Profit Analytics Blog
Read expert articles with insights about e-commerce profitability from analyzing thousands of e-commerce businesses' data.
The 4 Main E-commerce Business Models for Building a Successful Online Store
Running your own online business can be highly profitable, but it is not as simple as building a store and hoping for the best. You still need to have a set of business goals that will make your e-commerce store successful. That's why, in this post, we will cover the four main types of e-business models and how they can help you build a successful e-commerce business. What Is an E-Commerce Business Model? An e-commerce business model is a company's plan for how it will monetize selling products or services online. There are many ways to do this, but some common e-commerce business models include selling goods directly to consumers, selling goods to other businesses, or providing digital services. The defining difference between e-commerce and digital marketing is that digital commerce includes all forms of electronic communication, such as social media, text messages, emails, etc., whereas e-commerce only includes transactions that take place on websites. In addition to understanding the basics of an e-commerce business model, it is also essential to familiarize yourself with the available development platforms. Read the following comparisons to learn more about the three most popular e-commerce platforms: Wix vs. ShopifyWix vs. WooCommerceWooCommerce vs. Shopify Maintain a Profitable Edge You can now automatically calculate profits from multiple sources, saving time and effort. Analyzes results to ensure consistent, accurate profits.Keep track of data points from multiple sources at once.Both desktop and smartphone versions are available. Regardless of the e-commerce business model you adopt, the BeProfit analysis dashboard was designed specifically with the goal of making your life easier. The 4 Major E-Commerce Business Models There are many types of e-commerce business models. With examples, we cover the most popular ones here. 1. Business-To-Consumer (B2C) Business-to-consumer refers to transactions in which a business sells its products or services to consumers. B2C is the most common e-commerce business model, and, therefore, many online niches fall into this category. They often use digital marketing for their e-commerce business success. Example of B2C Think of a clothing, entertainment, and household supplies retailer like Walmart, which sells products to individual consumers online. The main advantages of B2C include: Potentially endless customer base.Greater potential for sales and profits. The disadvantages of B2C include: Competitive business niches.Difficulties presented by customer service and return policies. 2. Business-To-Business (B2B) A business-to-business e-commerce model is one where a business sells its products or services to other businesses rather than to consumers. This model is generally associated with high-end, high-priced products or services in industries in which the bulk of the revenue is generated by business purchases. The business-to-business model generally ends at the purchase stage—the company sells its product to another company, which then sells it to its customers. Another subsection of B2B is business-to-government (B2G) Although business-to-government e-commerce models are often grouped together with the B2B business model, instead of a business supplying another private business, they sell goods and services to government organizations. This can include anything from office supplies and technology products to complex consulting services. The B2G e-commerce model has become increasingly popular in recent years as governments seek to find ways to reduce costs and streamline operations. There are several benefits that businesses can experience when selling to governments through the B2G e-commerce model. First, businesses can enjoy increased visibility and access to decision-makers within government organizations. Additionally, businesses can benefit from cost savings associated with streamlined procurement processes. Finally, businesses can also benefit from opportunities to build long-term partnerships with government organizations. Example of B2B and B2G Think of an online retailer like Amazon that uses the B2B and B2G e-commerce business model. Amazon.com sells various products and services to businesses, including books, software, and electronics. In addition, Amazon has developed several web-based applications specifically for government entities, such as Amazon's Web Services (AWS), GovCloud. The main advantages of B2B or B2G include: Larger orders.Fewer transactions.Shorter cycle times. The disadvantages of B2B or B2G include: Limited customer base compared to B2C.Potentially higher customer demands, like product customization and pricing options. 3. Consumer-To-Business (C2B) A slightly less common but no less effective strategy is the consumer-to-business e-commerce model. C2B involves a consumer selling their products or exchanging their services directly with businesses. This generally occurs without the need for a middleman, such as a manufacturer or a wholesaler. Example of C2B Think of an online review website like Yelp or a social media platform like Facebook where consumers leave customer reviews, participate in company surveys, or even share product-focused social media content as an influencer. This is done in exchange for some kind of perk like the chance to win a prize, receive a discount, or be awarded a free product. The main advantages of C2B include: Affordable or free advertising.Potentially limitless brand awareness. The disadvantages of C2B include: Unpredictable outcomes.The potential for negative responses. 4. Consumer-To-Consumer (C2C) C2C, also referred to as peer-to-peer (P2P), is an e-commerce business model where a consumer sells their products or services directly to other consumers. It contrasts with business-to-consumer, where the focus of the business is selling products or services to consumers. C2C is a very popular e-commerce model as it allows business owners to broaden their customer base and reach a larger audience. Example of C2C C2C websites are often referred to as P2P selling platforms. The concept is very similar to classified ads, which are often posted locally at a neighborhood or community level. Think of something like Facebook Marketplace, which is essentially a sub-platform of Facebook's main platform—a place that connects consumers with other consumers. Facebook makes money from the buyers and sellers viewing on-site ads, and the consumer gets the benefit of connecting to another consumer who either wants to buy or sell secondhand goods. Leveraging this business model is a great way for businesses to increase their profit margins by growing their brand awareness. The main advantages of C2C include: Potential for high margins.Low to zero manufacturing costs. The disadvantages of C2C include: Highly competitive market.Increased potential for scams. Another "Fast-Growing" Business Model Direct-To-Consumer (D2C) In this post, we've outlined the four most common and most successful e-commerce business models—but know that there are more than just four. For instance, D2C, or direct-to-consumer, is now becoming a very broadly used e-commerce business model. D2C cuts out the middleman and allows a manufacturer to sell directly to a consumer. Regardless of which e-commerce model you choose to roll with, just be sure to clearly understand your business goals and which direction you'd like your online store to be heading. You should also take into consideration that you will have to address some of the challenges associated with e-commerce. Example of D2C D2C brands like Warby Parker and Harry's have disrupted the traditional eyewear and razor markets by cutting out the retail middleman and selling products directly to consumers online. The main advantages of D2C include: Control over brand messaging.Direct access to customers and their buying behaviors. The disadvantages of D2C include: Increased liability.Complex internal management. A great way to boost direct-to-consumer profits is through the use of advertisement. » Need help with ad management? Read our beginner's guide to effective advertising in e-commerce Selecting the Best E-Commerce Business Model There are a few key things to keep in mind when selecting the right e-commerce business model for your company. The first is deciding if you want to sell directly to consumers, businesses, or governments. Each e-commerce model has its own set of pros and cons, so it's essential to select the right model for your business. Here are a few things to consider when choosing an e-commerce model: What are your business goals? Analyze the market to better understand which e-commerce business model suits your business best. What is your target market? Define who they are, what they want, and how to reach them.What products or services do you offer? Decide this early on and market it appropriately.What is your budget? Set realistic budget goals, and stick to them as closely as possible.What is your level of technical expertise? Decide where your specialties lie, what you'd like to tackle yourself, and what work would be better outsourced to outside contractors. Once you've landed on a decision for each of these key considerations, you'll need to decide how you're going to reach them by choosing the correct e-commerce business revenue model. Is your new business model going to use an existing platform like Amazon or eBay, or are you going to build your own website? If you're going the self-hosted route, make sure to have a solid understanding of web development and e-commerce platforms. That way, you can create a site that's both user-friendly and profitable.
