Estimated reading time: 10 minutes
How do you plan your path to a successful eCommerce business? It's not the same question as how to build and launch an eCommerce website. It's not about the technical details of choosing a platform and solid hosting before building it out.
It's more than selecting the perfect domain name.
Beginning a business goes beyond brand and identity, but they're part of the journey too — along with the legal and financial steps that will set you apart from competitors and protect you as a full-fledged business startup.
A carefully considered business plan is part of the answer.
Traditional business fundamentals always apply — they are foundational. You should have them in hand or be ready to learn fast — sink or swim.
Developing a marketing strategy right from the start is crucial and natural.
Your marketing plan will develop organically from your business plan. Together, your business and marketing plans will shape — and more importantly, limit — the tools, services, and software you select to build your web presence.
All these things are important. We've covered them in other posts, podcasts, and webinars. We have a curated list of all this material for you on our “Getting Started in eCommerce” page.
But wait — don't go there! Not yet.
You can get lost in that forest quickly. Too quickly.
If you are still planning your plan — or “pre-planning” — this is the place to start. You have some ideas about branding and maybe a trade name picked out. Your business and marketing plans are in process or ready to emerge. Now is the time to take a breath and pause. Plan how you're going to pull all your planning together.
As you create your business and brainstorm your brand, but before you map out the technical details of an online storefront, focus on these five questions. They will take you on a deep dive, so deeply consider the responses you come up with. In the end, you should gain clarity and focus about who you and your customers are, what you are selling, where your target audience is, how you will sell and support your customers and your growth, and when you will know you have defined and reached an attainable minimum viable business or MVB.
Five Questions for Planning a New eCommerce Business
- What, where, how and to whom will you sell? Will you sell a product or a service? Can it be sold by subscription, through memberships, or event fees? Is your primary audience or customer base defined by geography and/or affinity? Do you have a local, regional, national, or international market? How small can you start and still turn a profit? How big can you grow? What will growth cost? How big do you want to become? These are the questions that define you and your customers. Who are they? What will you offer them — and how will you offer it to them?
- How can you invite and sustain a long-term relationship with repeat customers? Do your product or service offerings have potential for periodic repetition or renewal? Will you have the capacity to serve a repeat customer base? Will you be able to scale up your capacity to serve a growing customer base? Can you expect a high rate of churn. How will you win high customer loyalty? What can you do to you minimize churn and maximize loyalty? These are questions about the purchases you an anticipate will be made over the lifetime of a customer's relationship with you. The answers directly shape your long-term revenue, potential for growth, and the up-front costs you can risk for anticipated rewards later on.
- What are the ideal (and realistic) order sizes or average amount of spending per customer, per purchase? How much can you expect customers to purchase, on average? How can you maximize that figure? How will you met customer expectations and deliver goods or services? This is a question about the short term revenue you can expect and the inventory you will need if you have a specific target number of customer purchases per day, week, month, quarter, and year. What is the smallest number that will still turn a profit? At what point do you break even? At the other extreme, at what point would you have too many orders to fulfill? These questions touch your inventory and supply chain needs as well as your costs and profit margins. How much product you have and can expect to sell will direct the prices you set and the discounts you can offer.
- What kind of customer support will be needed? How will you deal with product returns, requests for refunds, service and subscription cancellation, disappointed and angry customers? How much capacity should you have to deal with these losses, and how can you make customer support a service that wins back and retains people who might otherwise never return? Are you going to tackle support work yourself, outsource it, or hire and train people who will be representing your brand under potentially difficult and draining pressures?
- What kind of marketing and sales system will best support the most important and unique features of your business? Answering the four previous questions will reveal your business's unique and essential qualities. Everything mentioned above touches and should shape the vital core of your business plan. Now you are ready to face the largely technical questions about the tools you need to build and/or buy, although it is imperative not to compartmentalize your software and website away from the human and bottom-line business questions.
Try putting the question this way:
What tools do I need to reach my target audience, give them a delightful purchasing experience, encourage them to maximize their orders and come back for more — while handling their problems and complaints with efficiency and grace?
Example: An Online Learning Project
Suppose you want to get into EduTech and create an online course for people starting out in eCommerce. Apart from the specific details of the course options and the learning management software (LMS) you'd need to use, our first question directs us to focus on the product. It's a digital product but also a service in this case — a productized service. We'd have to start with at least one course sold to potentially anyone online who can read English, unless it's going to be multilingual. (That might be a good option to explore later on.) We'd have to define our target audience to focus the course materials and how we market them. Maybe it would be focused on building a business plan or walking people who already have a plan through the process of setting up a store with their own WooCommerce site.
