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Read expert articles with insights about e-commerce profitability from analyzing thousands of e-commerce businesses' data.
One-Click Upselling to Boost WooCommerce Sales

Profit Optimization

One-Click Upselling to Boost WooCommerce Sales
Learning how to create an upsell strategy in WooCommerce means you can instantly encourage your customers to purchase more items from your store. It’s a great way to increase revenue by tempting your customers before they convert or just after they’ve made a purchase. With upselling, you offer a related product or service alongside the main product the customer has purchased from your store. Since the item is already related to what your customer is buying, they’re more likely to consider purchasing it. How One-Click Upselling Works One-click upselling is a common strategy for any business looking to boost sales for WooCommerce. Through WooCommerce, the easiest way to implement an upselling strategy is to simply use a plugin to offer your customers something through a pop-up or recommendation on the cart page. You can also provide additional post-purchase offers on the thank-you page. When your customer goes through the checkout, they’re offered something else to accompany the items in their basket by your plugin. This item will be related to the existing products your customer is already buying to ensure they’re more likely to buy. With “one-click” upsells, your customer can simply press one button to add the item to their basket without having to go back through multiple pages on your website. Upselling is considered to be an easy tactic for Shopify or WooCommerce sellers because it takes advantage of the fact your customer is already in the latest stages of their buying journey. How to Create an Upsell Strategy in WooCommerce Creating an upselling strategy in WooCommerce is simpler than it seems, thanks to the wide range of plugins available to help you. Simply search for an “upsell” plugin in the WooCommerce app store and install the one you want to use, then follow these steps: Create a funnel Decide whether you’re going to offer your upsell before or after the purchase and what the offer is going to look like in order to design your WooCommerce sales funnel. In some cases, you can even provide a series of different offers with the same app, but be careful not to overwhelm your customer.Add your upsell offer Link in your upsell offer. For instance, you might suggest specific products to go with certain items in your product catalog or certain items from a list of items commonly bought together. To help you decide, learn about the best products to sell online.Test and evaluate Constantly test the performance of your upsell offer, and determine whether you might need to make changes. A/B testing different offers and strategies can improve your profit levels significantly. Within three simple steps, you’ll have everything you need to start upselling to your audience. Why Should You Use a One-Click Upsell Strategy? An upselling strategy is a valuable tool to increase your website orders and boost the value of your online store. There are many reasons why you might choose to embrace the one-click upsell, but some of the most common include: Higher average order value Upsells can help you increase the average order value for every customer who checks out through your website. You can check your WooCommerce sales report plugins to see just how much each average order increases in size.Increased revenue The more your customers purchase, the higher your revenue will be. With one-click upsell strategies, you don’t need to constantly worry as much about finding new customers. Customer satisfaction With the right upsell strategy, you can provide access to additional products and deals your customer wouldn’t want to miss out on. You can even offer bundle deals to make your customer feel like they’re getting a better offer. Plus, adding upsells to your store is straightforward, and often a lot easier than investing in extra sales and marketing tactics to increase your sales. Benefits of Post Purchase vs. Pre Purchase Upselling One of the biggest challenges of implementing upsells into your WooCommerce store is figuring out when to offer your customer an additional product. Timing is everything with this sales strategy, and the two most prominent options are “pre-sale” or “post-sale”. Pre-purchase With a pre-purchase upsell, you offer your customer the extra product, deal, or bundle while they’re still on the checkout page. This means they can simply add the item to their cart before finishing their purchase, without having to worry about going through the checkout again. The key to success here is ensuring you offer the right products and don’t overwhelm your customers with too many suggestions. If you’re too pushy, you could drive your customer away. Post-purchase The post-purchase upsell allows you to offer something to your customer after they’ve finished their purchase and left your WooCommerce payment gateway. You can still allow your customer to take advantage of the same checkout form they’ve just completed, so they don’t have to pay for additional shipping costs or enter details again. The benefit of this strategy is your customer has already made a purchase, so you don’t risk losing out on anything. However, your customers may not pay as much attention to offers after the purchase is completed. You can check analytics on WooCommerce profit analysis plugins, or other WooCommerce analytics, to see which methods work best for your brand.
Using Amazon ROI to Maximize Profit Margins

