March 28, 2007

Virtual CEO: Grow E-Commerce Sales By An Additional 25%

Following up on a point from yesterday, I want to re-phrase a question that resulted in a lot of chatter today.

Assume you are an E-Commerce executive at a multichannel retailer. Your channel (online) is forecast to grow by 25% in 2007.

Let's assume that your Board of Directors is not happy with projected E-Commerce growth rates, and demands you grow the online channel by 50% in 2007. Your Board will not give you any money to spend on catalog marketing, television, radio, magazines, etc. Your Board will not allow you to source new merchandise. You are required to use marketing within only the online channel to grow your online business an additional twenty-five percentage points.

In the heyday of catalog marketing, you would increase pages circulated by roughly fifty percent, in order to grow your sales by twenty-five percent. You would prospect to inactive and new customers, add contacts/mail-dates to your best customers, and possibly add pages to your best catalogs. Given the money, you could achieve this unreasonable request --- albeit unprofitably. This was the magic of the old direct-to-consumer business model. You and your customers were a team that jointly determined sales and profit levels.

In retail, we know this request is not achievable within existing square footage allocations. A business leader would ask for capital to add new stores, renovate old stores, or acquire other businesses.

Now let's focus solely on the online channel. Could you grow E-Commerce sales an additional twenty-five percentage points? Is it possible? What marketing tactics would you use? Could you get there via paid search? Portal advertising? Affiliates? E-Mail marketing? Natural search? Blogging? How much would it cost you to get the increase, if you think this type of increase is possible? Would there be any long-term benefit to this short-term growth strategy?

Multichannel CEOs and CMOs: Today is as good a time as any to begin testing online growth strategies that don't include paper. If you have to go well beyond organic growth rates, how would you do it? Learn today, so that you can answer this question tomorrow.

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