FEATURE: The perfect dotcom
by Real Business - Thursday, 30th August 2007
You might get £1bn. That, after all, is how much Vodafone and Vivendi blew back then on their dotcom Vizzavi. It was a sort of er, portal, thing. Actually, it was a classic dot-bomb. Neither Voda nor Vivendi had any idea how to build a workable, profitable dotcom.
Today, many firms are still struggling to crack cyberspace. Some sites are still too slow. Some are inaccessible – over ten per cent of all websites are closed to the increasingly popular Firefox browser, including big budget creations such as Odeon Cinemas’ and the government’s Jobcentre Plus site. Others are cluttered with daft flash presentations, baffling graphics and agonising layouts. But a handful are within spitting distance of perfection. For this article we’ve talked to six of the most respected and profitable dotcoms in the land. We’ve asked them to open their doors to us, to show us round their warehouses and their backends, and to reveal exactly why they are succeeding where so many others are failing.
Perfect analysis
“Intuition is useless. In order to improve,
you must measure everything.” Christian
Robinson’s words should be every dotcom
entrepreneur’s motto. He’s the MD of
Firebox.com, a gadget website, but every
profitable dotcom will tell you the same
thing. Measure everything
. Here’s an example of how detailed this process can be. On Firebox’s homepage there is a list on the lefthand side of the 20 topselling items, including the Roboraptor toy, arcade consoles and poker sets. Firebox wanted to know if it was more effective to have the price listed beside each item. Robinson explains, “We had a theory that the price is a distraction. We also thought that users might be surprised by our prices, so it would be good to have them there.” The solution? Using cookies, Firebox segments users, and presents some with prices, and some without. Then they compare the behaviour of the two groups. “We run a test like this for three months, then make a decision. This way we are always fine tuning the site without relying on hypotheses.”
To measure your users’ behaviour you’ll need webanalytics software. This makes it possible to see which sites and links they came from, where they go when they leave your site and which links they click on when they’re on any given page. At office supplies firm Euroffice.com, chief executive George Karibian is a webanalytics addict. He recommends the well-established package WebTrends. “It’s fantastic. You are able to look at absolutely everything. They also have a great consultation business to help you get the most from the product.” Also on the market is RedSheriff. Phil Robinson, chief executive of CD Wow, particularly likes the facility that reveals which countries users come from. “We also look a lot at page exits.” The cost? It varies, but CD Wow pays £100 a month – a pittance for the return it gives.
Perfect sales funnel
To get maximum payback from webanalytics,
you’ve got to know what to do with your
data. It’s all very well realising that some of
your pages are too obscure for users to find,
and promoting them better: that’s kindergarten
stuff. The big boys are far more savvy.
CD Wow’s sales philosophy is built
around its sales funnel. For the uninitiated, a
sales funnel is an analysis of user dropout: for
example, for every 100 people that visit the
site, 20 will click on a product, 10 will get as
far as the checkout, and 5 will actually buy.
Your mission is to get as many customers to
the bottom of the funnel as possible.
“We have a 30 per cent conversion rate, which is enormous,” says CD Wow’s Robinson. “We achieve this by not confusing our customers. Instead of presenting more options as you make a purchase we give less and less. As soon as you’ve got something in your cart, the options start to disappear.” The most sophisticated thing CD Wow does on the suggestion front is offer you the top twelve albums in the genre you are buying from. “If you are buying country and western, you see our top albums at the bottom of the page. That’s it.” By the time you are putting in your credit card details, there are no distractions at all on the page. Firebox and Amazon don’t ask you to register before you buy. Christian Robinson says, “Customers see that as a waste of time – I mean you don’t do it in a normal shop do you? You just put in your credit card details and go.”
For a masterclass in honing your sales funnel, listen to Karibian’s technique. He uses webanalytics software to segment his users by how often they’ve bought before. Euroffice’s site morphs depending on who is looking at it, with the object of presenting them with precisely what they are looking for.
“First time users will be attracted to your site by price, or because they’ve been let down by someone else. We lure them with a 10 per cent discount. If they buy, don’t be fooled into thinking you’ve got a customer. You’ve simply stolen an order from a competitor. If they come again – it’s the same. You’ve stolen a customer.
“From their third order to their ninth is a crucial time. They are ‘in the nursery’. You’ve got to nurture them, and we use all sorts of techniques to keep them coming back.” Great special offers, 2-for-1s, freebies – all of these can be showered on customers in the nursery. Frequent reminders of your existence are important. “The number one reason they will not return is because they’ve forgotten about you.” And above all: “Make sure your service is right for these people. One bad experience, and they are gone.”
By the time a customer has bought ten times, they are yours. “These are your ‘key clients’. They will tolerate some level of bad service, because they are loyal. But you’ve got to use techniques to ringfence them to prevent them wandering off.” Offering long term contracts works well in this environment, as do offers such as buy nine products, get your tenth free. Karibian reveals that over 52 per cent of his sales and 62 per cent of his profit come from key clients. By focusing on getting customers in the nursery through to key customer status, other issues, such as order size, take care of themselves. “Average order value for nursery customers is $115. For key, is it $228.”