Profit Optimization

Using Amazon ROI to Maximize Profit Margins
Return on investment (ROI) is a measure of the efficiency of an investment, usually expressed as a percentage of the investment's original cost. It compares the amount of money gained or lost on an investment relative to the amount of money invested. The higher the ROI, the more efficient the investment. Difference Between ROI and Profit Margin One of the most important distinctions in business is the difference between ROI and profit margin. They may sound similar, but these two concepts are actually quite different. ROI measures how much money you make on your investment, while profit margin measures how much you make on each dollar of sales. In other words, ROI tells you how efficient your investment is, while profit margin tells you how efficiently your company converts revenue into profits. COGS, or the costs of goods sold, is another important metric that Amazon merchants should keep their eyes on. Check out this guide to see how to calculate cogs for your Amazon business. How to Calculate ROI and Profit Margin Calculating ROI and profit margin are essential for all businesses, regardless of their size or industry. The first step is to calculate your ROI, which is expressed as a percentage of the profit you earn on your investment. This is calculated by subtracting the initial value of an investment from the final value of an investment. For example, let's say your business invested $2,000 in advertising. One year later, the advertisement campaign generated $10,000 in profits. Therefore, the net profit was +$8,000. With these numbers, the ROI calculation would be: (8,000/2,000) x 100 = 400 This means that the initial investment in the advertisement campaign generated a 400% return on investment. Once you have your ROI, you can then calculate your profit margin, which is the percentage of each dollar earned that results in profit. This can be calculated by dividing net profit by net sales. For example, let's say a business generated a profit of $10,000 from $25,000 of net sales. The ROI calculation for this would be: (10,000/25,000) x 100 = 40 In other words, the business has generated a 40% profit from $25,000 in sales. Knowing these two numbers will give you a clear picture of how efficiently your business is running and where it could improve. It will also help you make more informed decisions about where to allocate your resources. If this looks too complicated, time-consuming, or both, there is an easier way to calculate profit for Amazon merchants. To do so, check out the best profit calculators for Amazon here. Healthy ROI for Amazon FBA Sellers For Amazon FBA sellers, a healthy ROI is essential for the success of their business. Sellers need to keep track of their expenses to minimize these as much as possible and boost sales through effective marketing to ensure that their profits exceed their costs. There are a number of considerations that factor into calculating a seller's ROI, including the cost of inventory, shipping costs, and Amazon fees. So what is a good ROI for Amazon FBA sellers? An ROI of around 100% is considered sustainable. Anything lower than this is working on profit margins that are too tight, putting a business at risk. For further reading, see how to track and calculate profit on Amazon here. Amazon ROI Strategies to Maximize Profit Sellers who want a healthy ROI should focus on keeping their costs as low as possible. Sourcing products from wholesalers or manufacturers can reduce inventory acquisition costs, and shipping costs can be reduced by using a fulfillment company like Fulfillment by Amazon (FBA). Amazon fees can also be minimized by using the right selling plan and taking advantage of promotional opportunities. If you'd like further insight into how to maximize e-commerce profits, see our guide on ways to improve profit here. Or, to kick-start your earning potential, check out the best products to sell online in 2022 here.
Ways to Increase Your Profit Margin in E-Commerce

Profit Optimization

Ways to Increase Your Profit Margin in E-Commerce
Profit margin is a measure of financial performance that shows how much profit a business makes for each dollar of revenue, calculated by dividing net income by revenue. In the e-commerce space, due to the low margins typically associated with this type of business, a high profit margin is essential for profitability. An online company must be able to sell its products and services at a price that covers costs and generates a healthy profit. Ultimately, if an online entity isn't profitable, it will eventually go out of business. To help you avoid this, this article will explain why it’s important to improve profit margins and discuss strategies for doing so. 3 Types of Profit Margins There are 3 types of profit margins: Net profit margin The percentage of revenue remaining after all expenses have been paid, including interest and income tax.Gross profit margin The percentage of revenue remaining after deducting the cost of goods sold from total revenue. Operating profit margin The percentage of revenue remaining after deducting all other operating expenses from total revenue. An effective method of determining whether your profit margins are sustainable is to use a customer profitability analysis. 3 Strategies for Increasing Profit Margins 1. How to Improve Net Profit Margin (NPM) To improve your net profit margin, you'll need to focus on 3 key factors: Review your expenses and reduce them Can you negotiate a lower rate with your suppliers? Can you cut back on some of your advertising or marketing expenses? Are there any unnecessary or duplicate services you can cancel?Increase your revenue by finding new customers This can also be achieved by selling more products and services to your current customers. Can you increase your prices without causing too much backlash? Can you cross-sell additional products or services to existing customers?Track your net profit margin regularly and make adjustments as needed Change your business strategy in order to improve profitability. Don't be afraid to make tough decisions in order to protect your bottom line. A high net profit margin is a good thing—it means the company is doing well financially. 2. How to Improve Gross Profit Margin (GPM) There are a few key ways to improve your company's gross profit margin: Increase the price of the products or services that you sell This can be done by conducting a market analysis to ensure that your prices align with those of your competitors. You may also want to consider raising your prices if you have not done so recently.Reduce the cost of goods sold (COGS) This can be done by producing or purchasing products and services more efficiently. You may also want to explore alternate suppliers who can offer lower prices for the same quality product.Keep track of business expenses Keeping track of business expenses can help you ensure they are in line with your overall business strategy. Reviewing your overhead costs regularly can help you reduce them without sacrificing quality or service. A high gross profit margin means that a company sells its products or services at a higher price than it costs to produce them. 3. How to Improve Operating Profit Margin (OPM) Operating profit margin is a key metric for any business. By understanding how to improve your company's operating profit margin, you can ensure that your business runs efficiently and makes the most money possible. There are several ways to improve your operating profit margin: Look for ways to reduce spending This applies to all areas of your business, which may include renegotiating contracts with suppliers, streamlining processes, and reducing headcount.Raise prices If demand for your products or services is high, consider raising prices to increase revenue. However, be sure to do so in a way that does not alienate customers or hurt sales. Optimize processes Make sure your business is running as smoothly as possible by optimizing processes and eliminating waste. A high OPM means a company is making money on its core operations. What Is Considered a Good Profit Margin? When running an online business, there is no magic number for what is considered a good profit margin. The amount of profit that a company makes on each sale can vary depending on the industry, the products or services being offered, and the company's overhead costs. However, most businesses would like to see a profit margin of at least 10-15%.
How to Use Snapchat Ads to Boost Your E-Commerce Store

