e-Commerce: Complete. Configured. Connected.
Simon Jones
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Posts by Simon Jones
Who Is In Your Social Network?
Mar 22nd
We wrote recently about some of the changes in the payments world, particularly about a tightening of the rules and regulations around who can sell online, and how they interact with the credit card associations. For most online merchants, these are changes that continue to fuel a mainstreaming of our industry, even if they do cause some irritation in the short term. The underlying theme here, to a large degree, is the virtual version of school yard: who you hang around with determines how others perceive you.
There’s the jocks and the nerds, the Goths and the slackers, even – dare one say – the stoners. Who we choose to associate with has a real impact on how we are pre-judged by those who don’t yet know us; sometimes fairly, sometimes unfairly. We can argue the justice of being judged ‘guilty by association’, but we certainly can’t deny that it happens, and likely always will.
This plays out in the online commerce world every day. There was a situation I learned about a couple of years ago where one online merchant was accused of playing fast and loose with the rules on adding post-purchase promotions: they successfully got a slew of consumers to unknowingly sign up for a subscription they didn’t realize they were committing to. Eventually their program was noticed, and all kinds of bad things happened, not the least of which was that that organization was sent packing by their payment processor. Perhaps toughest, though, was that dozens of other companies who offered similar programs – regardless of how transparent their processes were, or how high their customer satisfaction rates soared – were also advised that their business was no longer welcome. They had been tarred with the same brush, because no payment processor can take the risk of enabling behavior that can fundamentally damage their own reputation, and hinder their ability to serve their customers.
Plimus has just introduced a new process to the sign-up for our service, one in which new accounts run through a risk review before being enabled for credit card sales. To some, this may seem like just another cumbersome hurdle to clear in order to get into the marketplace – and there’s no doubt that it makes the path from creative genius to revenue-producing merchant a little longer. For current Plimus merchants, though, it ensures you don’t find yourself in the company of merchants with a more tenuous relationship with ethics and regulations – and protects us all from being viewed as part of a, shall we say, disreputable social network.
The Internet simply isn’t a border town any more, and the cowboys are becoming much less popular. To a lot of folks in the industry, this is – and is going to be – painful and frustrating. Customers, though, are evolving too and know when they are being bamboozled. They are learning to spot the signs of a scam, and aren’t afraid to chase down the perpetrator, get their money back, and make a loud fuss online. Fast-and-loose merchants can run, but it’s getting awfully hard to hide.
So our new review program may cause a few hiccups to genuine web entrepreneurs, but it will also help us to weed out the bad actors, and ensure that we properly curate the reputation of the broader Plimus community. Being part of the crowd known for doing the right thing is never going to harm any merchant’s standing with customers.
New Era in Payments for the Industry
Feb 6th
Although you may not have noticed, February 1, 2012, was a big day in the payment world – although it passed with limited fanfare. The date was important because it marked the enforcement of new rules from Visa around payments, both online and offline. Now, service providers, like Plimus, are required to have clients, who drive more than $100,000 a year through Visa (or any other credit card association), create a direct relationship with their acquirers, or what we commonly refer to as payment processors. Clients doing less than $100,000 a year can still be processed as part of the service provider’s own merchant account.
For us, this has meant implementing a process by which our largest clients have started establishing a relationship, in collaboration with Plimus, with processors directly. From an operational perspective there is very little change to the way in which our service operates, as revenues are still delivered to, and then paid out by, Plimus on behalf of our clients. That said, there is nonetheless a need for larger clients to complete a few forms that are new and unfamiliar in the context of our business.
The reasons for the shift in policy are really threefold:
1. The payment processors are now able, within an established and clearly regulated set of rules, to include payment service providers as a part of their business
2. The financial institutions at each end of the transaction (if you will, the banks for the buyer and the seller) will have visibility to see which merchants are doing business with them
3. Consumers will be safely and securely served by services that are designed to protect their personal information and financial identity
As it turns out, there are some great benefits for the merchant as well. First, because merchants are now viewed by the financial institutions individually, they start to build an individual reputation, rather than being seen as just a constituent part of their service provider’s total volume. Perhaps even more powerfully, the relationship they establish with the payment provider is transferable, meaning that subscriptions can be easily brought along if the merchant decides, for whatever reason, to leave their service provider and strike out on their own.
