One of the many things I’ve noticed about having worked with E-commerce businesses is that it’s important to understand the effects of pricing on margins.
Pricing is a complicated business that switches from a strategic to tactical decisions on a regular basis. Price too high in relation to your competition and you could price yourself out of the market. Price too low and you could drive yourself out of business as you struggle to make up your profits on volume.
At the same time, deciding to run loss-leaders and sales is a very tactical decision that can have long-term strategic effects. If you have a large sale every month, you can drive your customers to ‘buy the sale’. At the same time, not selling your excess inventory can cause cash-flow problems.
Learning how to balance this often requires both experience in the industry as well as an understanding of your overall strategy. Sometimes all that you need is an understanding ear.
While doing business or taking on any project, I always (consciously or unconsciously) refer to a small equation in my mind. It’s what is used as a headline and it basically states that the Result that you desire comes from the amount of time, money and expertise you are able to devote to the project.
These are the 3 major leverage points / inputs available, and if you reduce any one such input, you’ll need to increase the other(s).
So to finish a project quicker, you’ll need to increase the amount of money you spend on it and the expertise e.g. instead of buying stock photography and touching it up, you hire a professional photographer.
So when taking on a project, I like to consider the options available including:
– can I do it in-house or should I hire someone?
– how much would it cost to hire someone?
– do I go with someone cheap who might need more guidance or someone expensive who knows what he wants?
– how flexible is the final result? What’s the minimum acceptable quality?
And thus, from that simple equation, a variety of potential solutions appear quite often.
Well, the main business has really shot off the charts, with growth currently trending in at about 70% y-o-y. Which is damn good, considering this is year 3 and after the XMas season,where we normally expect a drop-off. We’ll have to see how February holds up.
Our second venture is currently on-hold, while we wait for our merchant processor to finish with the application submission. Once that’s done, we’ll be ready to heavily market it. It’s looking to do well even now, with minimal marketing and using only PayPal we’ve managed a few sales already.
That sadly puts the consulting business back on the backburner. Too much going on on the front end to deal with hunting down clients.
Sometimes, it’s worth paying for expertise and experience. Having worked in the industry for a while, you gather not only experience but contacts.
Here’s a real world example:
Recently, for the new business, we had to create a new logo. That’s pretty common theme, especially if you’re starting out. Using some contacts we had, we got it done within a week and 4 round of e-mail exchanges. Total cost? US$50 and probably 5 hours.
An acquaintance recently undertook to redo his logo as well. He went direct to an agency which proceeded to put together his new logo for him. Great logo, spot-on correct in 2 tries. Cost? CAD$1,500.
That’s not to say he was cheated – different levels of expertise in the designer / agencies part, different amount of time and dedication and the desired quality of the finished product all play a part. Our logo is good – his is great. Then again, we only wanted / needed a good logo.
At the end of the day, the trade off is something the client needs to decide on – and then inform us. From there, it’s simple enough to judge the correct parties to employ.
I’m a Marketing Generalist. Through a variety of past jobs and experiences, I’ve had experience in both offline and online marketing, in both above and below the fold programs. While the last few years have been focused on e-commerce companies, even Internet companies can benefit from an offline presence.
This experience is one of the reasons why I’m such a good fit for small & medium businesses and as a consultant – I know a little about most aspects of marketing and can put together plans that maximise the often limited budget available. And since I’m familiar with most areas, I’m not going to push you down a particular path just because that’s what I’m good at.
So when don’t you want a generalist? When you already have a good marketing plan and know what you want and have a decent budget. Or put simply, when you can afford to hire the specialist to work in his area, and only his area.
If you’re going to spend $100,000 on a single advertising campaign, it certainly behooves you to hire a good advertising agency. They have the knowledge, ability and expertise to get you the best return on your money possible for that campaign.
On the other hand, if you only have $100,000 for your entire budget and need to split it across all your marketing initiatives (SEO, SEM, offline advertising, Public Relations, etc.) then a generalist might just be what you’re looking for. We won’t suck up your entire budget in one area of focus and you’ll be able to get what you need before the law of diminishing returns kick in.
Of course, concentration is also important,and we’ll cover that in another post.
Unfortunately, editing this site further has taken a backseat to actual work. Currently working on the marketing plan for Collins Harper and launching a new Magento site.
Between those two factors, updating this site has got to take a break while we get to work finishing up this area. Always seems that way really, we find some time to update the site and then suddenly, we’re snowed under again.
PDB Sales is a Vancouver-based marketing company specialising in small and medium businesses and E-commerce marketing.
If you’re a Small & Medium Business that requires marketing strategy consulting or training or intend to explore E-commerce marketing, you will want to talk to us.
Our small size provides great flexibility and highly competitive rates, while our personal experience at running e-commerce and small and medium businesses allows us to bring real, effective marketing strategies and tactics to your business.