typically get slaughtered because they don’t have a firm grip on those numbers and they have no system in place to go out there and turn traffic into profit for their business. Not only are they in a hard position from the beginning, because they might be in one particular vertical or skew, right? They might be selling t-shirts or shoes or skateboards or bikinis or whatever it might be. They might have 10 to 20 of those products, let’s just say, that we’re looking at Google ads and jump onto Google and you type in th phrase, "men’s black t-shirts" and then you go on Google. Then you see your listing on Google, and you’ve got 10 to 20 black T-shirts or tee shirts on your website. Then you look at ASOS and they’ve got 20,000. Now, where do you think that the person is going to have a higher likelihood of finding that product that it is that they’re looking for, that they want to buy? On the person who has 20 products on their website or the person that has 20,000? The answer is very, very clear. Then what that means is that that website that has 20,000 products on it has a much higher conversion rate than the person that has 20 products on there because naturally the chances of them converting that traffic with such a big depth of skews on there are going to be higher.
What that means is that a company can go out there and they’re willing to spend more money per click to get that traffic through because the whole exercise is a lot more profitable. Say, for instance, you’re selling a hundred-dollar product. Typically you should estimate that out of that $100 product, you’re selling; 30% is going to go to your customer acquisition costs, that’s your cap. That’s how much money that typically you should be willing to spend in order to acquire a customer. Then from that, let’s just say that you make a 30% to 40% margin on that actual product that you’ve got. Already, we’re up to that 60% now. Then you’ve got another 10% that you have to allocate for contribution in terms of your overhead. Then you’ve got, at the end of the day, anywhere between, 30 to 40% margins on what it is that you’re selling. So when you look at that, that’s based on a dollar per click and a lot of times it’s a lot more than that.
So when you do that exercise, like if you’re selling like a $20 bikini, for instance, and you know the cost per click for something like "buy bikinis online" or "bikinis" is a dollar a click and your website converts at 1%, which is typical. It may convert a little bit higher, it may convert a little bit lower, but on average it’s 1%, if you’re getting any serious volume of traffic. So then you spend a dollar per click, you get a hundred people to your website, you spent $100 and you get one buyer. That buyer to you is the $20 for your vacating.
So immediately you’re just straight up 80 bucks in the hole and that’s not really a good growth model. That’s the reason why the traditional way of doing eCommerce is being made redundant because you’re getting so many big global players and Chinese companies into dropshipping and they’ve got thousands of skews and the ASOS’s and Amazon’s. All these people are just coming in and just eating everybody’s lunch and then, that doesn’t leave much room for the small guy to ever get going. Now, I’m not highlighting the problem here, we're going to give you the solution to this thing. This solution is really, when you look at it, kind of this six-step funnel and it’s really what you must use if you’re doing anything in e-commerce if you ever really want to make money.
The thing is that most people aren’t even doing anything like this. The vast majority of people are simply putting their product online, and then they’re just hoping, and they’re praying that enough people are going to buy it to make this whole exercise profitable. So instead of just having your gadget or your gizmo or your bikini or your pairs of socks or your shoes or the tee shirts that you’re selling online, this is basically what you want to do. You want to have a funnel in place, an e-commerce funnel, and you’re going to have a front end, which is you selling the initial product, and then you’re going to have the backend of the funnel. Essentially the backend is everything that you can see on this. So instead of just having the typical product, then you buy it, then they check out, then that’s it and that’s the end of the relationship; it’s like when you go to the supermarket. You’ve bought your groceries and then as you line up at the checkout, you’ve got all of these different products and magazines and everything on either side. That is another opportunity for you to basically upsell that person and make more money off that buyer.
So let me run you through each step of this. So the first one is quantity breaks. So, after someone has basically selected the product that they want to buy on your website, and it might be vitamins, it might be a protein, protein powder for instance, whey protein powder. They’ve put their details in there, and they’re like, “Yep, I’m going to buy this.” Then they enter in their credit card details, and you’ve already secured that sale. And then on the next page before they can fully check out, and they think the sale is over. Then you say, “Hey, you bought this kilo of protein powder for $30, would you like to buy another three kilos?” Instead of paying $30, it will be just $19 a kilo or $15 a kilo. So you’re just offering them more of the same thing that they just bought. Seems like such a stupid thing when you look at it in theory. “Hey, they just bought this, this kilo of protein. I’m like, why is it, they’re going to want more?” But you’d be amazed the number of people that buy these are crazy. The very best first thing that you can offer to somebody on the back end of your funnel is more of the thing that they have just bought.