Marketing4 Ways to Increase Your Marketing ROI With Dynamic PricingWant to increase your marketing ROI? Looking for high click-through sales and a high conversion rate? You are in the right place. Marketing ROI is a crucial performance measure for any marketing team. This is because when a marketing team is about to start a new marketing campaign it has to estimate the costs. To make their calculations efficiently, they will look at profitability with ROI (return on investment). In this blog post, we will first understand what ROI and marketing ROI are. And then, we will go over ways to increase your marketing ROI with dynamic pricing. Let’s dive right in! What is ROI? ROI is used to calculate the performance measure based on the efficiency and profitability of the business. It measures the return to your business on a specific investment. Marketing ROI Do you know how to measure the performance of your marketing activity and the profitability of your online businesses? For the marketing team, ROI metrics are extremely insightful. You can calculate the return of a digital advertisement and click-through sales to your business. To put it simply, you can track how the money you spent on your business is generated back. How to calculate ROI? ‘’(Sales Growth - Marketing Cost) / Marketing Cost = Marketing ROI’’ The goal to calculate ROI is to make more of each dollar you spend on marketing activities in return. Marketers who calculate their ROI are 1.6 times more likely to receive higher budgets for their marketing activities. This metric will help you understand whether your marketing strategy is working or not. You will also gain the ability to see your most effective marketing campaigns. By observing results you can make better decisions on how and where to distribute your marketing budget properly. » Improve your ROI by learning the best email marketing practices Dynamic Pricing There are a number of effective business models, in which one of the most popular models is dynamic pricing. Setting a product’s price is extremely tricky, and merchants can never be sure whether they are offering a good, optimal price in the e-commerce world. Business owners need to know that the price is one of the most important differentiators to customers. It affects every stage from visiting your website to researching your brand and purchasing a product. Any change might affect your marketing team’s efforts, whether positively or negatively. Introducing a dynamic pricing strategy to your products could be a game-changer. Let's first define dynamic pricing. Dynamic pricing is a strategy where you set flexible prices based on market demand and your competitors’ prices. You will constantly track and observe changes in the e-commerce market and price your products accordingly to those changes. E-commerce businesses, retail, and entertainment often use dynamic pricing strategies. It's an effective strategy to boost your sales, get higher revenue and maximize your profit. This is because it gives you a competitive advantage. By adopting it, you will monitor the market and track your competitors. Understanding your competitors’ actions and analyzing the market changes will help you take your online business to the next level. Now, let’s focus on increasing your marketing ROI with dynamic pricing. How to Increase Your Marketing ROI with Dynamic Pricing There are several ways to improve your ROI and dynamic pricing could be the right method for you. Dynamic pricing is more than price changes. It's also about working with internal and external factors in the market. Then, make necessary changes accordingly. While using a dynamic pricing strategy you will be observing your customers' reactions to your price changes. At what price point are they not willing to buy? Will your customers accept buying the same products at higher prices? For dynamic price optimization, there are lots of things to consider. Let’s go one by one. 1. Monitor Your Competitors How much do you charge for your products? You know the answer right away. But do you know about your competitors' prices? Tracking your competitors' prices is good for competitive e-commerce. You will see if there is a potential to increase your prices. If competitors are charging significantly higher prices and you are not, you might be losing profit. Since the e-commerce world is growing very fast, online sales are growing more than ever. Merchants are working to adapt their operations based on changes in the market. On the other hand, customers are making more rational decisions. Customers compare prices easily and rapidly. As statistics show; 90% of online shoppers say they actively compare deals before making a purchase. And nearly 50% of consumers only purchase discounted products. 60% of shoppers say that pricing is the key factor when making a purchasing decision. To optimize your dynamic pricing, you need to observe your competitors’ prices. Working with their pricing information can be your guide while offering dynamic prices. There are two ways to monitor your competitors' prices; Manually tracking and working with price tracking software. Manually tracking your competitors is time-consuming and not effective at all. Think about tracking all price changes just happening in a single day! To make it clear let’s look at some statistics; Amazon makes over 250 million price changes every day with the prices for millions of its SKUs changed every 10 minutes to ensure it offers the best prices to its competitors. Price change information will show you how much competitors are selling their products for and how much demand there is in the e-commerce market. Globally, many online retailers use this strategy to maximize their profit. You will gain a competitive advantage by understanding your competitors’ actions. 2. Start Marketing Campaigns According to Price Changes The effectiveness of your marketing campaigns isn't determined solely by the campaign itself. It's also determined by price changes. A competitive dynamic pricing strategy offers high click-through sales and a higher conversion rate. When merchants change the price, it affects your click rate and conversion. This might be positive or negative. But the important thing is that the marketing budget needs to be adjusted and be ready for those changes. Therefore, pricing and marketing strategies need to be managed together. Some companies use a low-pricing strategy to have higher sales. They also get a bigger market share. To increase your sales, the marketing team needs to start to invest in some activities such as advertising on Google Ads. This can be advantageous to have more traffic to your e-commerce website. Whichever pricing strategy you use, your marketing activities will need to work accordingly. 3. Set Dynamic Price Rules Some products have a minimum and a maximum selling price. Merchants do it to maintain their brand image. If you haven’t implemented this tactic in your business, you definitely should! You will determine the minimum price that you are willing to sell each product. You can set rules based on changing market dynamics. The actions in the price rules may be; Offer the lowest price compared to the competitors. Offer the average price in the market.Round up the price to the nearest ‘’.99’’ 4. Test Your Dynamic Prices Online stores realize the extremely competitive environment of e-commerce. Moreover, competition is not just between merchants. Customers love to make quick decisions by comparing prices and they are also looking for deals and promotions. In such an environment, testing different prices can be a good idea. You can observe your customers' response to price changes. See how different prices perform on different occasions. Observing your customers' response to price changes can lead you to comparison. Now you can see which price points are more effective for high sales and high conversion rates. Takeaways Good marketing ROI is something every marketer would want. Testing out new strategies might be a good idea for online merchants. Since dynamic pricing is becoming increasingly important and profitable for e-commerce merchants, marketing teams can increase their marketing ROI by adapting it.