At Plimus we understand our vendors filling out yet more forms is not something they have on their list of favorite things to do. In that regard, there is necessarily a degree of inconvenience to the new regulations; but in the long run, the benefits to all the players in the payment chain are irrefutable. In the big scheme, these new regulations deliver a high level of transparency to our industry, and represent a strong indication that the industry is taking e-commerce seriously and has made the transition to just being commerce. After more than a decade of experience as a pioneer in this industry, we could not be more pleased.
If you’d like to learn a little more about the new regulation, feel free to click through to
http://usa.visa.com/download/merchants/visa-expands-payment-service-provider-model.pdf.
Wild, Wild West No Longer
Jan 20th
Amid the noise this week about SOPA and PIPA, and the stunning takedown of Megaupload, a very real business reality is upon us: e-Commerce is no longer the Wild, Wild West. If you’ve never watched Middle Men, the Luke Wilson movie about the first company to work out how to make money processing payments, it’s probably worth a watch. It tells the story of how the pioneers into the unregulated world of online content sales resulted in the first wave of government attention. And it’s likely as much a forecast of what is to come as it is a re-telling of what had already taken place.
Nobody in the industry is untouched by the increased scrutiny on what is being sold, how, and by whom. At Plimus, for instance, we’ve been involved lately in a couple of initiatives driven by the new need for transparency. As many people already know, we’ve recently updated our approach to processing PayPal sales, allowing each vendor to receive revenues into their own, self-directed PayPal account. And we’ve initiated detailed reviews of a number of vendors who are selling products that fit into some categories that are receiving some much closer examination by the credit card associations and other financial institutions.
Change is rarely comfortable, and of course for the vendors whose ability to sell through Plimus is currently curtailed, the business disruption is far from pleasant. Given our business model of making money only when sales actually close, it’s also not that appealing to Plimus to have to create barriers to making sales. In the context of where the industry is headed, however, it’s a natural progression that is both unavoidable and likely for the best in the long term.
Payment processing is really just a long line of trust: each player in the chain must trust those both up- and down-stream in order to agree to complete a transaction. The sophistication and obfuscation of the Web can make it difficult for each player to be absolutely sure who else is in that chain, and there has been a recent awakening to a need for much greater transparency up and down the line. Everyone is seeking to continually firm up their processes to ensure they can have 100% confidence that consumers are being handled properly, and that there’s nothing misleading going on at any stage of the game. It’s not nearly as exhilarating as the initial rush of setting up new and innovative ways to do business online, but it’s every bit as necessary to the long-term health and stability of the whole industry.
The new approach to PayPal is actually helping us get revenues into the coffers of our vendors more quickly, and will ultimately be a great catalyst in accelerating business’ ability to re-market and continue to optimize their sales. Expanding the transparency of our client base so that all the players in the financial chain have total confidence in the process will increase our ability to add new and exciting sales methods and business models, and ultimately increase the conversion ratios we can deliver to the whole community.
Change is never painless, but perhaps the move away from the Wild, Wild West will ultimately bring benefits that we can’t see through the clamor of updating and re-imagining today’s business processes. Either way, it’s a reality that history tells us is coming whether we like it or not.
Virtual Economics
Oct 17th
When it comes to traditional retail, price is everything. Whether selling through bricks and mortar stores or online markets, vendors of physical goods define success in terms of the amount of money derived from each individual sale versus the cost of goods and extra expenditures. Online merchants selling virtual or digital goods, however, focus the bulk of their effort on driving traffic to their sites and converting visitors into buyers. Whether you’re selling content like videos, online games, or software and services through subscriptions, in the virtual world your digital inventory has no relationship to sales volume. The warehouse is always empty as your goods are virtual, electronic. Because of this, every increase in sales you can make from your traffic goes right to your bottom line.
To many people, economics seems daunting and complex. But the concept of virtual economics here is fairly straightforward. The digital revenue model is built upon four basic pillars; the intersection of their dynamics delivers maximum value.
These pillars are:
• Traffic
• Close rate
• Average order value (AOV)
• Retention
Let’s start with traffic and close rate – and the conversion of desire to action to purchase a virtual good. While traffic can vary greatly, your close rates need not. By removing hurdles in the online purchase process, such as problems with different currencies, languages or payment types, merchants can increase closure rates and significantly boost revenue streams. This is especially important when selling globally, as you want to cater to many different audiences across the world. Additionally, advanced techniques such as single-click buying and user-experience tuning can impact the bottom line. With the vast majority of shopping carts still being abandoned during the online shopping experience, traffic alone is no guarantee of success.
Maximizing the average order value (AOV) per consumer conversion results in greater success. Online merchants need to ensure they do not miss any opportunity to turn a browser into a buyer by connecting with the buyer when his or her wallet is open and they are eager to buy. The best way for merchants to do this is to learn more about what makes their buyers tick. When do they shop online? Who do they primarily shop for – themselves? A spouse? Friend? Co-worker? By understanding the shopper, and taking steps to address his or her needs, online merchants can take advantage of shoppers’ time and convert the sale. Offering an added value during the checkout process or appealing to an impulse purchase, simply adds revenue to your bottom line.
The last step, retention, is not as easily factored and measured, but holds just as great an impact as the previous factors within this equation.
Retention is the key to growth. Keep your old customers – and grow with the addition of new ones. It is nearly an urban myth that the costs to acquire new customers can run five to ten times more than the costs to retain them. Truthfully, these costs will vary by industry, product and company strategy, and are impacted by the rise and fall of economic cycles as much as anything. any implications can be drawn from this simple definition: Customer retention comes from the vendor and is built on retaining the customer without the need for a change of heart or mind (and thus the customer becomes loyal). Retention comes from providing incentives for the customer to return (and restrained from leaving) in the face of competitive actions. Reward the faithful by creating a retention benefit program that recognizes repeat customers. Today’s most effective perks programs do not involve much financial investment, however, every little bit of appreciation shown to the customer pays dividends. It’s important that once the initial transaction is conducted, the seller continues to evolve the relationship with that buyer, developing a business transaction into an emotional bond.
Putting it all together, we’ve got the recipe for converting browsers into buyers. In simplified mathematical terms, the model can be defined as:
(R)evenue (e)quals = (A)verageOrderValue x (C)loseRate x (T)raffic.
We call this the ReACT model, and it shows how any business can flex its marketing strengths to drive online revenues. By using pre– and post– sale promotions to increase AOV, multivariate testing on the checkout page and direct consumer management experience, sellers will build higher Total Lifetime Value from their customers. Leverage the ReACT model and online merchants will successfully increase their close rates, AOVs and revenue rates.
Casual Goes Mocial
Feb 14th
Tortured combinations of terms aside, Casual Connect Hamburg has been all about the impact of Mobile and Social gaming on the Casual Gaming market. It seems no conversation is complete without looking to the expansion of the space from downloadable games to new channels and new business models.
The cornerstone of the ongoing changes to Casual Gaming was the fascinating perspective shared by Rovio, the publisher of uber-popular title Angry Birds. Channeling the most forward-thinking entrepreneurs of our time, Rovio’s Mighty Eagle, Peter Vesterbacka, shared how the company’s flagship title is as much a brand and a franchise as it is a wildly popular and addictive time-suck. If you thought Angry Birds was ubiquitous on smartphones, you ain’t seen nothing yet: the brand will soon extend onto your TV, into your living room and throughout retail chains.
Casual Game publishers are starting to emulate Hollywood, whose products’ success was once measured by cinema ticket sales, but is now defined by crossover product marketing and multi-media sales. For some publishers that means taking a single popular title and creating ever more acquirable items (plush toys, board games and advertising tie-ins) to expand the brand. For others it means taking their catalog of games and building a studio-based franchise revolving around audience communities and continuous cross-promotion. Either way, the day of measuring success by number of units sold of a given title is becoming a thing of the past.
Certainly, Facebook’s decision to impose its Facebook Credits as the primary way to buy into games that inhabit its world has caused some consternation and concern. Nonetheless there is a sense that this may be just what the industry needs to start some reflection on whether to commit to a single platform led and controlled by someone else. There’s lots of innovation around allowing players to carry their in-game identity (and game progress) across channels – imagine taking those level-ups you’ve achieved on iOS and having them persist through your PC-based or IPTV-based game play. Ultimately, carrying one’s persona from channel to channel will open up the ability to build ongoing relationships between studio and player. Simultaneously, it confounds the efforts of the walled garden managers to retain control (and a large share!) of player revenues.
