Creating a robust eCommerce strategy in 2021 involves a blend of content, commerce, and community. Whether your company has been a leader in the digital transformation space, or you are just embarking on this journey, the basics for success still apply.
In our three-part series, we are breaking down the areas of digital and eCommerce into people and culture, process and budgeting, and platforms and tracking.
Today, we will focus on process and budgeting, cornerstones of a quality digital commerce strategy.
This topic is increasingly important in 2021. With the rapid advancement of digital commerce due to COVID-19 and the overnight virtualization of brands, traditional frameworks for eCommerce processes and budgets are no longer valid.
Instead, determining how much and where to spend money in eCommerce is changing, requiring organizations to shift their thoughts around eCommerce spend.
In this segment of our eCommerce strategy 101 series, we will help businesses look at the new frameworks that are rising, and we’ll deep dive into goals, processes, and key areas of focus for budgets for the year ahead. The result is that companies can feel empowered to make wise investment decisions in meaningful segments of their eCommerce strategy.
Determining Your Process
Embracing an eCommerce strategy must involve careful consideration of existing business practices and how they inform your digital transformation effort. Often, this involves process change structured with a careful framework, which then feeds into your eCommerce budgeting plans.
The Rise of a New Framework
For many years, the innovation budget allocation model by the Harvard Business School was the go-to when building a budget for digital investment aimed at growing a company. This allocation framework was used as a guidepost for companies looking to innovate in digital or simply migrate to digital.
The framework essentially allocated 60% of dollars into “Evolutionary” endeavors, such as new experiences, new features, and new models. It allotted 20% of a budget to “Differentiation” tactics, including new offerings and new capabilities. Both of these segments fell within a business’ current market. The remaining 20% of the budget was aimed at expanding into new markets, with 15% allotted to promoting current capabilities in new markets and the remaining 5% to crossing into new capabilities.
However, in a world heavily influenced by COVID-19 and the rapid acceleration of digital adoption across all user bases, a whole new process and budget framework is needed.
For this reason, a framework focused on maximizing opportunities is a must going forward. A more contemporary framework places eCommerce investments on a comparison graph breaking down initiatives by the complexity of development as well as the perceived customer value.
Using this framework, businesses can prioritize eCommerce initiatives based on the effort required and the potential profit achieved.
For example, the high value, high complexity side of the scale might include launching a personalized site experience. This may require a heavy amount of development dollars but can result in a high return on investment.
Conversely, for other retailers, incorporating virtual reality may fall in the low value, high complexity segment of the graph. This initiative requires a heavy amount of investment dollars and may show a small return on the budget allocated in the short term. It may take customers time to acclimate to the new experience and divert them away from the purchase path.
Additionally, businesses can use this more contemporary framework to capture quick wins. These commerce initiatives are simple to implement but offer a tangible benefit. An example of a quick win for a business might be implementing express checkout or one-click checkout into the shopping experience.
By plotting tactics in this framework, businesses can better design goals, allocate budgets, and get alignment on priorities.
Establishing Your Goals
An eCommerce budgeting process should always begin with a clear establishment of goals.
Too often, businesses fail to tackle this most basic question when developing an eCommerce strategy:
“What do I really want out of my e-commerce site or business?”
For digitally native companies, that question is easy to answer. After all, your digital presence is the essence of your ability to do business.
However, for established businesses with multiple channels and customer touch-points, this is a critical question.
At maturity, what would success look like by introducing or further investing in an eCommerce strategy and/or platform?
This might be a goal of generating net new revenue from new customers, increasing sales from existing customers, increasing repeat purchases or driving up the average order value.
If the goal is new customer acquisition, this might mean drawing in a new audience that you could not reach through previous channels.
It might even simply be a goal of a channel shift, looking to migrate existing business activity from higher-cost channels, such as a dependence on brick-and-mortar locations and sales staff, to lower-cost channels, such as a self-service website or mobile app.
There is no right or wrong goal. It is simply a matter of having a clear goal defined before creating a budget. When setting goals, be sure that the goals you lay out are specific, realistic, timely and measurable.
For example, if your company is currently growing sales at a rate of 2%, shooting for your eCommerce platform to increase sales to a rate of 15% may be challenging. Additionally, a timely goal must involve parameters—how long until a goal should be achieved? Lastly, make sure to implement goal tracking. If you don’t measure your progress, there is no way to adjust your strategy periodically, which can lead to wasted spending.