Profit Optimization

How to Use Snapchat Ads to Boost Your E-Commerce Store
Did you know that nearly 75% of Gen Z and millennials use Snapchat for at least 30 minutes every single day? With statistics like that, it goes without saying that, if you are looking for an effective advertising channel for your e-commerce business that targets younger generations, Snapchat may serve as your pot of gold at the end of the advertising rainbow. Effectiveness of Snapchat Ads Snapchat adverts are effective for many reasons, one being economies of scale. Think about the exposure your brand or product will get through a social media platform that: Is still (over 10 years after its launch) one of the top 15 most-used social media platforms in the worldHas well over 300 million active users daily Another good reason why Snapchat adverts may be beneficial to your e-commerce business is that the platform's advertising uptake has been slower than other social media platforms—making it an essentially untapped market in the bigger scheme of things. Because the uptake has been slower, Snapchat ads are also relatively cheaper than other platforms, such as advertising on TikTok. How Do Snapchat Ads Work? In short, a Snapchat advert is a vertical, full-screen video, gif, image, or cinemagraph that pops up in between a viewer's friends' stories in an attempt to acquire new customers without spending too much. If the viewer swipes up, they can interact with the ad by, for example, downloading an app. Snapchat ads are most effective when they are quirky and stylishly unpolished to reach the targeted younger audience. Cost of Snapchat Ads The good news is that you can control your Snapchat ad spend. As a result, the exact costs of advertising are difficult to bed down. It all depends on your bid amount and goal, your objectives and budget, as well as the duration of your campaign. Snapchat has a nifty ad manager tool that bases the cost of an advert on how you structure your campaign. The platform charges a cost for every 1,000 impressions (CPM) with goals-based bidding on a self-serve platform. With goals-based bidding, it's up to you to set up a maximum price for every time one of your viewers initiates an action that you've optimized your ad for. The bottom line is that you can advertise your products or services to a youth market for an estimated cost of $5 a day! Did you know that ads are not included when calculating your cost of goods sold (COGS)? Read How to Calculate COGS for Your Amazon Business to learn more. Snapchat Ad Analytics The Snapchat Insights tool tracks the number of story views your brand gets weekly and monthly, as well as how long you keep your users transfixed to your ad! You'll soon be able to see what your viewers like, and what type of ads inspire conversions from brand awareness to product sales. Statistics like these can guide your campaigns until your goals and objectives are reached. Here's what a good click-through or swipe-up rate looks like. Snapchat Pixel Snapchat Pixel—otherwise known as the Snap Pixel—is JavaScript code that will help you to measure the cross-device impact of your ad campaigns. This means that you'll be able to get exact numbers of how many of your viewers take action on your website after seeing one of your ads. In other words, Snap Pixel works really well when it comes to driving subscriptions, leads, and sales because you see beyond a single viewer's session and a single device. Snapchat is gaining momentum as the new e-commerce ad kid on the block. It is very easy to sign up and navigate, cost-effective to use and a pretty good match for your business if you are targeting younger customers. General Snapchat Ad Strategies The platform is highly flexible, giving you a wide range of advert types to choose from including collection ads, story ads, creative filters and lenses, commercials, and dynamic ads. You need to find the strategy that works best for your brand, which can be achieved by using Snapchat Insights. This tool tracks the number of story views your brand gets weekly and monthly, as well as how long you keep your users transfixed on your ad!
Revenue Analysis in E-Commerce: Benefits and Difficulties

Profit Optimization

Revenue Analysis in E-Commerce: Benefits and Difficulties
Whether you’re an established online business or new to the space, it is essential to perform financial analyses to determine whether the venture is feasible or will continue to be. This analysis should include an evaluation of the company's assets, liabilities, and cash flow. By doing this, business owners can get a clear picture of a business's financial status and make informed decisions about how to move forward. Most importantly, though, a financial analysis can help identify areas that may need improvement and how to go about rectifying them. What Is a Revenue Analysis in E-Commerce? In the context of e-commerce, a revenue analysis is a way to measure and track the amount of money a business makes from its online sales. This information can be used to help make decisions about pricing, marketing, and product development. The revenue analysis can also show how well a company's e-commerce strategy is working and identify areas where improvements should be made. By understanding how a company's revenue is generated and what influences it, businesses can make more informed decisions about where to focus their efforts to grow their business. A revenue analysis is important for all businesses, regardless of size, as it helps them to understand their sales and profits over a ‌given period. By analyzing revenue, a company can identify trends and make changes to increase sales and profits. Additionally, a profit/revenue analysis tool can help a business determine its overall financial health. Benefits of a Revenue Analysis A revenue analysis report can help you in the following ways: Benchmark your company alongside industry peers to identify opportunities and threatsPerform competitor analysis and discover which markets are the most lucrative for your business.Identify the optimal pricing strategies for your business.Recognize which products or services are most profitable, and which need to be improved or discontinued. Difficulties Associated With a Revenue Analysis Revenue analyses aren't without their difficulties, including the following: Accurate revenue analysis can be very time-dependent if conducted manually. Thankfully, an online tool like BeProfit will significantly cut time through automated functions and outputs.Revenue analyses are not always feasible if the company follows no standardization in the revenue recognition process and the basic accounting policies.For a revenue analysis to be accurate and effective, appropriate segregation of the revenue from different sources along with the different classifications of revenue are vital.Revenue analyses are complex if the revenue is derived from numerous sources, leading to variable results. Implementing Strategies From Your Analysis Revenue growth analysis is important for e-commerce businesses because it can help them predict future trends and plan ahead. By looking at past sales data, businesses can identify patterns and forecast future sales. This information can help businesses make decisions about inventory, pricing, and marketing, while a revenue trend analysis can also help them track their success and make changes to their business strategy as required.
Abandoned Carts on WooCommerce: Rates, Recovery, and Plugins

