Never Lose Sight of Your ROI

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Every day more Internet retailers go belly up. Does this mean the Internet is a failure as a venue for consumer sales?


Of course not. There are many companies well positioned to make the Internet a major source of retail income. It's just that most of these companies are not dot-coms. They are bricks-and-mortars.


In the rush to Internet riches, the dot-coms lost sight of some fundamental business and marketing rules. They thought the Web was such a hot, new technology and such a convenient way of shopping that the old rules no longer applied.


Most Internet-only retailers rushed to market without the infrastructure that bricks-and-mortar stores already have in place. Don't expect to see a business go from zero to 100 million overnight. Successful businesses are built over time.


That is why the bricks-and-mortars are in the perfect spot to succeed on the Internet. They have established infrastructure, established relationships with their customers and a wealth of customer data accumulated.


Traditional retailers with mass-market goods are made for Web sales. They have standardized products that, once bought in the real world, can be confidently reordered electronically. They have customer service elements such as return policies in place and a physical presence that a customer can go to for hands-on assistance.


Moving part of their businesses to the Internet will result in cost savings from:


• The need for fewer stores and less labor.


• Better product traffic control.


• Simplified transactions.


• Less theft.


• Use of the site as an advertising medium.


For a pure play dot-com to thrive on the Web, it must grow deliberately, with product offerings, infrastructure and customer base growing simultaneously.


A customer having a bad experience usually means the loss of that customer forever. Too many customers with bad experiences can mean the failure of the business. Most online retailers have been extremely ill-prepared in the area of customer service and fulfillment.


The other sure killer is burning all the cash on hand with poor marketing decisions.


Throwing millions of dollars at Super Bowl advertisements, radio ads and magazine ads caused the demise of many of these companies. They wound up with no money and few customers because the campaigns were unable to achieve an acceptable return on investment.


Spending millions of dollars to acquire hundreds of customers is a recipe for bankruptcy. It is mandatory that an acceptable ROI for customer acquisitions/transactions be projected before a campaign begins and that the campaign is constantly optimized to deliver that ROI.


Customer relationships must be built slowly. The dynamic really has not changed in more than 100 years, from the days of the neighborhood store.


I come from a ninth-generation retail background. My family ran a bakery for many years. They got to know their customers, their likes and dislikes. They provided the little extras like a free cookie here and there for children, an extra roll or two in an order and exchanging products with no questions if a customer was unhappy. Sure, it is partly marketing. It is also becoming part of your customers' lives.


You build a customer base on the Internet the same way, with effective marketing backed up by integrity, quality and service. You invite the customers in, you get to know them, you offer them the things they want and you make sure they are happy with every interaction. You deliver a quality product when and how you say you will deliver it and, if something goes wrong, you quickly make it right.


This is the basis of effective opt-in e-mail campaigns and banner offers. These outreaches are more targeted, more effective and less costly than 30 seconds in the middle of a football game, even if it is the biggest one of the year.


How many people do you think were saying to themselves while watching the Super Bowl, "Nice ad, but who are these guys?"


Opt-in is also a central tenet of this sort of relationship-building. The customer must want to be approached and must be allowed to indicate when and how the approach is made. Indiscriminate data-gathering and unsolicited spamming are much more likely to turn a potential buyer away than to create a loyal customer.


The point is that the Internet must emulate the real world when it comes to customer relationship management. Take advantage of the elements that make the Internet unique, that make it more convenient and easy to use. However, do not lose sight of the fundamentals of CRM.


The Internet provides new tools for attracting and retaining customers, but the basic dynamic is still the same. You must have integrity. You must offer quality products. You must give your customers the best experience possible with superior service. You cannot leapfrog over any of these steps.


Here are the steps for building and marketing a successful Internet start-up retail site:


• Start small and build out, emphasizing ROI in every step.


• Get to know your customers.


• Make sure you can deliver what you promise.


• Target your advertising/marketing for extreme ROI.


a. Opt-in e-mail and on-site offers can both be effective and have a low cost per acquisition.


b. Advertise in smaller, localized venues that are less expensive and more targeted to your core customer and, therefore, likely to deliver an acceptable ROI.


• Become more aggressive as your customer base and revenues grow.


• Add product offerings as your volume justifies.


• Never lose sight of the neighborhood store analogy to CRM.


You have probably realized by now that ROI is the key. It seems obvious until you look at all the crash and burn going on. Too many businesses talked about ROI but never figured out how to achieve it. The winners will not only learn the lesson; they will put it into practice.


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