Karibian also collects data from his customers by asking them fill out a form. This way he knows what type of customer he is attracting. “We tried to segment our customers by industry. That didn’t work. So we segmented them by their size, and we immediately gained insights. We noticed that our bread and butter are firms with five to 15 employees.” By understanding this, and marketing to this segment, Euroffice is sustaining 30 per cent annual sales growth.
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GOOGLE RANKING – HOW HARD?
If you don’t want to pay for a Google advert, just get a good ranking and you’ll get lots of traffic for nothing. But what’s the key to getting to the top? Cheapflights is the top rated result for “flights”, but chief executive David Soskin says it’s a tough position to achieve. “It’s immensely complex, not for the faint-hearted. Google changes its algorithmns every so often, so we have to guess what they’re doing.” Despite almost a decade of doing it, Cheapflights still hasn’t mastered the art, and is forced to outsource some of its Search Engine Optimisation research. Soskin’s tip: work hard at SEO, but if anyone tells you they’ve got all the answers, don’t believe them. Google leaves even the experts scratching their heads. |
Getting your sales funnel right requires years of experimentation with the look and layout of your site. All agree that the most important trend is increased clarity. David Soskin of Cheapflights says: “The reason Google is so successful is because it is so clean. It takes 0.2 seconds to load.” This spartan feel has dominated Cheapflight’s design. “Our site is unrecognisable from two years ago. It’s got simpler and simpler to look at and use.”
Another vital piece of advice is to be conventional. Karibian says he’s not afraid to follow the pack. “We used to have a lovely tabbed checkout icon. We changed it to a basket and put it where Amazon put theirs, because that’s what users recognise.”
When you absolutely must include lots of information on one page, follow the Firebox method. Christian Robinson says, “We are known for being experts on our products, and like to include technical information, user feedback and photos of customers with their products. We are scared of showing too much too early. So we put the essential information at the top of the page. If you want more, you can scroll down and find it. If not, things are simple for you.”
Certificates are nice things to show nervous customers. The Verisign, IMRG and ISIS logos are all well recognised. CD Wow’s Robinson says, “These certificates will tell your customers you are trustworthy,” though CD Wow no longer uses them – a luxury of being a £100m-turnover brand name.
Above all, the site should be fast. Remember Boo.com’s £30m site, which took two minutes a page to download? Cheapflight’s Soskin says, “I am constantly checking our site’s download speed against our competitors. We have to be number one.” Soskin uses a service called SiteConfidence to measure speed, and to identify which components are slowing the site down. Some graphics-heavy sites offer a text-only version – a godsend for users with ageing modems.
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NEWSLETTERS
Is this the most underrated marketing ploy in cyberspace? Asos.com sends out its newsletter twice a week to half a million women. “This is our main source of traffic,” says chief executive Nick Robertson. Asos’s letter is a composite catalogue image, revealing new products, discounted stock and what’s hot. Firebox sends its newsletter to 440,000 opted in customers. “It’s great for sales,” says MD Christian Robinson. “It reminds customers that we exist, it promotes stuff we want to sell. It’s a vital part of our marketing.” |
Of course, a glorious site is no good without visitors. And if you don’t have millions to blow on an ad campaign, then you will need friends. For example, Firebox, CD Wow, Figleaves, E-directory and a dozen other famous dotcoms are close allies. They sell each other’s wares, exchange advice and advertise each other’s sites. CD Wow’s Robinson says, “We are not competitors. You have to realise that everyone’s got the same two competitors, eBay and Amazon. They suck up most of the market. Everyone else is fighting against them.”
In addition to these direct relationships, you’ll need a network of affiliates. Firebox has dozens of affiliates which hawk its wares and get a 12 per cent cut of every product they sell. “We use three affiliates networks,” says Robinson, “Deal Group Media, Affiliate Future and Affiliate Window. Around 10 per cent of our revenue comes from these sources.” Firebox also has relationships with ISPs, such as Tiscali. Remuneration isn’t always percentage-based, but Robinson says it is always performance-based. “It could be cost per click or a share of sales that get generated at our site.”
By generating good affiliate traffic you can avoid the pitfall of relying on Google advertising. The world’s most important traffic hub is, according to Widget’s Mark Needham, a difficult medium to use profitably. “We don’t use Google Adwords. There is too much competition. If we wanted to sell a WiFi card we’d be up there with ten other ads. People might click on our site to check out our price, and do the same with all the other sites. So we’d all pay Google, and the one who got the sale would make no money because they’d have practically no margin.” CD Wow’s Robinson agrees. “You’ve got to use very, very specific keywords with Google to get value for money. It’s a really hard thing to get right.”
Which brings up the toughest issue in cyberspace: how to combat price dropping competitors who’ll undercut you and steal your customers. To win that war there are only two weapons you’ll need: a super-slick back end and dazzling customer service.