Profit Optimization

Abandoned Carts on WooCommerce: Rates, Recovery, and Plugins
When a customer leaves an online store without checking out, their items are left in an "abandoned cart." This is usually caused by the customer not having time to complete the purchase, being distracted, or encountering an error on the site. While most abandoned carts are never completed, they can still be a major source of lost revenue for online stores. Unfortunately, like any e-commerce store, WooCommerce is not exempt from experiencing online shopping cart abandonment. So maximizing your sales and keeping your business trending in the right direction, getting on top of cart abandonment is a must. How Often Are Carts Abandoned on WooCommerce? Cart abandonment is something that plagues all e-commerce stores. For WooCommerce, WordPress estimates that the rate of cart abandonment could be as high as 80%. That’s a ton of potential profit left on the table. Cart abandonment can be due to any number of reasons, such as shoppers not being able to find what they are looking for, concerns about security and privacy, or simply being overwhelmed by the number of choices available. Whichever it is, one thing is for sure: reducing shopping cart abandonment and remediating the reasons your customers aren’t fulfilling their orders will go a long way to boosting your business’s profits. WooCommerce Abandoned Cart Analytics Abandoned cart analytics is the process of tracking and analyzing data related to customers who have left items in their WooCommerce shopping carts. By understanding why customers are abandoning their carts, you can take steps to address the issue and increase your sales. We’ve mentioned the rate at which customers abandoned WooCommerce carts, but what about cart recovery? Well, according to WooCommerce, sending a simple follow-up email can help recover up to 30% of lost sales on their platform. Reasons for Abandoned Carts Unfortunately, abandoned carts are a common occurrence in online stores. Why does this happen? There are several reasons shoppers might abandon their carts, including the following: A loss of interest in the items a customer was considering buyingThe customer found a better deal on a competitor's websiteAdditional or unforeseen costs, like shipping rates, taxes, etc.The customer experienced problems with the checkout processA store’s shipping and handling fees are too highThe customer was not sure if the store was trustworthy How to Recover Abandoned Carts When a customer abandons a cart in your WooCommerce store, it’s not the end of the world. In fact, there are several ways you can go about recovering those carts and getting the sale, such as the following: Using a cart recovery plugin, like AddifyA profit/revenue analysis, like that facilitated by BeProfitAn email marketing platform, like Mailchimp How Do Plugins Help Recovery Rates? Specialized cart abandonment plugins can seriously help an online business’s recovery rates. They do this by leveraging these features: Purchase history Plugins provide the ability to react to cart abandonment by recommending items based on previous purchases.Payment portals The best plugins can even provide dynamic payment options, such as a discount coupon or free delivery.Email marketing If a customer is shopping for a specific product and then leaves the store, these plugins can land automated email-based recommendations for the same or similar products straight to a customer’s inbox.CRO optimization Some plugins will optimize your website for conversions, focusing on conversion rate optimization (CRO) best practices.Profit/revenue analysis The best digital shopping cart abandonment plugins will feature profit/revenue analysis capabilities. This allows online store owners access to valuable shopping cart abandonment statistics that can be used to reduce cart abandonment. Best Abandoned Cart Plugins for Woocommerce If you run a WooCommerce store, there are several abandoned cart plugins that can help you recover lost sales. The best of these include: Abandoned Cart Pro For WooCommerce WooCommerce Abandoned Cart Pro plugin is the ultimate solution to recover abandoned carts and increase your overall sales. It will automatically email your customers and remind them about their abandoned cart, giving you the opportunity to convert a sale that would have otherwise been lost forever and features a fully interactive dashboard and WordPress widget. Plus, it will automatically delete abandoned orders after a specified number of days to prevent your dashboard from becoming cluttered. Abandoned Cart Lite For WooCommerce Abandoned Carts Lite is lightweight, easy to use, and will help you boost your sales and profits. Unlike the Pro version, this plugin is limited to a few features. However, it will still send an email to the admin when an order is recovered and collects basic abandoned and recovered statistics that can be later viewed by the user. Although, the Lite version doesn’t collect customer emails, won’t automatically send recovery emails, nor allow users to access a full WordPress dashboard area. If you can afford the Pro version, opt for it over the Lite one. Use WooCommerce Plugins to Mitigate Cart Abandonments WooCommerce cart abandonment plugins are a behind-the-scenes remedy that will work to improve your online business’ recovery rates. Such plugins can help keep customers onsite and reduce the likelihood of them abandoning their carts - cart abandonment emails being a prime example. The best plugins for WooCommerce will also eliminate the chance of human error, making your online business more resilient to cart abandonment and profit loss than ever before.
Using Instagram With Shopify to Boost Conversions: Benefits and Guide