Business managementGet the Best Shopify Discount Shipping Rates: 3 Insider TipsShipping rates can make or break a sale. According to Shopify's Commerce Trends report, 74% of consumers want to know shipping costs from the get-go and 60% want same-, next-, or two-day delivery. Meeting these expectations can have a significant impact on conversion, revenue, and profits. So, finding sustainable options for discounted shipping rates can help you stay competitive in the e-commerce market. » Find out how to increase e-commerce store revenue with customer discounts What is Shopify Shipping? Shopify shipping is an integrated way to manage and fulfill shipping orders directly from your Shopify store. This feature is available to anyone with a monthly Shopify subscription who ships items from the US, Canada, or Australia. Some benefits of the integrated method include: Easy management - Shopify owners can manage all shipping orders in one place, simplifying the fulfillment process and saving time.Track packages from Shopify - You can view shipment tracking information directly on the Shopify platform, so you can easily monitor and troubleshoot any delays that may happen.Embedded shipping insurance - There's built-in shipping insurance available that can provide store owners and customers with extra protection if a package gets lost or damaged during shipping. Integrate Your Shopify Stores For Easy Monitoring Reduce the hassle with an all-in-one dashboard for KPI performance tracking, so you can keep track of your business's conversion metrics. Shipping data can be pulled automatically from online platforms and integrated.Get up-to-date reports on shipping and processing fees.Access conversion rates and profitability per platform and product. BeProfit can help you keep track of your sales performance and shipping profiles in real time, so you can easily spot when a shipping discount strategy is not converting the way you need it to. 3 Tips to Get the Best Discount Shipping Rates Shipping discounts can impact a business's bottom line. It can also help Shopify stores reduce shipping costs and can have a positive effect on profit margins and price competitiveness. Let's look at a few tips to get the best discount shipping rates for your store: 1. Calculate Shipping Rates Shopify's shipping rates are generally calculated based on factors such as package weight and dimensions, destination, shipping method, and carrier. The benefits of this system include: Real-time tariff calculationCarrier integrationDiscounted tariffs for users Here's a step-by-step guide to calculate discounted shipping rates using your Shopify account: Sign into your Shopify account and go to Settings > Shipping & Delivery. Click Manage next to the desired shop location. Select Add rate and select Use carrier or app to calculate rates. Enter the dimensions and weight of your package and select your preferred carrier. Repeat the above steps for additional carriers and shipping methods as needed. Add products to your shopping cart and checkout to test your new plan. » Need to know more? Learn how to calculate shipping costs for your Shopify Store 2. Explore Shipping Partners Shopify has partnered with several major carriers for its shipping services, including USPS, UPS, DHL Express, and Canada Post USPS. Each provider has multiple options that vary in price and shipping time. DHL, for example, has up to 74% shipping discount rates through Shopify and offers the following, among others: First-Class Package Service offers delivery in 2-5 business days.Priority Mail delivers in 1-3 business days.Priority Mail Express provides a delivery guarantee of 1-2 business days. By using these services, Shopify store owners can access discounted shipping rates based on any given Shopify plan and also enjoy benefits such as international shipping discounts. To use these options, simply set up shipping rates and connect your shipping carrier account to your Shopify account. This helps by: Streamlining the shipping processReducing costsImproving overall customer experienceBoosting Shopify sales and profits 3. Consider Your Rate Options You can also set predetermined rates for each purchase from your Shopify store, which can allow for greater flexibility and optimized pricing that can help increase your profits. But it can lead to under-charging or over-charging, so be sure to test your rates first. For example, free shipping on all orders can lead to lower profits, and high rates regardless of how small the purchase is can lead to customer dissatisfaction. Here are some shipping options: Flat rate - This is a fixed shipping rate for all orders regardless of weight, size, or destination. A use case example is if a store sells small items with a consistent shipping cost.General shipping - These shipping rates are also fixed rates, but with some wiggle room, such as a set rate per shipping method. An example is a store offering free shipping for orders over $50 or charging a flat rate for orders using standard delivery times.Weight-based - Shipping rates here depend on the weight of the package. For example, a store that sells products of varying weights, such as furniture or pet supplies, may implement this shipping calculation.Price-based - These rates are based on the total price of an order. For instance, a store may offer discounted shipping rates for high-value purchases or for customers who sign up for a subscription. Discounted shipping can be applied to each of these shipping rate options where needed to help increase Shopify conversion rates and profits. » Discover shipping analytics: benchmarks and insights for e-commerce sellers Save Time and Money With Discount Shipping Rates Utilizing Shopify shipping and its discounts can help store owners reduce shipping costs and focus on customer satisfaction, which can increase sales and profits. But that's only one part. Keeping track of your ROI and sales performance can help you identify where the discounts aren't effective and which shipping methods should be changed. With BeProfit, you can integrate your Shopify store into an intuitive dashboard for real-time monitoring of e-commerce expenses, profits, and shipping profiles.