Perfect backend
CD Wow competes in a purely commoditised
business – anyone can sell CDs – yet it’s
the UK’s number one site. How? It’s the back
end. Phil Robinson’s operation is so slick he
can compete against anyone on price. And
his customer service is so good, even if you
undercut him by 10p, you won’t win a
customer because of his reputation.
“Price comparison sites like Froogle or Kelkoo are not a problem for us because we are always low on price. We charge a flat rate of £8.75 for every album, and make 50p profit on each one. Our operation is very cost sensitive. We don’t put any unnecessary content on the website. There are no reviews, no feedback, just lists of products. We have 130 employees, 110 of whom are in the warehouse. The rest are in customer service. Just three people, including me, run the site.” This bare-to-the-bones operation means CD Wow is as lean as can be. It is all but impossible to compete against it on price.
Firebox uses customer service as its differentiator. Its warehousing operation is designed to get products out in minutes. Christian Robinson: “We offer a next-day service, and we are working on timed services, so you know to the nearest hour when your goods will arrive. Customers really value speed. If they get the product the next day they love it.” Firebox has experimented with all mail services, and opted for Royal Mail and Initial City Link. The firm sends its goods in bright orange boxes and throws in retro-style sweets such as fizzy cola bottles or parma violets to give the customer a surprise treat. “If you are selling commodity products you need to offer a distinct advantage for your customers.”
Firebox’s other trick is to offer new products months before their competitors. “This gives us a window when we are not vulnerable to price comparisons.”
There are no shortcuts to a smooth IT infrastructure. Almost all good retail sites abandon off-the-shelf software packages in favour of bespoke creations. At Firebox everything is home made. “Our website, our payment processing, our checkout basket, and our entire back end is ours. Writing your own code means you know your own system inside out. You don’t have to pay for upgrades, and you are more secure, because there are no unfamiliar areas. It’s easier to get different parts to work together this way.”
Robinson says he would advise even small firms to create their own code for things like vouchers. “We wanted to do a promotion whereby we issues a unique code on the cover of New Scientist magazine. Each code would give you money off at Firebox. If we bought an off-the-shelf package to do this, it would have cost thousands. Writing our own program was simple, and meant we got what we wanted.”
Fashion retailer Asos uses Microsoft’s Great Plains system. “It really earns its nickname, Great Pains,” moans chief executive Nick Robertson. “It’s not proficient, so we are moving to proprietory programs.” Robertson says he’s happy with his warehouse management system, Chess Empirica, but says integrating it with the rest of his system will be easier with a purpose-built program. “We are also tired of paying for upgrades, which cost a fortune.”
At Euroffice almost everything is bespoke. Karibian even uses his own CRM system, a surprise since there are so many on the market. “My system does more than any package commercially available,” he says. “It allows my entire operation to be automated. Invoices are sent out automatically, invoice reminders are too. Getting here has required 10 to 15 improvements every week for five years.” It seems that for really serious online players, even the most expensive, versatile software won’t cut it. You really have to build it yourself.
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OUR EXPERTS
Phil Robinson, CEO of CD Wow!
Christian Robinson, MD of Firebox.com.
David Soskin, CEO of Cheapflights.com.
Nick Robertson, CEO of Asos.com.
George Karibian, CEO of Euroffice.com.
Mark Needham, CEO of Widget.co.uk. |
Ultimately, building a perfect dotcom requires perpetual improvement in every department. Karibian says one overlooked but hugely important area is improving his site’s Frequently Asked Questions. “Our number one target is to improve our ratio of sales per employee. Euroffice has 16 employees, and eight of these do customer service. If our FAQs aren’t right we take more calls, I have to employ an extra one or two staff, my ratio gets worse.” Karabian’s technique is to have a monitoring week once every three months. Every call to customer service is logged. At the end of the week the site’s FAQs are updated to answer all the questions. “We want to avoid ever getting the same calls twice.”
At CD Wow the top KPI is repeat business, followed by new member acquisition and units per order. (“We are at 1.6 units per order,” reveals Robinson, “Our target is 2.”) He says that by picking the right KPIs you can point all your departments in the same direction. But Robinson recommends never losing sight of the ultimate KPI – making a profit. “Grow for cash. Keep away from balance sheet nonsense. Look at your bank statement, not your balance sheet.”
This approach explains why CD Wow is still in business and dozens of rivals are not. It is no coincidence that our featured gurus can all reel off long lists of defunct competitors. Karibian and Euroffice have seen off seven bigger rivals, including £60m-backed Mondus.com, because of his preference for making money rather than swelling turnover. Soskin’s Cheapflights, founded in 1996, is still here, he declares, “because we have been profitable every year since day one.”
As Boo.com proved, blowing millions on your dotcom is great fun. You might even get on the cover of Wired magazine. But in the end the only yardstick of perfection is profitability.
Where next?
Web tools:
www.webtrends.com
www.urchin.com
www.websidestory.com
www.siteconfidence.com
www.nielsen-netratings.com
Design tips:
www.webpagesthatsuck.com
www.useit.com
Dotcom obituaries:
www.fuckedcompany.com
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