Four Frictions, Four Solutions
In a previous series, I wrote about how ecommerce companies’ profitability often suffers due to an over-reliance on acquiring new customers. A disproportionately high focus on constantly expanding the customer base overshadows the potential in maximising value from existing ones. As I wrote: “A range of inefficiencies – what I term “funnel frictions” – impede progress at every stage, from customer acquisition and conversion to retention, repeat purchases, and loyalty.” The four funnel frictions are: Attention Recession, Red Journeys, Dormancy and Churn, and Adtech AdWaste. These frictions can be effectively addressed by optimising the “good fractions,” leading to profitable growth and creating a profipoly.
The first friction, Attention Recession, stems from the fact that customers are bombarded with marketing communications, leading to a decrease in engagement with promotional messages. To bolster the 1/100 good fraction, eCommerce companies need to adopt Inbox Commerce via email shops. This strategy involves transforming emails from mere communication tools into virtual shops, thus captivating their attention and moving the conversion funnel closer to where their attention resides.
Next, the Red Journeys friction refers to the challenge of customers disengaging on brand properties (websites and apps) due to irrelevant content. The 1/33 good fraction can be boosted by adopting Green Journeys via iDarpan, a tool that predicts the next best action for each customer. By personalising interactions, brands can ensure relevant content and experiences, reducing drop-offs, boosting engagement, and eventually transactions.
The third friction arises because of Dormancy and Churn, where customers become inactive over time or switch to other brands. The 1/3 good fraction can be improved by partnering with a Reactivation Progency to re-engage dormant customers. A progency leverages data enrichment and targeted content to recapture the interest of dormant customers, often at a fraction of the cost of acquiring new ones.
Lastly, Adtech AdWaste is a friction arising from ineffective spending on customer acquisition caused by wrong acquisition and misguided reacquisition. The 1/2 good fraction can be increased via the strategy of Near-Zero Acquisition Cost which emphasises reactivation over reacquisition, robust referral programs focused on Best customers, and acquiring lookalikes using the Best Customer Genome (BCG). This approach reduces wasteful marketing spends, thus improving the bottom line.
Addressing these frictions is paramount for any ecommerce brand aspiring to become a profipoly. By initiating the pivot to profitability with Inbox Commerce and Reactivation Progency, then curbing AdWaste, and finally cultivating Green Journeys, ecommerce brands can create enduring, profitable businesses.
This lays the groundwork for discussing the potential fifth friction (Identify Gap) with the solution (Anon-to-Known). The big winners in the future will be those who are closest to their customers, which necessitates identifying anonymous shoppers to build direct relationships, thus paving the way to more personalised and efficient marketing.