Then once that they’ve put it in there, they said no or yes to their quantity break. Then, this is where you want to hit them with an OTO, which is a one-time offer or an upsell and you can have a series of these upsells. This is where they’ve just bought the protein powder. For instance, you might be selling them a protein shaker or an ebook or something along those lines. Well, not really ebook, we’ll get to that later in the funnel. But anything that would be an upsell that would be complementary to what it is that they’ve just bought. It might be another, it might be a probiotic, it might be a multivitamin, it could be anything else that you could offer to this person as an upsell and it needs to be a really good offer. I typically recommend at least having two upsells in your e-commerce funnel. So you know you’re going to offer them the first one, it might be a protein shaker. Then, after that, you might be offering them a probiotic, for instance. Now, if they say no to the first one is still going to offer them the second one. If they say yes to the first one, you guessed it, you’re still going to offer them the second one as well.
Then what you’ve got here are shipping and fulfillment. A great little upsell and a great little way to make a few extra dollars on each transaction is by offering people an option to have either priority fulfillment, meaning that you just give them the message, “Hey, we get lots of orders every day. If you would like to have your order taken to the front of the queue and have our warehouse process this quicker then you can pay an extra $4 and we’ll put you at the top of the list and you’ll get a one-day processing” for instance. Or you can also offer them the shipping. You can say, “Hey, you voted regular shipping and you go express shipping.” And you make an extra one or $2 on each of these things and you might be thinking like one or $2 like this isn’t going to add up. But when, when you go through this whole process, the numbers, you’re going to see how they add up. And it can be substantial and it’s what makes this whole process of being able to go out there and actually buy traffic profitable.
Now, the next one is, for instance, they’ve bought some protein powder, and then they bought a probiotic and a protein shaker, for instance. Then what you want to do is sell them an ebook, something at like a very impulse purchase price, so maybe $9.95, $7.95, $6.95. Anything kind of below that $10 mark. It’s, literally, there’s no cost for you to fulfill that ebook. You’re not shipping it out. It’s an electronic download that they’ll get. It could be something like you offered them three different eBooks and one might be, we’re still talking about the protein, for instance, it might be like a bulking plan or you could be looking at a shredding plan or whatever it might be or how to get six-pack abs. It’s just something that they can get that is a three-week plan for them to actually get their results. They would possibly be buying this product to get and giving them the step-by-step process of exactly how to do that.
Then what you’ve got is a warranty.
Depending on what the country is that you operate in, typically standard is by law, you have a 12-month warranty in your product that you’ve got. That means if your product or service is faulty by any means or anything like that, it’s standard, you have to have a 12-month warranty. But you know another great way to make some extra money is by offering somebody a warranty. It may not make sense, for instance, for protein, but it would definitely make sense if you’re selling any kind of electronics or get gizmos and gadgets or, anything like that, or skateboards or whatever it might be. Where you can actually say, “Would you like to get 18 months or 24 months or 36-month warranty for the small added price?” The price can be something, not something too onerous, but something that will give them that protection. This is another great way you’re going to have a very, very small recall rate on that warranty, and essentially, a lot of that money that you’re going to be making is going to be additional free profit.
Then the last one is what we call a free plus shipping offer. So what are you going to say to them is, “Thank you for your order. You’ve got all this. What we would also like to do is offer you the opportunity to get this free product. We’re going to cover the cost of this product. So we’re going to give it to you for free. Just help us out and pay for the additional shipping that it’s going to cost us in order for us to put this into your order and to get it dispatched.” It might be a water bottle, it might be a key chain. It just needs to be something that has a value attached to it but is also very, very cheap for you to buy or for you to manufacture. What you’ll find from this process is that this allows you to basically increase your average cart value. And that’s really the game when it comes to eCommerce.
There are two different kinds of your, three big metrics that you want to be looking at in the eCommerce space. And the first one that you want to be looking at is what is the AOV? What is the average order value or the average cart value? There are two different acronyms you can use whichever one that you want. And that is how much is the average cost of the basket of goods that someone totals up to when they come through to my website or to my funnel and buys. And really, it’s the person who has the highest AOV who can really afford to spend the most to acquire a customer.