Profit Optimization

Using Instagram With Shopify to Boost Conversions: Benefits and Guide
The use of social media and e-commerce shopping platforms has reached an all-time high, with Instagram quickly becoming the newest social media platform for online retailers using Shopify. This omnichannel approach to business can help boost conversions by generating brand awareness, customer loyalty, and lead generation. This article looks at Instagram shopping, the benefits of linking Instagram to your Shopify store, and gives you the steps to do so. What Is Instagram Shopping? Instagram Shopping is a new form of electronic commerce that allows for the purchase of products directly from the images on an Instagram post. Purchases are made by clicking or tapping on an image, which brings up a detail page with more information about the product and its cost before directing the user to their desired payment method. This creates a very accessible shopping experience. With high engagement rates and a billion monthly active users, you’d be crazy not to leverage Instagram as a sales channel. Just be aware of Instagram's shopping fees, which are set at 5% per shipment or a flat fee of $0.40 for shipments of $8.00 or less. How to Link Shopify and Instagram Step 1: Switch Instagram Account to Professional Open the Instagram app and go to your business’ profile.From your profile, tap the ☰ icon.Tap the “Settings” option.Tap “Account” and then “Switch to Professional Account”.Select the category your business falls within, confirm your contact details, and be sure to connect the Instagram profile to your business’ Facebook Business Page. Step 2: Setup Instagram Shopping Through Facebook’s Sales Channel From your Shopify dashboard, select “Facebook sales channel” and then “Overview”.Click “Set up to start” under the “Instagram Shopping” section.Next, connect the Facebook account to the Facebook sales channel.Accept the terms and conditions and apply for a review by clicking “Request approval”. Step 3: Add Shopify Products to Instagram Once your application has been approved, reopen your business’ profile on Instagram and head back to the “Settings” section.Once there, tap “Business”, then “Shopping”, and confirm your Facebook account.Select the Shopify product catalog you’d like to connect and tap “Done”.Ensure the products are shoppable.If you need to make any changes, edit the product listing on Shopify and publish the updated version to Facebook. Benefits of Linking Shopify and Instagram Customer Reach The linking of Shopify and Instagram increases customer reach by providing a platform for users to showcase their products through a visual medium - a powerful strategy for invoking an emotional response from customers and subsequently boosting conversions. Brand Discovery Linking Shopify and Instagram increases brand discovery by integrating different marketing channels to reach a wider audience. The integration, which includes the creation of a storefront on Shopify that functions as a feed on Instagram, has been successful in driving traffic to brands' websites and increasing sales. Instagram Ads Ads on the Instagram platform are primarily illustrated with images or videos, making them an excellent choice for many types of products. Instagram ads are also an excellent way to generate leads as it's one of the few platforms that doesn't discriminate against businesses without a significant following. Hashtags Hashtags are tools for categorizing similar posts under common topics. Creating an Instagram hashtag for your Shopify products will make it easier for people to find your posts and products. If you want to draw attention to a specific product, such as a new release, you can promote the hashtag in posts on other social media sites or use paid advertising on social media that targets Instagram users. Shop Tabs Shopify business owners can optimize their online storefronts with Instagram shop tabs, making it easy for shoppers to find the product they are looking for on Instagram. Furthermore, the tabs help increase sales by reducing the need for customers to browse through search engines or social media feeds to find the products they want. If customers can't find what they're looking for, they will usually abandon their shopping carts and look elsewhere. Influencers A retailer can use influencers on Instagram to enhance their digital marketing campaign. A company could assign specific tasks such as posting pictures of the products they sell on Instagram and sharing them with their followers. The more followers an individual has, the more influence they have, and the easier it is for a business to reach a wider audience. Removing friction Instagram removes friction throughout the shopping experience, enabling a quick and easy way to purchase a product. Conversion rate experts will tell you: The easier it is to make a purchase, the higher conversion rates are likely to be. Increased Sales Through Integration With Instagram's Shopify integration, consumers can purchase products in-app without ever leaving the platform. This feature ties in the two major social media platforms to create a seamless shopping experience, which has been shown to increase sales. The in-app store allows for consumers to mix and match different product options, browse through different collections, and even preview swatches of color before making a purchase. By leveraging great-looking photos and a little effort, you can boost your site’s traffic, increase sales, and take home more profit than ever before. Couple these efforts with a profit/revenue analysis tool and you’ve got yourself a serious marketing strategy that is sure to take your online business to new heights.
Customer Profitability Analysis: Benefits, Formula, and Step-By-Step Guide