While it’s not wildly clear how the social gaming meme of the last year or two will play out in the next 12 to 24 months, there’s absolutely no question that casual gaming is delving deeper into the persistent relationship between player and game. Nor is there much challenge to the idea of building a movie franchise-like halo of offers around any title that gains traction. If ever there were a year to Go Mocial, it seems, 2011 is it.
Simon Jones,
VP of Strategic Solutions
Photo credit: http://www.flickr.com/photos/daryl_mitchell/3560636199/
Recap from Revenue Seminar 2010: What a Packed House!
Oct 20th
Just got back from the Revenue Seminar 2010 in Tel Aviv – and boy, what an experience! Some 600 people came to learn more about how to make money online through Internet marketing. In marked contrast to many events we attend in the United States, the presentations are phenomenally well-attended, with a high level of engagement and more discussion and questioning than most of us could begin to expect.
Plimus presented on the concept of ‘closing the last mile’ – actually closing the deal once the prospect reaches the purchase page. The response was overwhelmingly positive, and we were once again struck by how, for many people, really focusing on the actual checkout process to ensure superior conversion ratios (and therefore income!) seemed like a new concept. Research shows quite incontrovertibly that conversion is artificially limited when customers don’t see their preferred languages, currencies and payment methods, as well as when the user experience changes from one site’s look-and-feel to a generic ‘payment box’. Yet, time and again, we find that the majority of online marketers dedicate the least amount of effort to fine-tuning this element of their business. This is one of the key reasons savvy Internet marketers turn to Plimus, as we deliver these elements right ‘out of the box,’ delivering higher conversion rates than many of the alternatives that are still popular out there.
The good news is that lots of the attendees took the time to come and learn more, which we interpret as a really good sign! The industry has become very sophisticated in traffic generation and qualification, and we look forward to the day that final cash conversion reaches a similar level of success.
The message coming from the other speakers really boiled down to this: successful Internet marketers don’t just promote others’ goods, they also source and market their own products. The highest echelon of the players in this market work hand-in-glove with a small number of business partners, each supporting and promoting the others’ releases. This allows them to leverage their hard-won customer lists with new and exciting offers many times per year, sometimes for their own products, and often for their partners’.
In the hard-fought Internet marketing space, it’s all about partnering and cross-promotion: the lone wolf will always find it difficult to break through to a high level of performance. This was music to our ears, of course, as it validates our decision to develop complex network cross-selling capabilities, and to enable team selling across our seller community!
The last few presentations we saw were from ‘super-affiliates’ who were marketing their own solutions for new affiliates. The right phrase for these offerings would be caveat emptor – or buyer beware. Insofar as the ingredients for success appear to be a solid network of partners, buying into the system of a super-affiliate on an anonymous, pay-to-play, basis seems like a risky and expensive decision. It is far better to focus one’s initial investment on licensing solid product, marketing it well and starting to build a network that is directly-sourced.
In Internet marketing, as in all businesses, there is no free lunch.
Simon Jones,
VP of Strategic Solutions
The Social Web: This Changes Everything for e-Commerce
Jul 21st
The social web has irrevocably changed the way that web users interact with the Internet. Sharing thoughts, opinions, reviews, and personal responses to what we find online creates a vast pool of deeply valid consumer information. This empowers consumers to make choices that are informed by their peers, rather than relying on the PR and Marketing delivered by sellers. It also changes usage expectations: today’s buyer is looking for more than a storefront, a catalog, and a checkout page.
There is no greater indication of this shift than the rise of social applications, particularly games, within the wonderful world of Facebook. Zynga recently suggested that they expect to drive $1B in revenues through their games on Facebook – in 2010 alone! What drives the popularity of those games, and the resulting monetization? Sure, there’s advertising and PR, but fundamentally the drive for users to join the fun is the recommendations and comments of their connections within the network.
Simultaneously, we see the same shift occurring in the MMORPG world. The newest Lord of the Rings MMORPG is making headlines due to the announcement that it will offer Free-to-Play (F2P) access to absolutely anyone. The expectation is that monetization will happen within the game through the in-game commerce (and also that free players will convert to paid memberships, of course). The underlying assumption is high volumes of participation will drive more revenue through upsells and cross-sells than could have been captured via subscription payments alone. This is the network effect writ large!