Business metricsUnderstanding CLV: Definition, Analysis & ExamplesA survey by eConsultancy shows that 76% of respondents view customer lifetime value (CLV) as a pertinent aspect of their business. However, only 42% were able to measure it. It may not be easy to accurately gauge how much revenue a customer will likely generate over their entire relationship with your business. Nonetheless, measuring and improving CLV can boost your bottom line and build long-lasting customer relationships. What is CLV? CLV is the estimation of total revenue per customer based on past and predicted purchases. While there isn’t a one-size-fits-all answer to a good CLV metric, it's helpful to measure because if, for example, your CLV is lower than your usual customer acquisition costs (CAC), you are likely to lose profits and revenue. An ideal ratio here would be 3:1. CLV is often alternately called lifetime value (LTV). Although these two don't have any material differences, LTV is sometimes more focused on the accumulated value of all customers. Gain Insight To Boost CLV BeProfit can help you understand your CLV through in-depth analysis, so you can make data-driven changes to your acquisition and marketing techniques if needed. Uncover actionable insights to improve your margin, profitability, and retention.Easily connect store and advertising platforms into one dashboard.Access the BeProfit app from mobile or desktop devices with ease. How to Measure CLV There are some variables you may need to calculate before getting to CLV, such as: Avg. Yearly Revenue Per Customer = Total Revenue / No. of Active CustomersGross Margin = Sales Revenue - Cost of RevenueChurn = % of customers that stopped using your product or service over time. From there, you can work out the CLV using this formula: CLV ($) = (Avg. yearly Revenue Per Customer X Gross Margin) / Churn » Need some clarity? Learn how gross profit and gross margin differ Understanding CLV: Examples Scenario 1: “Good” CLV Let's say an e-commerce business has an average yearly revenue per customer of $500. Its total revenue over the past year has been $1,000. Over the same period, it spent $500 on bringing and promoting its products to the market (the cost of revenue). Let’s also assume they had 100 customers at the beginning of the year and 20 left by year-end. First, we'll need to work out the gross margin, then the CLV: Gross Margin = Sales Revenue - Cost of Revenue= ($1,000 - $500) / $1,000 x 100= 0.5 or 50%CLV ($) = (Avg. yearly Revenue Per User X Gross Margin) / Churn= ($500 X 0.50) / 0.20= $1,250 This is a good metric given that the CLV is more than three times the cost of revenue, meaning the business is reaping a profit. Scenario 2: "Poor" CLV Now, let's say a subscription-based software company has an average yearly revenue per user of $100, a gross margin of 70%, and a churn rate of 40%. CLV ($) = (Avg. yearly Revenue Per User X Gross Margin) / Churn= ($100 X 0.70) / 0.40= $175 Here, a lower CLV can be a warning sign that the company needs to take action to improve its customer relationships and generate more revenue from its existing customer base. Why is CLV Important? CLV and positive customer-business relations go hand-in-hand. Without satisfied customers, your business can experience low sales and retention, which ultimately can negatively impact your bottom line. So, let's look at how CLV relates to and influences the following facets of e-commerce businesses: Customer behavior and retention - When customers feel valued and engaged with a business, they are more likely to make repeat purchases over time, which can increase CLV.Marketing - CLV can highlight whether marketing strategies, like email marketing, are effective or not, so businesses can then make informed adjustments to improve conversions.Average order value (AOV) - Loyal and satisfied customers are more likely to make larger purchases, which can boost CLV.Sales and profit - Understanding CLV can help businesses identify their most valuable customers and focus on retaining and growing those relationships. This can lead to more purchases, higher AOV, and larger profits. How to Improve CLV There are multiple strategies businesses can utilize to help increase their CLV and enjoy the benefits of the facets mentioned above. Some of these include: Loyalty programs - These can encourage repeat purchases, build customer retention, and maximize product profitability and CLV.Improved customer service - Customer satisfaction and loyalty can increase because customers may feel more understood. This can boost CLV and sales.Upselling and cross-selling - Recommending relevant products or services to customers based on their preferences and browsing habits can increase CLV as well as AOV.Leveraging social media - Businesses can build brand loyalty and encourage repeat purchases through strong online engagement, presence, and open customer feedback.Simplifying user experience - Optimizing sites, streamlining checkout, and providing clear product information can improve overall customer experience and increase sales and CLV. » Find out how to double CLV methods from WooCommerce sellers Boost Profits By Prioritizing CLV in Your Business Analyzing CLV can aid in the success of an e-commerce business by providing insights into business performance. Leveraging strategies, like marketing and social media, can help improve customer retention and loyalty. This can reduce CAC, increase profits, and ultimately boost CLV. To this end, BeProfit offers an intuitive, all-in-one dashboard that allows businesses to track profits and sales data, which can be actioned to improve retention. BeProfit is a wonderful solution for businesses looking to take their CLV analysis to the next level for better revenue and profits.
Profit optimizationSuccessfully Increase E-commerce Store Revenue With Customer DiscountsDid you know that 92% of US shoppers search for promotions or coupons before shopping online? It can be a powerful way to improve retention. Businesses can leverage this in numerous ways, such as product-specific discounts, free shipping, or rewards. With the right strategies, you can boost customer satisfaction and improve revenue and profits. How Can Discounts Improve Revenue? Discounts can help increase sales by reassuring customers that they are saving and products are within their budget. Abandoned Cart Discounts Baymard research shows that 48% of customers abandon their carts because of high additional costs, like shipping and taxes. Offering a free shipping discount can help recover abandoned carts and improve your revenue and profit by increasing conversion rates and average order value (AOV). For example, a business that offers free shipping on orders over $50 can encourage customers to add items to their cart to meet the free shipping threshold, as well as complete their purchases. Seasonal Discounts These are offered at certain times of the year, such as holidays. Seasonal discounts can be powerful tools to help businesses increase profit margins and sales by attracting new customers, boosting sales, and clearing out seasonal inventory. For example, a clothing retailer offering 40% off all winter jackets in February boosts sales and clears inventory by the end of the season, while also attracting customers looking for winter clothing sales. Businesses can leverage their customers' shopping habits and seasonal festivities for higher AOVs and profits. » Stuck on marketing? Learn how to increase your marketing ROI with dynamic pricing Referral or Subscription Discounts This strategy encourages customers to make repeat purchases or refer new customers to your business, which can lead to increased sales and profits. With 48% of customers saying that exclusive offers would make them purchase items sooner, businesses can utilize personalized and targeted discounts to help convert them. For example, a meal delivery service that offers discounts based on past purchases to customers who refer a friend can help drive repeat purchases from existing customers while also gaining new customers. Minimum Spend Discounts This discount is awarded when a customer meets a certain minimum spend threshold. This type of discount encourages customers to add items to their cart and increase their AOV to receive discounts. For example, a cosmetics retailer that offers a $10 discount on orders over $50 can encourage customers to purchase more products to meet the minimum spend threshold. This strategy helps businesses increase sales and profits by increasing