And that’s really the second metric. Is looking at what is the, what does it cost you to acquire a customer?
The third metric is what is the LTV? What is the lifetime value of that client? So the average cart value might be $100 but then they might come and repurchase from you five times over the course of their lifetime. Meaning, that your AOV is $100, but your LTV is $500, and whoever really has the highest LTV and AOV is the person that can really win that market because they can go out there and they can afford to spend the most amount of money on traffic and hiring agencies and the best photographers to take photos of their product. And they can just afford everything to be a lot higher because they make way more money off each client.
But there’s a thing here that most people don’t talk about and they don’t really look at in much detail. Most people in the marketing community, specifically in the eCommerce space. They typically look at the LTV. They think that, basically, if your AOV is lower than your LTV, then you can scale your business, which isn’t the case because you’ve got this thing called a payback period. And I call it, it’s like you think about it as like a pendulum. You put the money out, it swings out in terms of ad spin, and then it swings back and it gives you a return on that money. Now even if your AOV is lower than what your LTV is, how long can you really afford that?
It might take you three months or six months to earn that money back and that payback period. Meaning that you’re going to have to go in the hole and burden those losses on your credit card for three to six months. So you can’t really scale that eCommerce business to the moon because you’re going to need to have a line of credit to be able to help you in that payback period. And it can get pretty vicious. You’re not going to know and get that feedback for three to six months, whether or not this cohort of customers that you’ve brought in is actually going to repeat purchase. And that’s really why you want to look at this funnel. And you want to engineer a situation where you’re making as much money on the front end as possible so you can fund the growth of your eCommerce business. Because you might be looking at a typical environment where you’re making $30 off somebody who orders protein off you, but then are going to be repurchasing that every two months. They’re going to have a very high LTV and that’s great. That’s obviously the reason that’s going to allow your business to be profitable long-term.
But I’m talking about the short term. So by going through this exercise, you know what you’ll find is that we’ll take your, your normal conventional AOV of being $30 for say a kilo of protein, and push it up to maybe $65 or $70 meaning that you liquidate the traffic costs or you liquidate them much, much quicker. Your payback period might be 30 days and you only have to pay your credit card every 30 days. Meaning that you’re buying customers, and then you’re liquidating that cost of buying those customers in a 30 day period.
You might be thinking, “Yeah, but I’m not making any money Sabri. I’ve spent this money, I brought these customers in, but I’m not making any money off it.” That’s a good situation. If you can bring customers into your business for free, and then everything that you make on the back end in all those repeat purchases is going to be pure profit. This is the kind of mindset that you need to have if you’re going to survive in today’s day and age where the cost of traffic just keeps going up and up and up and up. So if you’re not implementing a system like this, then you will be eaten alive. And there is absolutely no way that you’re ever going to be able to compete with these huge online retailers who go out there and they raise 5 million, 10 million, 20, 30, 50, 100 million dollars in venture capital.
The only thing that those venture capitalists really care about is seeing that top-line revenue grow. So that company is going out there, they’re out-muscling, all the little guys. They’re willing to spend way more money to acquire that customer, not worried about profit because they know that they’ll make that in six months or nine months. The way that they look at it is like they’re going into a market with oxygen tanks on their back. They’re basically then going underwater and they’re taking everyone underwater with them. And then these smaller guys who don’t have huge budgets, their oxygen runs out and they die. Then, because they just can’t sustain those losses for as long as somebody who’s got out there and has got venture capital in their business. Then when they go under the hole for six months, nine back, nine months for those burn back periods and then they come up and there’s no one else standing except for the big boys that have enough money to fund those losses.
And a lot of these big boys, they’re not this advanced funnels and trying to really increase the AOV on the front end and have all these different upsells and eBooks cause they’ve just got so many products and services that would be difficult to roll out. So, this is a way for you to find a chink in their armor and then just go in there and really utilize this where you can start to compete, and then you can start to scale. So that’s the very first part right.
Now the second part, let’s say that you’ve got this all set up and you’ve got your head screwed on right? And you’ve got this system that goes out there and is able to squeeze as much juice from the orange of traffic and make a profit as possible. Now, what are some other ways that you can increase and just crush it as an eCommerce store? Well, a really good way is a button. If you look at most eCommerce sites, they have a very weak copy and they’re like this is the product. It’s like a 150-word product description and then there’s just a buy button, right?