The core of this shift is explained by some pretty simple behavioral economics: once a consumer has something, it is more valuable to them than something they simply want. When I read glowing accounts of Farmville from my friends, and watch the notifications that their farm is getting bigger and better, I’m already immersed – and want to participate more actively. Similarly, my spending patterns within my favorite MMORPG are driven by the desire to compete with my friends far more than a simple motivation to succeed.
Interestingly, casual game studios are in amazingly good shape to take advantage of this set of consumer behavior changes. Their games are already resident on players’ computers, and presence is, to re-write an old saw, nine tenths of the law. What casual game studios have known for years is that trials are infinitely better than storefronts: as soon as one is installed, the player feels they own the game. This makes it very much easier to fill in the missing links between the player’s impulse to buy, and the necessary steps to have them complete the process.
The tactics to take advantage of this are shockingly simple. During the first sale, ensure that a cross-sale or up-sale promotion is present – it’s amazing to me how high the customer-attach rate to these is, yet how few online sellers maximize their potential here. Once the sale is made, use the wrapper application you implemented to secure the game to provide messages and promotions to other items; those items can be completely free, because you know that your trials convert really well.
Go one step further, and ensure a customer creates an account somehow – add a check box to allow you to store that account in your checkout page. That way, when they come back next time, you can eliminate the friction of re-typing personal information and deliver a single-click experience. Eliminating that painful step can double your checkout conversion in a single stroke.
The bottom line is that casual game studios, while staring down the barrel of the threat of games moving to the social web, are also faced with a wonderful opportunity to build longer-term relationships with their players. Jumping in now represents a strong move to build strategic advantage in the marketplace – and don’t we all need one of those?
We’re at Casual Connect in Seattle this week – and will be presenting on this very topic on Thursday afternoon at 1pm at the Triple Door, so come by to hear more and ask your questions.
Simon Jones,
VP of Strategic Solutions
Photo credit: http://www.flickr.com/photos/intersectionconsulting/4465834448/
Team Up To Grow Your Business
May 19th
You’ve got to hand it to the computer hardware manufacturers: they know a thing or two about wringing every last penny out of each sale. Go configure a laptop at Dell or HP, and you’ll find more options than you can shake a stick at. Most importantly, you’ll notice that lots of those options are not, in fact, manufactured, or even conceived of, by the equipment manufacturer.
For many online software sellers, the primary limitation on sales is the finite size of the product catalog: once a customer has bought everything you make, you run into a wall.
But think bigger: how about if you could expand that product catalog without dropping another penny on R&D? That’s what a lot of vendors are starting to move to, and it’s working very nicely, indeed. Here’s how to get in the game.
First, find a complementary vendor right here in the Plimus Community, or through your own contacts. Agree a fair commission rate for you to resell their product – 30% or so seems to be a figure most organizations can live with. Now, every time a customer buys from you, offer them the opportunity to also buy your partner’s product.
Most companies who shy away from this are quite reasonably concerned about the impact on their own sales process: what if the customer sees too many come-ons as offensive, as abandons their purchase?
You can offset this by
- Offering the upsell in your Thank You page, so that you ensure you close the deal before upselling; and
- Placing the ad for your partner’s product in a follow-up email. The attach rate will likely be lower, but it’s a great way to get into the game without taking a new risk in the checkout process.
It is very easy to execute these sorts of campaigns inside the Plimus E-Business Platform, and you have no reason not to do so – that it, unless you don’t want to maximize your profits and grow your business.
Simon Jones
VP of Strategic Solutions
Photo credit: http://www.flickr.com/photos/oakleyoriginals/2786948178/
New Network Sales Model Changes the Online Sales Game
May 5th
Traditionally, online sellers have fit into one of two models. Either they are a pure retailer, selling other companies’ products at a mark-up. Or they are a ‘factory outlet store’, selling their own products and services direct to consumers.
The second – the factory outlet stores – are leaving literally millions of dollars on the table.
Do the math. A merchant that has one product to sell, at $40 a pop and a goal of selling fifty thousand units next year has put an artificial cap of $2 million in revenue on their business. And once a buyer has put their trust in the merchant, there is nothing more to sell them – that business relationship is valueless.