Profit Optimization

Customer Profitability Analysis: Benefits, Formula, and Step-By-Step Guide
Customer profitability is the difference between the gross profit margin earned on a customer and the cost incurred to acquire them. Most businesses determine customer profitability with the help of a cost and profitability analysis. This analysis helps prioritize clients, services, and marketing campaigns in order to increase profitability. It considers the costs of servicing each customer and the profits made by maintaining that client. The analysis measures the profitability of new customers versus existing and retained customers. Step-By-Step Guide to Customer Profitability Analysis 1. Determine Cost of Servicing Customers A good place to start a customer profitability analysis is by determining the expenses incurred by obtaining and retaining your customers. These costs include: MarketingCustomer supportStaff wagesTransit and shippingWarehousingTaxes Once you’ve determined what each customer is costing you, it’s time to designate them into separate groups. 2. Segment Your Customers Segmenting customers based on their profitability to a business is important to a customer profitability analysis because it allows for the identification of high-profit customers. This information can be used to ascertain what customer segments are worth targeting, how much they are worth, and what they are most likely to buy from you. There is no definitive way to do this, but you could determine the groups by profit ranges that you define as "worth it" and "not worth it." 3. Track Your Data Now onto the most important part of any analysis, data tracking. Data tracking is the only way to accurately and consistently quantify outcomes, such as those represented by metrics like ROI (return on investment) and TCO (total cost of ownership). Customer profitability analyses also help to forecast what will happen in the future. Data can be used to see how customers are behaving now and predict what they will do in the future, which can help a business determine which products they need to focus on and where they need to provide better service. Advantages of Customer Profitability Analysis A customer profitability analysis offers businesses substantial advantages. This type of analysis helps: Optimize customer acquisition strategiesFind new customers with the maximum potential profitIdentify customers that are not profitableReduce customer churn and increase customer retentionCreate segmented customer lists How to Calculate Customer Profitability The product profitability calculation looks like this: Total profit per customer = (total generated revenue) - (total incurred costs) In a real-life profitability analysis example, the formula looks like this: Customer A places an order totaling $450, but the cost incurred to the business to entice them to make these purchases was $300. Therefore, the total profit generated from customer A stands at $150. Customer B places an order totaling $300, but the cost of enticing the purchases they made was only $50. That makes the total profit for customer B $250 Even though the revenue attained from customer A was $450, which was $150 more than customer B, they were not the more profitable customer. The cheaper cost of acquiring customer B made them $100 more profitable than customer A, even though the total order amount was less. We suggest that you read more about the mistakes to avoid when calculating profitability to ensure that your figure is accurate. How to Benefit From a Customer Profit Analysis The data generated by a customer profitability analysis can be used to optimize marketing and sales activities by determining which customers are profitable and which should be prioritized. Once customer profitability has been assessed, it's possible to determine if one customer segment is more profitable than another, or if a certain group of customers has a higher profit margin than expected. The insights gained from this type of analysis are also perfect for creating marketing strategies that will boost a business’s overall profitability. This may include the following methods: Customer segmentation strategies Implementing a customer segmentation strategy to identify consumer groups with maximum profit potential and create a targeted marketing campaign for these segments. Building brand loyalty Increasing the number of customers who buy goods at full price by building brand loyalty among shoppers will entice them to become regular shoppers and spenders, increasing the total long-term revenue without spending more on acquiring new customers. Using discounts sparingly Discounts can be a great way to acquire new customers or hold on to existing ones but can undermine profits if used too frequently. If you’re serious about determining the profitability of your customers, use the BeProfit app to easily conduct various profit analyses.
The 5 Best E-Commerce Business Revenue Models

