Already there have been quite a number of articles and open letters written about Taggle shutting their shop and what direction the existing online retailers are moving.
I was not surprised learning about the burn rates for Myntra, Snapdeal(Pluggd.in) etc. Not too sure about the margins that they make on the each sale. Considering the price of acquisitions for each customer coming in the range of Rs. 1200 to Rs. 2500, I am sure about the revenue generated by that customer must be some thing out of this world – yeah right!
The Ad Networks and the Publishers are having their best sales year. Have few friends (Media Sales) who had completed their annual sales target by the end of the second quarter of this year. Dot com players have been pushing hard to earn and grow their marketing lists.
Essentially, it has been a competition among the players to get more and more buyers to register on their website. Considering the current situation every player has been able collect huge numbers. However if we look a bit deeper the calculation of revenue per user has gone for a complete toss. Loyalty towards a retailer means nothing to the consumer as everyone’s initial proposition was and is that I am cheaper than the other guy. In the greed to sell more every retailer took up more orders than they could actually deliver resulting in order cancellations, irritated customers, bad customer reviews.
Net Result – One-night stands or, sour relationships.
The price of acquisition per customer increases many fold the moment you have new customers who are irate. Because, they are not likely to shop again. They are Lost Customers.
How many orders can i fulfill ensuring customer delight in at least 90% cases? This is the math, which needs to be done each morning & not how many orders can I ship today and which ones?
If this is the scenario than maybe we are venturing a decade back when dot coms tried to “Get BIG fast” and crashed by the dozen. According to dot-com theory, an Internet company’s survival depended on expanding its customer base as rapidly as possible, even if it produced large annual losses. For instance, Google and Amazon did not see any profit in their first years. But their timing was impeccable and they made it. Both the companies also ensured Customer satisfaction, which brought loyal customers to them.
A backward calculation of the ROI expected per sale SKU can help determine the maximum cost per acquisition which can be invested. Going beyond this figure would mean eating away not only the marketing bucks but also the operational cost to ensure smoother operations.
It is also a fact that the cost per acquisition is not going to be the same at all times. Infact it is going to be lower- The primary reason being either few players would crash or dry up their marketing bucks . As it is going to be the last man standing who shall reap the benefits of calculated spends and ensuring customer satisfaction.
Timely interventions bundled with relevant communication to the right audience are always a killer combo. Yes it does require some efforts but it pays having the right mix of Profitability and Growth.
Soon we will be posting more strategic initiatives that a marketer could take up to achieve the mix.