AOV. Similarly, discounts for higher quantities are also an option, where customers can enjoy price cuts if they buy in bulk. Returning Customer Discounts These discounts can form part of loyalty programs and usually offer percentages or flat rate discounts. The purpose of these is to encourage repeat purchases, increase customer loyalty, and ultimately boost sales and profits. For example, an online bookstore that offers a 10% discount to customers who have already made a purchase may encourage those customers to come back and buy more, which can increase retention and lower acquisition costs. Related Product Discounts This can be done by suggesting similar products of interest or cross-selling products. Highlighting a discount this way can help encourage large purchases since customers can feel you understand their interests and that they're getting higher value for money. For example, a technology retailer offering discounts on related items bought together, like a laptop, mouse, and laptop bag, can encourage customers to make multiple purchases at once, increasing total order value and revenue. Take Action With Real-Time Insights BeProfit offers an intuitive platform to help you monitor your sales data, profits, and revenue metrics. Uses auto-matching and manual tagging to track revenue metrics and cost per order.Provides an aggregated view of business performance by connecting all shops.Accessible on mobile and desktop devices for easy collaboration with teammates. Some Tips For An Effective Discount Strategy Research shows how effective discount strategies can also improve retention and loyalty, stating that 39% of customers are more likely to return for repeat purchases after using discounts. However, ineffective discounting can imply poor value and lead to lower profits and higher cart abandonment rates. Some tips include: Ensure profitability - Too many or too frequent discounts can reduce profit margins and revenue, so limiting promotional discounts to certain periods or items is suggested.Monitor the market - This can ensure that businesses' rebate strategies remain competitive and relevant. For example, a retailer offering 20% discount during a big sales event when a direct competitor is offering 30% may not be effective.Make sure discounts aren't too frequent - If discounts are frequent, customers will expect them all the time, which can lead to lower perceived value and even cause customer loss when discounts aren't available. Ultimately, this can hamper revenue and profits.Choose discount types strategically - Discount types should match businesses' overall goals and customer preferences. For example, if a business wants to increase AOV, minimum order discounts may be a good option. Discounts for repeat customers can be useful if a business wants to optimize retention. » Find out how to track revenue like the e-commerce giants with trade secrets Boost Revenue With Strategic Discounts By choosing discount types carefully, businesses can encourage customers to purchase more and encourage repeat purchases. This can not only help lower customer acquisition costs but also improve revenues and profitability. And choosing these strategies comes down to efficient performance monitoring. Tools like BeProfit help businesses with an all-in-one dashboard to track profits and monitor real-time sales data. This way, your discount strategies can be data-driven for improved results.
Business managementIncremental Cost vs Marginal Cost: 5 Ways They Affect Your BusinessStatista forecasts that e-commerce sales are expected to reach around $8.1 trillion by 2026. To gain efficient revenue and make informed decisions, you need to understand the cost of producing goods and services. Two related concepts that are used in this context are incremental and marginal costs. While these terms are often used interchangeably, they have distinct meanings that are important to distinguish between. » Learn about effective cost leadership strategies with examples Difference Between Incremental and Marginal Cost Incremental Cost Incremental cost refers to the cost of producing an additional unit of output, taking into account all costs that vary with the level of production, including fixed costs. Some costs may include: Power usageNew production line implementationUpgraded equipment The costs may differ depending on the step in production. To work out the incremental cost per additional unit, you can use the following formula: Incremental Cost = Variable Costs / Units Produced Marginal Cost Marginal cost, on the other hand, refers to the cost of producing an additional unit of output, considering only the variable cost associated with that unit. These variable costs may include: LaborMaterials To calculate the marginal cost per new unit, you can use the following formula: Marginal Cost = (Future Costs - Current Costs) / (Future No. of Units - Current No. of Units) Track Your Costs With Ease Monitor your store's—or multiple stores'—profits, revenue, and expenses from one dashboard. Effortlessly visualize complex data with charts and graphs.Get up-to-date data reports on COGS and processing and shipping fees.Access your data from anywhere using a desktop or mobile device. With BeProfit you can monitor and track your business's revenue metrics and costs per order in real time. How Do These Costs Affect Your Business? These costs can have negative and positive impacts on a business's strategies and revenue, depending on the accuracy of calculations. Some areas of impact include: Profitability In manufacturing and retail businesses, knowing the marginal cost of each unit produced can help determine the optimal production level and pricing strategies that can increase your profit margins. Additionally, knowing the cost associated with each production unit helps businesses allocate resources effectively to different products or services. Product Volume If the incremental cost of producing additional units is higher than the selling price, then it is not profitable to produce them. And if the marginal cost of producing an additional unit is lower than the selling price, producing more units may increase profitability. Therefore, businesses need to carefully consider both costs when deciding on the volume of production. » Want to organize product volume? See the best Wix inventory management apps Product Pricing If the incremental cost of producing additional units exceeds the product selling price, you aren't likely to gain a profit. And if the marginal cost of producing an additional unit is lower than the product selling price, then a business may be able to offer lower prices and still maintain product profitability. Volume discounts may work, for instance, if marginal costs are low, whereas higher prices may be necessary if incremental costs are high. Marketing Reach Marketing costs may include: Specialized marketersInvestments into new software or platforms If the incremental cost of reaching an additional customer exceeds the expected revenue generated by that customer, then you may need to lower your cost per acquisition (CPA) and rework the strategy. Conversely, if the marginal cost of reaching one additional customer is lower than the revenue generated by that customer, then it may be a profitable marketing strategy. Production Changes Incremental and marginal costs both play a critical role in determining production and how it changes due to the effects it has on the business. Some changes may include: Altering the steps of the production lineIncreasing production numbersOutsourcing If the incremental cost of the changed method exceeds the marginal revenue generated by the units it can turn out, then it may not be economically viable. And if the marginal revenue generated by producing additional units, more example, exceeds the marginal cost, then increasing production may be profitable. » Got excessive costs? Check out these insights on how to reduce your COGS Keep Costs in Mind and Run Your Business Confidently Incremental and marginal costs are fundamental business concepts that help you make confident and informed decisions about production, pricing, and marketing. A level of confidence plays a major role in growing your business and sustaining it long-term. By tracking the efficiency of these e-commerce expenses, you can make strategic adjustments in a timely manner. With BeProfit's platform, you can monitor expense metrics in real time all from one dashboard, making it easier to implement changes that can maximize your bottom line.
MarketingGoogle Ads vs. Instagram Ads: ROI Analysis Per E-Commerce VerticalIf you own an e-commerce business, you know that the right marketing channels can make or break your success. While there are many potential channels to choose from, two of the most popular are Google Ads and Instagram Ads. So, which one should you invest in? Let’s take a brief overview of each channel before comparing their return on investment (ROI) for e-commerce. Google Ads Google Ads are a great option for e-commerce because they're cost-effective and highly targeted—you can target customers based on their location, gender, age group, interests, and more. You can also customize your ad campaigns to fit the needs of your specific business and budget. According to research conducted by Merkle and reported by Search Engine Land, over half of all retail search clicks come from Google—and those clicks have an average order value (AOV) of $94. On top of that, the cost per click (CPC) is fairly low compared to other channels like LinkedIn Ads. This makes Google Ads a great option if you want to increase your visibility without breaking the bank. Additionally, you can improve your performance with features like Google Shopping. Create great visuals to showcase your products and provide detailed product information to your potential customers. Instagram Ads Instagram Ads are viable for e-commerce brands because they can reach a large audience and have a high engagement rate. You can target people based on their age group, interests, and activity on other platforms like Facebook or Twitter. Instagram isn’t just about pretty pictures—it’s also an incredibly powerful marketing tool. For example, if you’re selling apparel, beauty products, or home goods, Instagram is a great place to start advertising due to its visual nature. According to Statusbrew, Instagram Ads have an AOV of $65 and an average click-through rate (CTR) of 1.08%. While this CTR isn’t as high as Google’s (1.91%), it still gives you good value for money and helps bring more people into your sales funnel than other platforms. ROI Analysis When you evaluate the ROI of Google Ads and Instagram Ads for your e-commerce brand, it's important to consider your specific e-commerce vertical and target audience. For example, B2B products like industrial equipment or office supplies may not see as much success with Instagram Ads because their target audience may not be active on the platform, whereas Google Ads may be more effective in reaching them through targeted keywords and industries. Alternatively, high-end luxury goods like designer fashion or fine jewelry may not see as much success with Google Ads because their target audience may not be searching for them on Google. In this case, Instagram Ads may be a more effective platform because those businesses can target their audience through visually engaging images and videos. » Discover 4 ways to increase your marketing ROI using dynamic pricing ROI Comparison Example: Beard King Last year, my e-commerce client, Beard King, approached me to launch two advertising campaigns to compare the ROI between Google Ads and Instagram Ads. To start, both campaigns had a monthly budget of $2,000. I used this formula to calculate ROI: ROI = (Sales from ads - Cost of ads) / Cost of ads The details of both campaigns were as follows: Google Ads18-35-year-old men4-week running timeFocused on the Search networkTargeted male grooming products (e.g., beard oils and balms) through keywordsInstagram Ads18-35-year old men4-week running timeInfluencer pages and stories advertisementsTargeted beard care products After targeting the same audience and running for the same length of time, the final results of the campaigns in terms of CTR/engagement rate, cost per click (CPC), and total number of clicks were as follows: Google AdsCTR: increased by 7%CPC: $0.30Total clicks: 654Instagram AdsEngagement rate: increased by 12%CPC: $0.50Total clicks: 400 If you compare the results of both campaigns, it's clear that Google Ads yielded a higher ROI for Beard King in this case. Google Ads was able to generate 254 more clicks than Instagram Ads. This represents an additional ROI of 25%. Also, because Google Ads has an average cost per click (CPC) 30 cents lower than Instagram Ads, Beard King managed to save $76 while gaining those extra clicks! » What about other platforms? Compare Google Ads vs Amazon Ads Final Verdict: It Depends on You Both Google Ads and Instagram Ads are powerful tools in any e-commerce marketer's arsenal—but they're not created equal when it comes to ROI. Generally speaking, Google Ads tend to be better if you're looking to increase your overall online visibility because its AOV and CTR are higher than Instagram's—but if you're selling something where visuals are important (like apparel or beauty products), then investing in some well-crafted Instagram Ads could be well worth your effort. If you're starting to feel intimidated by any metrics or calculations connected to ROI or ads—don't! Simplify the entire process with BeProfit's app. Effortlessly integrate your online store and use the customizable dashboard to get an overview of all your store's figures so you can make data-driven decisions for your e-commerce business. » Book a demo to try the BeProfit app's features for yourself
MarketingPinterest Ads vs. Facebook Ads: ROI in 2023 (for Online Sellers)Everyone knows that Facebook is the preferred advertising platform when it comes to e-commerce—it's one of the most popular social networking sites, but also one of the most visited sites on the world wide web overall. But what most people don't know is that Pinterest actually has quite a few of its own unique advertising benefits and features. Let's explore this below. » New to e-commerce ads? Read this ultimate guide to effective e-commerce ads Pinterest Ads According to Pinterest, "... 433 million people use Pinterest every month to find ideas and inspire their next purchase." While this stat may make you think Pinterest ads are worth it, you must first understand Pinterest's advantages and disadvantages because if you decide to add it to your marketing strategy, you can be sure you're using it for the right reasons. Advantages Longer running ads Pinterest ads stay in your feed long after your advertising campaign has ended. This helps you to build your brand presence while, at the same time, getting more value for the money you spend on advertising. Increased brand awareness and engagement Pinterest, as another contender in the social media advertising space, will add an extra dimension to your advertising campaigns, resulting in significantly enhanced brand awareness and engagement. Easier traffic management It's easier to direct traffic to external business sites because Pinterest has the traffic-driving ability of a visual search engine PLUS the social interaction of a social media platform. » Think Pinterest ads are for you? Plan your Pinterest ad strategies for 2023 Disadvantages Original pin images The pin images you use must be your own. If you share an image that was posted by another user, without the author's permission, you may be liable for infringement. Complicated calls to action It's more complicated to encourage your users to take certain actions because of how Pinterest curates content. It isn't a single-feed layout like other social media platforms, so you'll have to be extra smart and creative when developing effective calls to action.Very specific audience People who frequent Pinterest are looking for new, fresh ideas, but can be quite particular. Therefore, such a critical audience could be either a pro or a con depending on your target market. » Find out 4 ways to increase your marketing ROI with dynamic pricing Facebook Ads A whopping total of 1.62 billion users visit Facebook every day on average. It may seem like a no-brainer to you, but Facebook ads have advantages and disadvantages too. Let's take a look: Advantages Bigger reach Facebook is the largest social media platform, giving you access to the biggest audience and a wider range of people.Targeting and retargeting capabilities The point of targeting and retargeting is to gently nudge users from being interested in your products to actually finalizing a sale. Facebook is the ideal platform to achieve this because of its varied functions to customize audiences.Effective ads manager tool Facebook Ads Manager makes data tracking and analytics easy. This will help you understand your customer better, thereby moving closer