A digital product or productized service can be sold with a one-time fee or by subscription to any number of customers.
The ways a digital product can be sold are very flexible. Courses for online learning may have a certain shelf life, but you can always update and re-issue them. To continue with this example, we could offer one flat fee for entry to our course and all additional courses we plan to release — a deal that's good for a year or never expires. We could offer a lower fee for a single course or a monthly to annual subscription to all courses. Adding access to personal mentoring and a community forum would incentive a premium pricing option.
We might build toward a multi-tier pricing approach as we develop courses, but we could start with single fee for the first course in a series we plan to develop next. Maybe we'd offer a free, short primer that prepares people for the main course and puts them in a position to see its value and relevance. This introductory course should also serve to build trust and loyalty in us as experts who can help new business owners. The free course might filter out people who aren't ready and who would not be happy paying for a course they're not prepared to complete.
Once we have a product and pricing structure, we can do the math and calculate the revenue we can anticipate based on the precise number of customers we need to generate enough revenue to cover our anticipated costs.
Turning sales into relationship-building
It's already become clear that selling an online course leads naturally toward a learner-teacher relationship. You're going to have customers with questions and needs generated by the product you're selling. So, offering them additional paid access to forums, live webinars, recorded videos, and mentoring might be necessary to satisfy both the customer and your need not to get bogged down in support. A mix of self-help and live assistance should help balance the load and defray costs.
The possibility of repeat customers in this business model is very high, but this comes with a high responsibility too. Your customers will be loyal as long as they see you as a trusted expert reliably offering information of value to them. If they expect new courses to be rolled out every month or quarter, you need to meet that expectation.
Dealing with — and accepting — churn
You may see a high churn rate if you offer free, entry-level product options. You may get a very high number of subscribers to a free course delivered by email and/or a public part of your website — but maybe only 10% or fewer will convert to be paying customers no matter how good your product and marketing is. This will be a point of constant concern and experimentation where you learn what improves conversion and what hurts it — but it may be best, in the end, to accept that a freemium model means always having a high churn rate. At least the people who don't convert from your free to paid option will become very familiar with your brand and offerings
Selling a product like a course where failure is a possibility presents a special challenge
In our example of selling access to an online course, there is a unique challenge that comes with it. You're creating the possibility that some customers will pay for the course and fail to finish it. Or, if there is a grade or score involved or any kind of assessment at the end, you are going to have some unhappy customers or people who simply exit and do not come back. Messaging that sets expectations well would be key.
It would be great to have an automated system for following up with people who buy but do not complete the course. You'll want to learn why they didn't finish and what might bring them back. And you'll want your customer support role to be one that's more coach-like than most. You may always have some customers coming away from your course feeling less prepared and more uncertain of what to do next. This is a problem or an opportunity, depending on how you prepare for it.
Benchmarking — and maximizing — your sales potential
With a productized service like online learning, it's not like a store where customers might select any number of products to add to their cart. Maybe there's no cart. Or, maybe you should have some complementary products to sell with your course subscriptions. Maybe eBooks — another great entry point for people who want to try before they buy. Maybe tickets to special events like workshops and webinars would be a good additional source of revenue and attention.
Whatever you do, you will soon find out what your churn rate is and how much an average customer is willing to pay for your goods and services. Once you have that benchmark, you can try to improve it and monitor upticks and declines in your sales relative to the established baseline.
Technical implementation is a means to an end: happy people — your customers!
Now comes the technical part of planning your new eCommerce business.
Will you use self-hosted software or hosted service platforms for content management and marketing? Are they built to be mobile-first (easy to use on a phone as well as a desktop computer) — and fast? Do you need a subscription or product-focused eCommerce platform? Do you need to manage events and/or members/subscriber? Will you try to build a community of fans with a forum or social media? WIll you feature a social network of your own, restricted to your premium subscribers? Do you need an email newsletter with automated drip campaigns, a customer support desk or ticketing system?
Can these systems be integrated so customer support can see the whole purchase and interaction history of someone who contacts them? When someone contacts you, do you know if they've already a customer or a recent newsletter subscriber? How will you avoid creating silos of data and even use customer data to shape and refine your systems and practices? How much functionality tied to your website is too much? How much will it cost? Can you manage it yourself or will you delegate technical responsibilities to others?
Once you find yourself in a position to ask and begin answering these questions, you are closing in on the development phase of your eCommerce site. Its launch may not be in sight yet, but you'll know what steps you need to take — and the questions you need to answer — to get there.