I had a difficult conversation again last week with an online retailer who was struggling with the high acquisition costs of selling via online marketplaces (eBay, Amazon, etc.) but not putting the time and effort into his own site because it hadn’t generated enough sales.
He’d given up on expensive paid search marketing, could never find the time to promote new products on social media and — the ultimate sin — never even considered email marketing.
The little traffic he did generate came from affiliate partners — although much of this came from price comparison sites, which meant most sales were based on a strategy of heavy discounting and wafer-thin margins.
In short, the online retailer had no real relationships with his customers — their loyalty was with the online marketplaces and affiliate sites, and he only picked up the crumbs because he fought hard to be the cheapest. While this is a common business strategy for many online retailers, it’s not an easy or very lucrative path to success.
Note: Volume sales, if not managed correctly, can be incredibly expensive. The more you sell, the more staff you need to pick and pack, the more warehouse space you need, and the more costs add up and squeeze those tiny margins.
Acquisition vs. Retention
The online retailer had thrown all his marketing eggs into one strategic basket and focused his efforts entirely on the acquisition, with nothing on retention.
Note: Acquisition marketing is always more expensive than retention marketing.
The retailer had two options:
- Continue down the same path and hope his competition would allow him the space to make a decent margin on a higher volume of sales (he worked in an incredibly competitive space, so this wasn’t likely to happen).
- Start looking at a strategy to retain and grow his own-site sales — yep, you’ve guessed it — through email marketing.
Start Small and Build
Even though sales via his site were limited, every customer engagement gave him the opportunity to build a potentially lucrative relationship and increase his margins by bypassing those expensive acquisition costs.
Note: Too many online businesses believe they have to have a substantial list in order to start email marketing. To the contrary, if you have a handful of customers, you have enough people to start marketing to. They have already made a commitment to your business, so why would you ignore them?
Insulate Your Business
Think of email marketing as insulation for your business. Like a roof on a house, it traps the heat (cash flow) inside a business and prevents the rain (unwarranted expenses) from coming in.
You wouldn’t build a house without a roof, so why would you build a website without email marketing?
How have you used email marketing to build relationships and take ownership of your business and its profits? Share your comments below: