Previous Writings
PxL: Transforming eCommerce P&Ls
I had reproduced this funnel view from Smart Insights and tracking these numbers is a good idea. Of these, the key is how many sessions convert to a transaction.
I had added: “The ProfitXL (PxL) framework focuses on three categories of customers: the top 20% Best customers, the 80% Rest customers, and then the Next acquisitions. This is a categorization which can work across eCommerce companies. Key to this is segmenting customers by their lifetime value… The one-word missions for the three teams: Maximise (Best), Energise (Rest), Minimise (Next). Done right, there is no reason why eCommerce companies should not be able to drive an additional 10% upside on revenue (and gross margin), and a halving of spending on new customer acquisition costs. This will address the twin problems of low conversions and rising CAC, thus having a multiplier impact on EBIDTA, supersizing profits, and transforming the brand’s P&L.”
The Profipoly Quest: Maya’s Story
I had discussed the BRTLNG framework:
- Best and Rest (for existing customers), with Best being the top 20%, and Rest being the other 40-50% who account for a significant chunk of revenues.
- Test and Left (for exiting customers), who have become dormant (the bottom 30-40%) or churned. These are customers who eventually get retargeted via Adtech, resulting in a AdWaste because there is an existing communication channel available to them.
- Next and Guest (for entering customers), who are the new customers. “Next” customers are prospects yet to engage with the brand and will probably be acquired via Adtech, while “Guest” customers are anonymous visitors to the brand’s platforms who come organically.
I also wrote about the EnCoRe triad – Engagement, Conversion, Retention. Linked to the funnel, it as a combination of three key metrics:
- Engagement: the percentage of contacted consumers who engaged in the last three months
- Conversion: the percentage of all visitors who made a transaction in the past three months
- Retention: the percentage of customers who made more than one transaction, serving as a crucial health check for martech
Profipoly Score: The North Star Metric
I had designed a framework for the Profipoly Score: “The Profipoly Score is a tracker for measuring the progress in the transformational journey towards exponential forever profitable growth. It is a leading indicator for the health of the business, a metric which will indicate the capacity of a business to maximise the profits pool in an industry. The Profipoly Score needs to become as important as earnings per share and NPS in the management lexicon.”
How to Boost eComm Profit Margins by 1000 Basis Points
I had outlined a 5-step roadmap for marketers to boost profit margins:
- Optimise Customer Segmentation: Utilise the BRTLNG framework (Best, Rest, Test, Left, Next, Guest) to understand customer behaviours and value.
- Reactivation for Revenues: Prioritise re-engagement of ‘Test’ and ‘Left’ customers to reduce ad spend waste, employing Email 2.0 Reactivation Progency to revive dormant and churned relationships and convert them into profitable ones.
- Enhance Customer Experience: Implement Velvet Rope Marketing to provide ‘Best’ customers with VIP treatment and use the Profipoly Stack to predict and influence ‘Rest’ customers’ behaviours.
- Refine Acquisition Strategy: For ‘Next’ customers, adopt a near-zero acquisition cost approach. Leverage the Best Customer Genome for better targeting, encourage referrals, and maximise identification of anonymous ‘Guest’ visitors.
- Performance-Based Profit Uplift: Capture a 1250 basis point increase in profit margins by sharing a portion of the gains with martech partners. By doing so, brands can keep a substantial 1000 basis point rise, thereby significantly improving profitability and paving the way for reinvestment in innovation and growth.
I had written: “Marketers are paying for four distinct audience segments, but only one represents genuine new customer acquisition. The other three segments – especially known non-buyers and existing customers – represent pure AdWaste.”
I listed critical questions every marketer needs to answer to understand their AdWaste:
- Reacquisition AdWaste
- What percentage of “new” users acquired through paid channels already exist in the CRM database?
- How many are known non-buyers and existing customers? (These should never have been reacquired; they should have been retained.)
- What is the total spend on reaching these already-known users? This is Reacquisition AdWaste.
- New Acquisition AdWaste
- Of your genuine first-time users, what percentage provided a digital handle (email/mobile)?
- The rest are essentially “ghost users” you can never reach again.
- What is the cost of these unidentifiable acquisitions? This is New Acquisition AdWaste.
- True CAC Calculation
- What is the actual customer acquisition cost (CAC) when measured against truly new identifiable customers?
- True CAC = Total digital ad spend ÷ New email IDs or mobile numbers added
- This reveals the true cost of acquiring actionable customer relationships
To summarise: Total AdWaste = Reacquisition AdWaste + New Acquisition AdWaste, where
- Reacquisition AdWaste = Cost of reaching known users
- New Acquisition AdWaste = Cost of unidentifiable acquisitions
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Many of the numbers and metrics I have discussed are not being tracked by marketers — and that’s precisely the opportunity. To unlock sustainable growth and true profitability, we need to shift focus from vanity metrics to value metrics. This is where EAGLES comes in.