So the very first thing that you want to look at is having a story attached to the product that you’re selling. It’s been proven that products that have a story behind themselves, infinitely more than ones that don’t. When you can tell a story about how you manufacture the goods or why is it you’re selling this and the problem that you experienced in your own life that caused you to go out there and really craft a product that addresses that specific problem. And you really want to tell a story about it, talk about the ingredients, talk about where it’s come from, talk about the recipe, whatever it is that you can add a little bit more context is really going to help you.
Now the second thing that you want to really look at is also attaching a cause to what it is that you say. You’ve seen a lot of companies have started to kind of attach a cause where it’s helping restore people’s eyesight or adopting certain animals or whatever it might be or giving back to less fortunate people. This not only allows you to do good in the world and give back to the less fortunate people, but it also allows you to basically create more Goodwill with your audience, which is going to allow you to make more sales long term. So if you don’t operate in an area and you don’t already have a cause, this is something that you definitely want to look at implementing for your eCommerce store because there’s a lot of studies out there that show that having a cause attached to your product can increase your sales by anywhere between 15% to 50%. And that’s something where it allows you to help somebody but also allows you to make more money on the front end as well.
So are just a couple of the hacks that I specifically know that we have tried and tested for our clients in our own agency that really allows you to go out there and just completely beat the pants off anybody that you’re competing with and really allows you to take your eCommerce store in a challenging market against people that have got way more money and gone out and raised venture capital and got business loans and done all this stuff and allows you to not only start competing but also to get them going like what’s going on? How can this small person compete with me and how are they able to go out there and out muscle me all certain traffic sources and bring more people in.
And the very last point that I would make is that if you look at like what is the best kind of channel right now to scale an eCommerce business? It really is Facebook and Instagram ads. And that’s because on Google ads you’re limited by how many people are searching for your product and service. And not only are you limited by how many people are searching for it, you’re also basically entering directly into a price war because you’ve got Google shopping right now, which has all the prices. It’s typically the person with the lowest price who’s the person that’s going to get the most sales. So it puts you in an environment where yes, these people are in hunt mode, specifically looking for the product that you sell, but you’re also competing with every other person on there that’s running Google shopping and who’s got an eCommerce site and all the prices are transparent and they can see everything.
And if you don’t have a story copy and a cause and a funnel and all these other things, then why would that person pick you over the other person? And the reason would be solely based on price. With Facebook ads, you’re not really entering into that where that person is going to be seeing all these other products on Facebook that are directly exactly what it is that you’ve got at the same price point. So it allows you to also charge higher prices. But the biggest benefit really for Facebook ads on an eCommerce store is it allows you to scale. You’re not limited by how many people are searching for what it is that you’ve got and you can really just ratchet it up and you can keep scaling and scaling and scaling and reaching out to audiences that are going to work well and that are going to convert for your business.
Because you know it’s all well and true, like basically serving ads to a hundred people or a thousand people that are looking for that. But that’s not really going to get you to really the highest scale levels that you’re probably going for. You need to start thinking about, well what is it that makes an eCommerce product be really successful in Facebook ads as opposed to the ones that flop. And what we’ve seen is it’s the products that have something that is demonstrably right there and you can basically show, you can, show somebody’s jumping on a bed or you can, show somewhere like wiping up a big mess or wringing out a cloth or you can show what a teeth whitening product looks like or contact lenses or whatever it is that it happens that you’re selling. There needs to be something that you can demonstrate on it that really has that kind of wow factor that people can clearly see in a short kind of 3-second video. The benefits are visually shown as a demonstration of what they’re going to get or what makes the product that you’re selling unique.
So they’re kind of my steps in terms of what I look at in terms of helping an eCommerce business go into their market and completely crush it. The very first thing is making sure that this funnel is in place in their business and they have all of this backend and all these upsells and these ways to squeeze as much money and ROI out of that ad spend as possible. Then it’s looking at story-based copy and really helping them in terms of telling a story around the product and it doesn’t just become a commodity where they’re looking for the lowest price. Then attaching a cause to that and really kind of creating more Goodwill and higher conversion rates across the board and then making sure that that product has demonstrable value, that you can demonstrate it, show its unique features, or show it actually working in how it works and then you can make sure that your eCommerce product ticks all those boxes, has that funnel set out. Then you will go out there and you will crush it.
To design is much more than simply to assemble, to order, or even to edit: it is to add value and meaning, to illuminate, to simplify.
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