In today’s competitive marketplace, simply offering the lowest price is no longer enough to guarantee success. A recent study by the National Online Accessibility Alliance (NoA) found that price premium and differentiation are key factors in getting a profitable e-commerce business. This is best done through strategic communication and marketing that focuses on more than just price.
By stressing the unique features and benefits of your product or service, you can create a compelling reason for consumers to buy from you instead of your competitors. In addition, by making it easy for customers to find and purchase your products online, you can increase sales while reducing costs. By taking a strategic approach to online marketing and communication, you can create a successful e-commerce business.
The study “The key to profitable e-commerce” from The North Alliance (2022) shows that if e-commerce continues to develop in the same way as it has developed until today, it will have a dark future. The study testifies to a price war where the one with the lowest pressured price does not necessarily survive in the long run due to too small margins and mass death of e-retailers. What is also apparent is that a different tactic needs to be adopted by companies in order to survive and thereby also create a better climate for e-commerce. The study provides valuable insights into how companies can adapt their strategies to stay ahead of the competition and create a sustainable future for e-commerce.
The price war is not the solution
A total of 1,500 customers have benefited from 42 of Scandinavia’s largest e-tailers. And the result is clear. Few people act in accordance with what is required to be profitable in the long run. In fact, only a few of the actors are able to create a deal for which the customer is willing to pay more, which is a critical factor in developing a profitable e-commerce business.
However, many people lag behind. According to the report, few manage to stand out with their unique offering. According to the research, this is concerning and demonstrates a high level of illiteracy on the part of e-traders.
E-merchants who focus solely on providing the lowest price and fastest shipping will become trapped in a fatal price war, so begin working on developing added value for the customer in addition to a low price.
The study yielded three keys to successful and profitable e-commerce, according to the researchers. Make the customer feel inspired, instill a sense of social belonging, and assist the consumer in making sustainable decisions. If you succeed, you will have added emotional value to the customer experience and increased their willingness to pay.
None of the Scandinavian webshops, which sometimes also have a physical store, would be missed by the majority of their customers if they disappeared from the market. However, three e-tailers stand out among consumers where they report that they are prepared to pay more. It is Skincity with its added value around social cohesion, Lyko with its inspiration, and Matsmart with its sustainability. All with different values that hit the right target with the target group and drive up the price premium.
6 pieces of advice for e-tailers
Stores work just as well online as offline
In a world where consumers are increasingly connected and can purchase anything they want with the click of a button, it’s more important than ever for businesses to create a seamless customer journey. Today, customers often move back and forth between physical and digital channels as they research products and make purchasing decisions. As a result, stores must be designed to interact with everything else in the customer’s journey, from e-commerce to marketing. All touch points must be aligned and working towards the same goal: providing value to the customer. By creating a cohesive customer experience, businesses can stay one step ahead of the competition and keep customers coming back for more.
Strategy and tactics are not the same things
In order to build successful e-commerce, it is essential to have a strategy that focuses on the customer’s entire journey. This means creating content that is not only relevant and engaging but also adds value at every stage of the customer’s journey. From the initial awareness stage all the way through to purchase and beyond, it is important to build relationships and create positive feelings with the customer. Only by doing this, you will be able to create successful e-commerce that stands out from the competition.
Focus on the feelings
It has long been known that positive emotions have a direct impact on consumer behavior. Studies have shown that emotions such as joy, anticipation and relaxation increase the willingness of customers to pay. Therefore, it is essential to study what creates these feelings in your target group and build the customer experience accordingly. By creating an experience that evokes positive emotions, you can increase customer satisfaction and loyalty, as well as boost your bottom line.
The customer first – the technology second
Too many e-tailers see e-commerce as a way to make a quick sale, rather than a strategic tool for building long-term value. With technology changing rapidly, it’s important to choose the right platform for your company and target market. Keep the customer in focus, and think about what will make them happy and willing to pay more. In the future, it will be more expensive to buy traffic, so it’s essential to understand what customers want. By taking a long-term view of e-commerce, you can create lasting value for your business.
Put measurement in a process
When it comes to online sales, there are a variety of different ways to measure success. This is why it’s so important to choose your long-term and short-term goals carefully and to keep track of the strategic effects you want to achieve. In addition, it’s important to have both hard and soft metrics that you follow up in a smart, iterative way.
One key metric to consider is conversion rate, which measures the percentage of visitors to your site who take the desired action (such as making a purchase). Another key metric is the average order value, which measures the average amount spent per order. Additionally, it’s also important to track things like website traffic, bounce rate, and time on site. By tracking all of these metrics, you’ll be able to get a well-rounded picture of your online sales performance.
Of course, it’s also important to keep in mind that not all measures of success are purely financial. It’s also important to consider things like customer satisfaction, brand awareness, and overall engagement. By considering both financial and non-financial measures of success, you’ll be able to get a complete picture of your online sales performance.
Manage the customer experience for a profitable market position
To grow profitably and long-term, identify which position is most profitable in your particular category and competitive situation. The position should be defined based on what you want to be known for so that as many customers as possible pay as much as possible for your product.
Marketing is the key to profitability
Through the three choices of inspiration, sustainability, and social affiliation, you can build added value that creates a price premium that leads to profitability. All three points need to be communicated and packaged well. This is where the marketing comes in. Of course commitment and budget need to be put into both the media placements and the creative design in order to reach the target audience with their message, but the entire customer experience in all small touch points (physical and digital) needs to be imbued with these elements.
In recent years, sustainability has become an increasingly important issue for consumers. As a result, many companies have made an effort to incorporate sustainable practices into their operations.
However, sustainability is not the only issue that matters to consumers. The researchers have also found a correlation between efforts that create positive feelings in consumers and an e-retailer’s profitability. It is these positive feelings around precisely the three areas mentioned above – inspiration, sustainability, and social belonging – that allow profitability to arise.
This requires time to continuously and with frequency communicate your well-packaged message and adapt it to all contact surfaces. It also requires that you can strategically set aside capital for such investments at the company level in the first dog years in order to bring in capital to reinvest in marketing. E-retailers who focus on these areas will likely see the most success in the long term.