to giving them exactly what they want. Disadvantages Waiting time If you're impatient and deadline-driven, you may dislike that there are sometimes delays in the approval of ads. Strict competition With such a large user base, comes serious competition. You'll need to make sure you use spectacular Facebook ads strategies for e-commerce to stand out. Engagement ends with campaign Since competition is so stiff, you may find that you lose engagement soon after ad campaigns end. The problem is that Facebook has so much content to promote, and users' feeds are already overcrowded. » Concerned about your ad budget? Consider using Facebook's campaign budget optimization Key Metrics to Take Into Consideration There are several essential metrics you must consider when you're contemplating which marketing channel will be best suited to your e-commerce store. Average Cost Per Click (CPC) Pinterest: $1.50Facebook: $0.97 Average Cost-Per-Thousand Impressions (CPM) Pinterest: $30 per 1 000 impressionsFacebook: $7.19 per 1 000 impressions Average Click Through Rate (CTR) Pinterest: 0.28%Facebook: 0.90% Average Conversion Rate Pinterest: ranges from 1.5% to 8.5%Facebook: 6.57% Average Return on Ad Spend (ROAS) Pinterest: 2.7Facebook: 10.68 Sidenote: A good ROAS for e-commerce is around the 4x or 400% mark. Average Return on Investment (ROI) Pinterest: According to Pinterest, Promoted Pins typically earn $2 in profit for every $1 spent. Facebook: According to a study by Social Media Examiner, the average ROI for Facebook ads is about 200% Sidenote: A good ROI for e-commerce is 25% to 50%. » How do ads on other platforms compare? Discover if TikTok ads vs Facebook ads are better The Final Say... Unfortunately, there's no one-size-fits-all answer. Your industry, the products and services you sell, even your geographical location, must be taken into account before you make your final decision. The point is to utilize platforms that will help you reach your target audience. Don't waste resources on a platform that doesn't provide you with a good ROI, either because your audience doesn't use that platform or they're just too bombarded with content. To ease your stress, there are many handy tools you can use—like BeProfit's profit calculation app—to help you achieve a high ROI in 2023.
Business management5 Fundamentals of Planning an Effective TikTok BudgetTikTok has exploded in popularity over the past few years. With 246.96 million app downloads in the first quarter of 2023, TikTok is a booming platform businesses can leverage to spread their reach and boost conversions. However, with so much competition and businesses having varying budgets or ad spend, managing KPIs can help ensure your TikTok ads are efficient. What To Consider For Your TikTok Budget When planning a budget for your TikTok ads, you'll need to consider the minimum budget: more than $50 for campaigns and more than $20 for ad groups. And optimizing the budget to meet your business goals can help boost conversion rates. For instance, 67% of TikTok users say that the platform inspired them to make purchases even when they weren't looking to shop. So, what should you factor into your planning? Intention TikTok ads can have the following business intentions: Increasing brand awarenessDriving traffic to your website or storeBoosting sales By understanding your ultimate goal, you can better allocate your budget and choose the most effective ad types. For instance, if you're looking to drive sales, allocating more of your budget toward product listing ads will be more beneficial than just focusing on brand awareness campaigns. Bid and Budget Types Depending on your campaign's objectives, you can choose your budgeting and bidding types accordingly. Let's start with budgeting types on TikTok: Daily budget - ideal for short-term or immediate campaignsLifetime budget - suited for long-term campaigns Additionally, you can choose between two types of bidding. Manual bidding allows you to set the maximum price you're willing to pay for a specific action.Automatic bidding will automatically adjust your bids based on the competition. » Worried about CPC? See if you're spending too much per these industry benchmarks Ad Types TikTok offers several ad formats. And choosing the best for your business depends on your budget and intention. Some ad types include: In-feed ads - ads appear in users' feeds as they scroll in the app.Branded effects and hashtags - sponsored effects and hashtags that users can include in their videos.Topview ads - the first ad users see when opening the app. If you have a lower budget, branded ads are less of an option as they are typically used by big corporations with high ad spend. For a more budget-friendly route, you can try in-feed ads, which can grab users' attention creatively with clear CTAs and engaging videos. User-Generated Content Encouraging user-generated content (UGC) in your advertising campaigns can help amplify your brand message. UGC can optimize your budget because it leverages users or e-commerce influencers as a way to help boost reach and buzz around your product or service. For example, a brand could create a TikTok hashtag challenge that asks users to showcase how they use a particular product in their daily lives. The brand can then share the best UGC on its channel or website. This can be powerful because it can: Foster a larger sense of community and engagement around the brand. Boost sales and revenue through collaboration.Improve customer loyalty and reach for improved conversions. » Check out the ultimate guide to effective e-commerce ads Interactivity Engaging with your audience can help build a successful advertising campaign on TikTok. Using interactive elements in your ads can allow you to gather feedback and better understand your potential customers. These interactive elements include: PollsBranded stickersHashtag challenges Additionally, factoring in your audience's feedback in future campaigns can help you adjust your budget and tactics more efficiently. Therefore, interactivity can create more value from your budget and achieve greater results. For instance, if you invest some of your budget into branded stickers for a limited product, you could see a positive ROAS if the content is engaging and promotes UGC. Plus, it could spread faster on the platform because of the urgency associated with limited content. Keep Your Budget In Check With Ease Save time and effort with a fully integrated view of your store's ad performance, profits, and expenses. Uses cohort analysis for in-depth insight into marketing performance.Can highlight ROAS per platform.Auto-syncs with TikTok and other platforms seamlessly. BeProfit offers an intuitive dashboard for easy data access and customizable reports to help you monitor your budget and profits in real time. Why Should Businesses Use A Budget Planner? By having a budget planner in place, you can easily track your business expenses and optimize your ad spend for maximum ROI. You can better plan your TikTok budget through the following tracking methods: A/B testing - By running different TikTok ads and testing bid amounts, you can identify which amounts and ads garner the best results, whether it's high conversions, more impressions, or increased sales.Demographic monitoring - With TikTok ads and personalization AI, you can target audiences based on age, location, gender, household income, and more. Analyzing which groups respond most to your ads can help you adjust your budget allocation to marketing for groups more likely to convert.Ad performance - You can check impressions, click-through rate, conversion rate, and other metrics. This can help you identify whether your budget has been spent wisely or if you need to rework your ad strategy.Behavior trends - You can identify which user behavior most commonly occurs with your ads, like category searches, devices used, and more. Then, you can use this to optimize your budget for remarketed ads that are more likely to reach your ideal audience. » Check out more about TikTok ad metrics e-commerce sellers should keep an eye on Maximize Your Profits With Strategic TikTok Budgeting Launching a successful advertising campaign on TikTok requires a well-planned budget. By utilizing ad types and engagement tools that align with your intentions, you can initiate campaigns effectively that resonate with users and maximize profitability. With BeProfit's help, you can easily keep track of your expenses and your ad efficiency all from one integrative dashboard.
