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Well, hello, and welcome to this week's edition of the eCommercer.
There's a stage most growing businesses reach where spending money starts to feel like progress. The bigger the invoice looks, the more serious the decision feels. Like bringing in the specialist can feel like the grown-up move.
Sometimes it is. But not always.
And that's roughly where this week's conversation starts.
Cem Atik (it's pronounced "Sam") co-runs Harucon Ventures out of Düsseldorf with his partner Tobias. They work with ecommerce brands in the UK and across the German-speaking markets to help them scale.
100,000 people who would have said it for free
One of the brands Harucon works with has gone from $15m to $50m in revenue. That's not bad growth! A few weeks before we recorded, the founder mentioned they'd just signed a contract with an outside firm, $15,000, to tell them what they were doing wrong.
Cem asked him why.
| | "You have 100,000 customers to ask what you're doing wrong. Why are you hiring a company?"
Cem Atik |
The founder's answer was that this felt like the next step. Cem wanted to know who had decided it was the next step, because from where he was sitting, all it did was add cost to the business.
Sure, the consultancy has an impressive client list. But their 100,000 customers have something better, which is that they actually bought the product. Some of them will have sent it back. Some will never have ordered again. Every one of those is insight, already paid for and already sitting in the business.
So how much would it cost you to ring thirty of them this month?
The five numbers
Cem opens every client call with the same question, which is what your customer acquisition cost to lifetime value ratio is. He asks it, by his own admission, mainly to find out whether the person opposite him knows.
I probed, and these are his 5 key metrics:
Customer acquisition cost, average order value, new customer share, lifetime value and repurchase rate.
They aren't the sacred numbers, but they do need to be understood together, as a whole. Take a brand that complains its acquisition cost is climbing. If the repurchase rate is 40%, that isn't a problem worth a meeting. If it's 10 or 15%, it very much is. Same number, opposite conclusion, and you can't tell which one you're looking at without the other figure sitting next to it.
Which brings us to the part of his argument I think is right and a little unfashionable. Paid marketing does not stay profitable forever.
| | "You cannot stay always profitable with your marketing if you just reached 100, 150, 200 million. Marketing is not made for that."
Cem Atik |
The profit, in his view, comes from retention, conversion rate and the unglamorous work on your own site.
Cut the feelings out of it
His advice for finding the problem is pretty blunt. Your brand is your baby, and so there's a lot of emotion in it, and that emotion is what stops you reading the data honestly. Return rate sitting at 20%? Phone the customers and ask them why they sent it back. Don't build the dashboard first, and don't hire the expert first.
He described a call with a partner brand whose repurchase rate collapsed after the third order. Nobody could work out why. The data showed no gifts, no welcome series, no emails, no contact of any kind after that first purchase.
| | "It takes us five minutes to fix something you've been thinking about for two or three weeks."
Cem Atik |
A bit brutal, maybe. Usually true, though.
When you think you've cracked it
The other mistake Cem names is ego, especially if your turnover is between $2m and $5m. I know what he means, too.
When we had our first ecommerce hit and were doing millions online, I genuinely believed I'd figured it out. So we took the code behind Jersey Beauty Company, copied it, and launched Jersey Gift Company on the assumption that anything we touched would work. It died in about three weeks.
Jim Collins has a phrase in Good to Great that helped me a lot, which is that great leaders confront the brutal facts while holding on to a belief the future can be different. Both halves matter. The brutal facts on their own are just misery. The belief on its own is what built Jersey Gift Company.
Cem's version of confronting the brutal facts is cheaper than most. Go and ask the people who already gave you their money.
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