Aligning Teams and Priorities
In Part 1 of our eCommerce strategy series, we discussed the importance of hiring the right people and establishing a culture for digital success.
Now it’s time to take a look at your processes and initiatives.
Companies should prioritize initiatives in such a way that they will deliver on the stated goal. Use your budget framework as an anchor to the prioritization of goals and visually represent initiatives through it.
From here, be sure your teams align with these priorities. This often involves breaking down historic silos within your business, particularly for large organizations with long-established processes and structures.
Training and Supporting
With a framework in place, alignment across the business, and clearly established goals, the next place where success or failure will take root is in roles and responsibilities.
No matter how large or small your company, the people of your business have to be on board, properly trained, and supported.
It is important to note that any eCommerce strategy and budget should include room for change management. Change management includes building awareness and desire around the change first and then transitioning into creating the knowledge and ability required to carry out the process change.
Skipping over this critical component will lead to premature failure in any eCommerce strategy.
Focusing on the Three Key Areas
Finally, as you button up your eCommerce processes, there are three key areas to hone in on:
- Program Management: Clearly define who owns the plan and the eCommerce development. Make sure that accountability is in place so that processes don’t fall through the cracks.
- Product Management: Determine who in the business will be responsible for owning the eCommerce site and who will be the voice of the customer. Product managers should drive your business’s eCommerce strategy forward with a customer-obsessed focus.
- Product Development: Behind the scenes, make sure you have clearly outlined who actually owns the development of what you’re building. Define who is responsible for ensuring that what is specified by the business is what is being delivered. Having clear acceptance criteria in place can save your business from launching services and products misaligned with the business’s needs.
Additionally, make sure to establish a mechanism for prioritization and change. Who are the key players involved in prioritizing work and making changes to the program, product, and development?
Build the Budget
With processes and framework in place, it is time to create a clear budget to support your eCommerce strategy. Whether you operate in B2B commerce, B2C commerce, or D2C commerce, building a budget will involve five key areas of focus.
Start with a zero-based budgeting approach.
Identify critical initiatives linked to your core digital strategy that must proceed as planned or at a slightly lower speed. From here, identify core projects that are more complex and can be delayed without ramifications to your business goals.
In this way, you can work backwards to identify what initiatives need budget dollars first and which can receive less of the budget upfront.
This will also be influenced by how far along your business already is in the digital transformation process. For D2C brands that operate solely within the eCommerce realm, core initiatives will look dramatically different than B2B brands, just beginning a journey into the digital realm.
Regardless of your position in a business, your budget will only be as effective as your understanding of the components that make up an eCommerce strategy.
You need to account for:
- the platform utilized
- hosting costs
- customizations, and more.
Breaking this down further, you can compare choices within each of these segments.
For example, the platform will be the core engine of your eCommerce strategy. There are numerous options available on the market, but budget for one that at least includes product pages, listing pages, search capabilities, cart, and checkout. Additionally, factor into your budget future goals. Is the platform solution you choose now scalable to match your needs two years from now?
Getting into the nitty-gritty aspects of budgeting, you will need to determine how you will account for costs.
Depending on your organization and current accounting practices, much, if not all, of the initial implementation of an eCommerce strategy may be capitalized as you are creating an intangible asset arising from development.
A brief list to think about may include the following:
- upgrades and enhancements
- development requirements (security & software updates, bug fixes, etc.)
As such, every budget affected needs to be considered during this stage of planning. Think of your ongoing plan as your Keep the Lights On number or your KLO budget.
In anticipation of a shift toward online sales, allocate more of your marketing budget to digital channels. This should include everything from a strong social media presence to integrations with conversation-based commerce.
If digital marketing tactics have not been integral to your business KPIs historically, establish a new cadence.
For example, put together a C-level digital performance dashboard that provides a cross-channel view of eCommerce, customer relationship management, and social media. This will enable the rapid identification of opportunities for optimization or growth and will place your eCommerce marketing strategy center stage.
Talk to Vaimo About Your Ecommerce Strategy
In part two of our eCommerce strategy 101, we aimed to shed some light on creating the right processes and budget to build long-term success. At Vaimo, we have years of experience assisting clients who are either ramping up their digital transformation or looking to set foot into the world of eCommerce for the first time. Regardless of where your business currently stands, we will be happy to talk to you about your eCommerce strategy moving forward.
Reach out today for a consultation with our team and find out how you can fuel the growth of your company through a digital commerce strategy.