Executive Briefings

E-Commerce May Be Really Important to Do, But It Isn't Really Inexpensive

To determine your total e-commerce spend, start by identifying all online expenses: IT costs, personnel for marketing and merchandising, content, outside services, and the portion of catalog expenses used in e-commerce.

It adds up to more than you may think, because expenses are spread between IT, writing content, search, marketing, merchandising and a percent of call center expenses supporting customers. The IT support for a Website-alone model may be 1 percent to 4 percent of net sales.

You also have to understand where your Web traffic comes from. Do most customers come in to your Website directly to the URL, through natural search, via pay per click, e-mail marketing or affiliates?

And then you must accurately measure response rates and costs. Identify for each channel, effort and offer, the cost, response rate and profitability. Before e-commerce, direct marketing methodically measured its offers and calculated response.

E-commerce media thoroughly complicates this analysis today, says Al Bessin, a partner at catalog consulting firm Lenser. "Many marketers, especially on the Web side, believe e-commerce is inexpensive," Bessin says. "But you have to fairly allocate demand by channel, determine the costs equitably, and then create downstream analysis to compare financial results."

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To determine your total e-commerce spend, start by identifying all online expenses: IT costs, personnel for marketing and merchandising, content, outside services, and the portion of catalog expenses used in e-commerce.

It adds up to more than you may think, because expenses are spread between IT, writing content, search, marketing, merchandising and a percent of call center expenses supporting customers. The IT support for a Website-alone model may be 1 percent to 4 percent of net sales.

You also have to understand where your Web traffic comes from. Do most customers come in to your Website directly to the URL, through natural search, via pay per click, e-mail marketing or affiliates?

And then you must accurately measure response rates and costs. Identify for each channel, effort and offer, the cost, response rate and profitability. Before e-commerce, direct marketing methodically measured its offers and calculated response.

E-commerce media thoroughly complicates this analysis today, says Al Bessin, a partner at catalog consulting firm Lenser. "Many marketers, especially on the Web side, believe e-commerce is inexpensive," Bessin says. "But you have to fairly allocate demand by channel, determine the costs equitably, and then create downstream analysis to compare financial results."

Read Full Article