10 Immutable Laws of Driving Online Revenue for Start Up E-Commerce Brands

We’ve been talking with a lot of startups. Lots. Many of these potential clients used to work for some of the big, established brands we work with. They find that doing marketing for a startup is entirely different from marketing for an established brand. With little brand awareness and almost no brand equity among consumers, a new brand has to create the kind of awareness that an established brand takes entirely for granted. Where with an established brand, our online work tends to focus on “harvesting” sales that are already out there, for a new brand, it’s more about creating demand.

Here are 10 things that we’ve learned over the years that you should know if you’re launching a startup e-commerce brand.

1. Count on Losing Money in Year One.

Your brand is going to lose money out of the gate. It just will. Then you’ll have a shot at breaking even in year two… if you’re lucky. That means you need to raise enough capital to spend during year one for building a brand and not simply trying to harvest sales that might be lurking out there. You need to set the expectation early and often with your investors that investing in the long-term health of the brand is more important than short-term gains. If you go for the short-term, you’ll sub-optimize. For example, by becoming too promotional too soon, you could do lasting damage to the brand.

2. Investment Spend on Marketing.

You’re building a brand and that means investing in your brand. You don’t toe dip with a startup and just “see how things go.” Potential clients who are underfunded say this all the time, and it’s a HUGE red flag. If you toe dip: spending a little here and a little there, it’s going to take you 10 years to build the kind of awareness you need to be a real brand. You’ll need to spend at least 100-200% of your first year’s revenue target in marketing to build a quality brand of lasting value (unless you’re a rare exception). That means if you want to drive $200,000 in first year sales, you’ll need to spend between $200,000 to $400,000 in marketing during year one to build something that has momentum. Sure you can launch with less, but you’ve got to lower your expectations about return on investment.

3. Your Earliest Customers Will Be Your Best Friends.

Repeat purchases are critical to building a base for a successful year two. What drives repeat sales? Past customers. Your ability to maximize the lifetime value of your past customers will determine your success in year two. It’s that simple. It’s much easier to get someone who has already “voted” for your brand by purchasing from you to purchase again than to acquire a new customer. It’s always less expensive on a cost/acquisition basis. SmartClick typically will set up specific retargeting ad campaigns and specific email campaigns to go after past customers. Don’t make the mistake of thinking that because you’re emailing past customers you’re golden. We’re seeing a lot of newsletter type emails from brands to past customer, but that’s not really what drives sales, talking about products and price points, and yes, sometimes sales, will drive sales.

4. Make Early, Frequent, and Smart Use of Email.

Many brands are afraid of emailing too much. If your content is lame, or if you’re a one trick pony saying the same thing in the same way week after week that’s a concern. Right from the beginning, you’ll want to email every single customer with a triggered post-purchase email series. The idea is to get a customer to buy again. Why? Because you’re trying to convert a one-time customer into a loyal, lifetime customer. Then you’ll want to transition the customer into a high-frequency, long-term email program. If you’re worried about emailing too much, all you need to do is look at the unsubscribe rate for your emails. We’re always astounded when we ramp up the frequency of quality communication for a brand from 1x/month to 3x/week and we don’t see an increase in unsubscribe rate. In fact, we typically see each email drive incremental revenue in an additive way.

5. Treat Your Prospects Differently from Past Customers.

Just as past customers need their own marketing plan, prospects need a plan as well. Prospects are either past website visitors that you can retarget in many ways with advertising, or they’re past website visitors that have actually given you their email address, but not purchased. In either case, you can use retargeting and email marketing to lead a prospect down the path to conversion. Prospect targeting is never going to drive the same amount of revenue and is always going to have a higher cost/acquisition than targeting past customers. However, you’ll never have past customers if you don’t target prospects. Why? Because targeting prospects introduces you to more customers and moves those consumers down the road towards purchase.

6. Get Good, Early PR Placements.

This is the least self-serving of all our points here, because it’s undeniable: The startups we’ve worked with who launched with a strong PR program are infinitely more successful than those who launch with just us. When we talk about PR, we’re not talking about a regional PR agency in Topeka, or your friend who used to work at that PR agency and has some time on her hands, or even that big-name Madison Avenue agency you can’t afford anyway. No, we’re talking about a respected, small, niche Madison Avenue agency that specializes in your category. We can recommend a few. For a few thousand dollars a month, you can get someone who has real relationships with editors at newspapers, magazines, and television networks. It’s not crazy to expect that their relationships can get you into the WSJ, New York Times, and Today Show at least once in year one.

7. Realize That Even Great Brands Will Go on Sale Once in A While.

We’re convinced through copy testing that the two most powerful words in consumers’ minds are “New” and “Sale” (in that order). As a new brand you’ve got “New” covered, so don’t forget to do a sale once in awhile. Even though year one should be about building a brand, you’ve got to move inventory. You should at least create the perception of 3-4 sales over the course of year one. Even Tiffany’s has sales. They won’t kill your brand. We’re not recommending 50-70% off Crazy Eddie sales, but seasonal 25% off sales will create news that’s critical for driving retargeting and email revenue.

8. Price Your Product at or Below The Competition.

Here’s why pricing for a new brand is critical: If your products aren’t priced at or below competitors, and at or below retail prices available for your products on Amazon or Google Shopping, you’re not going to sell much. First of all, your brand is new, why take a chance on you versus an established brand? Second, consumers shop around. They’re not stupid. If the product costs $40 on your website and $35 on Amazon, they’re going to go with Amazon. That said, if you can keep your products off Amazon, or at least launch your own webstore first, you might be able to charge a premium. This is especially true if your product is rare or your brand is perceived as being much higher quality than any of your competitors.

9. Accept That Free Shipping is a Reality.

Finally, no matter how cool your brand is, you’re competing in a world of “Free Shipping” defined by Amazon and a zillion other online retailers. Consumers have come to expect it. If your product is at parity with other products, and if you’re charging anything other than free shipping, you won’t sell a dime. Don’t be fooled into thinking that “Free shipping with a minimum order of $___” is the same as “Free Shipping.” It’s not. We recently tested a move to free shipping with a client, and the incremental sales gained by the traffic increase with free shipping far out paced the profit gained by requiring a minimum order. Sure some orders will be less profitable, but you’re giving consumers one less reason to jump to Amazon or Google Shopping to buy your same product or a competitors’.

10. Your Website Must NOT Suck.

Your website may be the cleanest, most slickly branded site on the planet. But if it’s not optimized to selling online you’re going to have a hard time selling online. If the page a consumer lands on from an ad isn’t relevant, you won’t sell anything. If it’s too hard to figure out what the brand or product is all about, you won’t sell anything. Consumers won’t explore the site deeply if it’s slow to load or has poor navigation. If the site is the kind of “clean” site so many designers and product visionaries like, it’s likely not going to be a good e-commerce site. Why? Because the things that make a site “cluttered,” like links, buttons, bursts, and boxes are the things that expand the situational relevance to a wide range of need states to reign in customers who arrive on your site with a staggering array of needs. One consumer might be looking for video testimonial content, while another wants to know how much shipping is, while another is looking for new items, and if your site isn’t screaming to each of them, it’s not going to capture all the sales it could.