Profit or Growth?
Depending on where your business is in the ecommerce cycle, people need to run a different strategy at any given time. If your business is a newcomer in the market and isn’t well established yet then you really ought to focus more on business growth above anything else and put all of the profit back into the business and perhaps more.
What about those people that prefer a profitable marketing strategy? Well then ask yourself – would you prefer to have a business taking $2000 a month and yielding a 50 percent profit or would you rather have a business doing $200,000 per month and making 10 percent profit? Which business would you rather be on?
If you already have a good market share then you might want to look at tweaking things to make the business more profitable such as increasing conversion rates, per visitor value and average sale value. No matter what level your ecommerce business is at, the important thing is that you plan your marketing strategy and stick with it for a definite period of time. Strive to get consistent results and decide which strategies actually work best for your business.
When starting out or planning your marketing strategy for the business year, you want to think about which strategy you are going to run. Are you going for growth in the next 12 months or profit? If your goal is business growth then your marketing strategy will be tied around acquiring as many sales as possible regardless of how much profit you end up with.
Although it might sound surprising, it’s not unusual for a number huge online retail ecommerce businesses to spend more in their efforts to acquire a sale than what they actually make out of it. For instance, they may spend $2 securing a $1 sale but why in the world would they do such a thing? Well there are certainly a number of good reasons which include:
- Quickly increasing market share
- Preparations for a buy out
- High average lifetime client value – businesses may lose money on the front end but ultimately yield a good profit on the back end.
Don’t be caught in the trap of thinking that running a profitable model is a must when starting your own ecommerce business. It is better to ask yourself if there are any opportunities your business is missing out on. If you are going to run the profit model without enough substantial capital upfront, what is it actually costing you?
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