Profit Optimization

The 5 Best E-Commerce Business Revenue Models
The e-commerce business revenue models are varied and cover a wide range of verticals and industries. To keep your operations running and profitable, we will explain exactly which revenue models apply to e-commerce and break down the different revenue models based on the various e-commerce operations you may wish to pursue. What Is a Revenue Model? An ecommerce revenue model aims to define where an online store’s revenue is predominantly sourced from. This is determined by which revenue sources to pursue, what value to offer the market, how to price this value, and who the customer base is. 5 Types of E-Commerce Revenue Models 1. Dropshipping The dropshipping revenue model is a method of selling goods online without ever holding stock. The store owner simply lists the item for sale and when an item sells, the store owner purchases the item from a third-party (or uses its warehousing services) and has it shipped directly to the customer. Dropship models example: StardustLEDS is a great example of a dropshipping business model. They source colorful LED lighting products that are sold directly to customers from a manufacturer through their storefront. 2. Manufacture The manufacture revenue model is a more of a traditional style of selling goods. Unlike the dropshipping model, online business owners source raw materials and then design, manufacture, and sell the products themselves - all conducted in-house. Manufacture models example: Vew-Do manufactures a wide range of board sport products directly through their online store. 3. Wholesale Distributor The wholesale distributor revenue model categorizes online businesses who act as a middleman between manufacturers and wholesalers. Most commonly, a distributor will promote the goods of a manufacturer and sell the manufacturer’s goods to a wholesaler. Wholesale distributor models example: The best example of a wholesale distributor is AliExpress. They connect millions of suppliers with e-commerce storefronts from around the world. 4. Subscription-Based The subscription- based revenue model works just as it sounds. Customers sign up for a subscription-based service and goods are distributed on the agreed upon frequency over an allotted period. Subscription models example: Manscaped has quickly climbed the ladder and positioned itself as the ultimate subscription-based e-commerce store. Selling men’s shaving products through their subscription services directly to customers around the world. 5. Private Label The private label revenue model involves an online store teaming up with a third-party company that offers white label e-commerce products. On receiving the product, the merchant often brands it with their own labeling and presents it to customers as their own product. Private label models example: The white label revenue model is becoming more and more popular. One of the best examples of this is e-commerce stores using online marketplaces to source and sell rebranded products directly to their customers. Is There a "Best E-Commerce Revenue Model" for Your Business? Determining the best-suited e-commerce revenue model for your business can lead to serious success. Although, as you may have already worked out, the e-commerce revenue model that is great for one store may not be the best for another. The type of store, the product it sells, and the target audience are all important factors to consider when determining which e-commerce revenue model is best. Get this right, and your online e-commerce store is not only sure to succeed, but absolutely thrive.