To understand how much profit is being left on the table, first cast your mind back to the last time you reached the check-out at a grocery store. You’ll recall that the space around the check-out is densely packed with impulse-buy items: packs of gum, gift cards for iTunes, magazines and more. Each of these items represents a high-margin opportunity to add to your eventual bill. And that space is actually bought for the most part by the products’ manufacturers – because they know that once you have your wallet open, you’re highly likely to add another item to your basket.
Now imagine an online buyer purchasing your $40 software package. They would be more than happy to add an impulse-buy item, if you offered them one. Maybe a casual game at $9.95, a support package for $14.95, even a PC Accelerator for $20. If you could take a 30% to 40% revenue share on selling these items, your business’ revenue could increase by as much as 20% – without the need to invest in building new software.
And now imagine running a monthly newsletter to each of your buyers offering a ‘special deal’ on another partner’s product with another 40% revenue share on, let’s say, a $40 item. Assume you have a user base of fifty thousand, and a conversion ratio of just 1% – that would mean you could look forward to 500 sales per month, or six thousand per year at $16 revenue each. Combined with the promotions you offered in the purchase process, you’ve now increased your revenue potential by a full 25%.
The really good news is that you can do this right now, without any financial investment, by using the Plimus e-Business platform. With your own account in place to take care of the e-commerce for your own products, you can swiftly agree to re-sale deals with companies like Namco, Avanquest, Surf Secret and literally thousands more. And of course, you can seek partners who will re-sell your products on a revenue share basis, increasing your audience size.
Plimus merchants are seeing initial invoice sizes as much as 43% higher using Network Sales, increasing their revenues and helping them build a sustainable business for the future.
Simon Jones
VP of Strategic Solutions
Photo credit: http://www.flickr.com/photos/elvissa/823054325/
A Purchase Page Without a Promotion is a Crime Against Business.
Mar 31st
In the retail world, there is an unspoken convention that when checking out you must be bombarded by inexpensive impulse purchase-driven items. At the grocery store, you are tempted by bubble gum, magazines and phone cards. At furniture stores like Ikea, even, you may be tempted by Swedish meatballs and chocolate bars. And who ever left a fast food restaurant without being asked, “do you want fries with that?”
Why is this? Because, time and time again, it has been proven that the average retail customer will, in fact, accept the offer of a low-cost addition to their shopping basket once they’ve reached the point of opening their wallet.
Bizarrely, the vast majority of online sellers have missed this point.
The large retailers, of course, often have excellent and effective strategies in place: you can’t get out of (or even around!) Amazon.com without their offering you scores of items they think you’d like. But for the average site, the best you’re likely to see is a somewhat halfhearted effort to tack on overnight shipping or gift-wrapping.
The challenge, especially for merchants pushing intangibles like software and music, is that they may not have a rich catalog of options to offer. For a grocery store, it requires close to zero effort to source a pallet of bubblegum to position by the checkout; for a company selling their own software on the Web, it is not as obvious how to find a similar offer to line up on the online BuyNow page.
This is exactly why Plimus introduced Network Sales in Spring of 2009, and is now promoting the concept of “bubblegum promotions.” Simply stated, bubblegum promotions are broadly-appealing, low-cost, impulse purchase-driven offers that can be easily added to any purchase process driven by the Plimus platform. Any merchant selling through the Plimus e-commerce platform can now implement bubblegum promotions in just seconds and add the potential for double-digit revenue growth without investing a penny in developing or sourcing new product. The Plimus catalog offers a wealth of products that are available immediately for promotion. These range from IT support sessions, to software for fixing slow or virus-laden PCs, to some of the world’s most popular video games.
Bubblegum promotions can be added as actual promotions within the purchase process – but they don’t have to be. For merchants concerned that they might reduce the conversion rates on their core offerings by adding new and unfamiliar offers to the purchase page, there is still plenty of opportunity. Ads to these promotions can be added to the Processing Page, allowing the customer to browse recommended promotions while their current purchase is being completed; promotions can be added to the Thank You page post-purchase; and promotions can be added to Sales Confirmation emails – and even follow-up email campaigns.
The opportunities for revenue growth are many, the costs virtually zero and the potential unlimited: which is why Plimus likes to say that a purchase page without a promotion is a crime against business.
Simon Jones,
VP of Strategic Solutions
Photo credit: http://www.flickr.com/photos/thetruthabout/3347053181/