Business metrics5 Most Important Sales KPIs for Maximal Customer RetentionNo business wants to lose customers. But when customers are not engaged, whether it's because your business's site is unintuitive or your marketing doesn't appeal to them, they are more likely to move on. So, understanding trends about past customers and the most engaged customers can help improve customer retention. This is where Key Performance Indicators (KPIs) are most vital. KPIs offer targets for teams to achieve, track goal progress, and provide insights that can help businesses grow. Let's explore some important sales KPIs for customer retention. » Learn how to better understand your customers 1. Customer Churn Rate The customer churn rate is the ideal metric to consider if you're looking to track how many customers are leaving versus how many stay. This should be measured for a specified period—annually, monthly, weekly, or even daily. Customer Churn Rate (%) = Number of Lost Customers / Number of Customers Before x 100 Typically, a higher customer churn rate results in low customer retention because it means you're losing customers often. But it can be a great way to assess where your business is succeeding and where it may need to alter your strategies. For example, if numerous customers left after a particular marketing campaign, you can use this to improve your strategies for future campaigns. 2. Sales Cycle Length Now, you may have many potential customers, but how many of them result in a sale? This is where understanding your business's sales cycle length can help. It measures the time it takes for prospective customers to close a deal with you. Sales Cycle Length = Number of Days To Make Sale / Number of Sales Made The goal should be to reduce the sales cycle length because if more purchases are made in shorter periods, your bottom line is impacted positively. However, business-to-business sales generally have longer cycles because they involve multiple people consulting with one another before closing a deal, as opposed to an individual customer deciding to make a purchase. Longer sales cycles could lead to lower customer retention. For example, if your target market doesn't know your company well, their hesitancy may be higher, which means the sales cycle will be longer, and a completed purchase will be less likely. 3. Average Conversion Rate A conversion rate calculates how many site visits result in desired actions (conversions), like completing a purchase or signing up for a newsletter. This should usually be measured over consistent periods of time (like, weekly or monthly). Across multiple industries, the average conversion rate is 2.5%, so anything below this could impact your customer retention and profits negatively. Average Conversion Rate (%) = Number of Conversions / Total Number of Visitors x 100 Knowing your business's average conversion rate will allow you to track the success of the various steps you’ve taken along the way. For example, if you have a high conversion rate, you can deduce that the amount of money you've put into advertising has paid off. If you have a low average conversion rate, your customer retention may be low, too. So, adjusting your strategy for conversion can help retain customers and improve your bottom line. » New to e-commerce? Check out the best conversion rate metrics 4. Customer Acquisition Cost Customer acquisition cost (CAC) refers to the approximate cost to acquire a new customer. This can include advertising and marketing campaigns' expenses, marketers' salaries, equipment, overhead costs, and more. It's important to factor in the total of all the costs that went into securing new customers. CAC = Total Costs / Total Customers Acquired Over a Certain Period CAC can get expensive. It naturally takes more money to acquire new customers than to retain them. So, by focusing your efforts on CAC more than retention, you could be losing profits. An example of how you can implement this KPI is to focus your resources on acquisition when starting your business, then direct more costs to retain the customers you've successfully acquired. » Discover how you can use email marketing to improve customer retention 5. Customer Lifetime Value When attempting to maximize your sales potential, you should measure customer lifetime value. Simply put, it’s the amount of money you estimate a customer will spend with your business or on your products over a lifetime. You can also use this to compare the performance between certain campaigns by using data from the period in which the campaigns were active. To calculate the customer lifetime value, you first need to calculate the customer value. Customer Value ($) = Average Sale Value x Average Number of Sales Using this, you can then calculate the customer lifetime value. Customer Lifetime Value ($) = Customer Value x Average Customer Lifespan Let's look at an example to contextualize. Say Shop X has an average sale value of $30 and, on average, a customer buys products three times a year for 3 years: Customer Lifetime Value ($) = Average Sale Value x Average Number of Sales= $30 x 3= $90Customer Lifetime Value ($) = Customer Value x Average Customer Lifespan= $90 x 3= $270 This statistic can give you an idea of what to expect from an average customer throughout your business relationship. A higher customer lifetime value could indicate higher customer retention, which would benefit your bottom line. A lower value can help you change strategies and, perhaps, allocate funds for bringing in more high-value customers. » Are you a Shopify user? Check out this guide to Shopify sales reports KPIs Can Help Improve Your Customer Retention Tracking these KPIs can help you better understand the trends of loyal customers and those who have moved on from your business. Utilizing these KPI metrics can also help you strategize improved methods to increase customer retention and help your business grow. This can get overwhelming quickly. But don't worry, BeProfit can help you monitor and manage these metrics. Then, using the data results, you can focus on optimizing customer experiences and strategizing improved ways to lower acquisition costs and increase customer retention.