I originally wrote a blog post about my e-commerce marketing philosophy that revolves around three pillars: product, branding, and sales.
The original blog post ended up being more than 7,000 words. As a result, I decided to split it up into three separate posts.
This blog post ist about the first pillar (Product).
The 1st Pillar: Your Products
Your product is the backbone of your business.
Nowadays, there is a lot of noise in the world of online marketing. Too many gurus and experts are trying to sell you their new tactics, methods, and systems (hint: NEW always sells. It’s a consumer-psychology-based trick most good marketers use).
The truth is: you don’t need all those new Facebook ad tactics and e-commerce funnels. Yes, they might increase your profits a little bit. But what’s much more important (and unfortunately very much overlooked these days) is selling a good product. It’s overlooked because it’s such a simple piece of advice that no guru can make money from it. Yet, having a good product is extremely important and powerful if you want to build a sustainable e-commerce business.
You see, the quality of your product and product delivery matters more than ever in e-commerce. The reason for that is simple: people are fed up with low-quality products they see on social media.
In the early days, Facebook and Instagram ads were so efficient that a lot of Dropshippers jumped on them and aggressively scaled their dropshipping store and their ad spend. Since they were dropshipping and marking up the prices of their products more than 500%, they could dominate Facebook and Instagram with their ads. They were able to outspend other e-commerce businesses that sell higher-quality products, simply because the margins on drop shipped products are much higher.
Fortunately, the days of selling Chinese crap with 30 days shipping time and 500% markups in price are slowly coming to an end. Consumers are more aware of what’s going on. More skeptical than ever before. Recently, an older lady commented on an ad for one of my e-commerce clients. Her comment was:
“Finally an ad that is not selling cheap Chinaware but actually good products”.
That old lady probably has no idea what dropshipping even means. But even she is aware of what’s going on with all the Chinaware ads on Facebook and Instagram.
Here are my personal recommendations for the product part of your e-commerce business:
Disclaimer: product development is not my strong suit. I am a marketing guy and I am mostly involved in the branding and sales part of e-commerce businesses. That’s why the second and third pillar of my personal e-commerce marketing philosophy are more in-depth. What follows are basic observations from working with 7-figure e-commerce businesses.
Sell good products that satisfy your customers
Let’s face it: if you want to build a profitable e-commerce business, you must be selling good products. You can’t sell crap. Selling crap might work in the short-term, but you won’t be able to build a sustainable business selling crap.
What is a good product?
In my opinion, a product qualifies as good, if it satisfies the customer who buys it. The customer’s satisfaction level also has a lot to do with his expectations that can be shaped by your branding/advertising (more on that later), but for now, let’s just focus on the product itself.
If you constantly have to hide negative comments on your ads, you are probably not selling a good product.
If you get raving customer reviews on your ads, you are selling a good product.
If you need to use fake reviews and testimonials on your sales page, your product is probably not good.
If you have more positive reviews than you could possibly show on your sales page, your product is good.
A good product doesn’t need to be innovative or something new. Heck, one of my clients is selling freakin’ bed sheets with Facebook ads. He is getting a ROAS (Return on Ad Spend) of more than 6x! The secret? His products are very high-quality. You can feel it just by touching the fabric. People love them. Sometimes it can be just as easy as selling a boring product but in such high-quality people are not used to it.
Nowadays, customer satisfaction is influenced by the entire purchasing process. That means that not only your product has to be good, but also the whole buying experience on your website, the delivery times, shipping costs, product packaging & labeling, instruction manuals, and post-purchase customer service.
We live in a time where Amazon ist the biggest company in the world. Consumers expect free shipping, 1-3 days shipping times, easy return policies and good customer service. Amazon raised the bar, so you better step up your game too.
Customer Lifetime Value over Short-term profits
The reason we want to satisfy our customers as much as possible is the concept of Customer Lifetime Value (CLTV).
The concept is easy to explain: the customer lifetime value is the amount of money a customer pays you over the course of his entire life. If you sell a $50 product and the average customer buys three times from you until they die, your CLTV is $150 (assuming you only have one product).
You can calculate your CLTV by taking the total lifetime amount spent by all customers combined and dividing it by the number of total customers who bought from you.
As a rule of thumb: the happier your customers are, the higher your CLTV will be (unless you sell a product that people only buy once in their lives).
If you want to build a sustainable e-commerce business, you need to maximize your CLTV.
Most dropshipping stores are not sustainable because they are selling cheap Chinese crap from Aliexpress. They go for the short-term profits because almost none of their customers buy again. Their CLTV is almost the same as their AOV (Average order value). People buy from them once, wait 30 days until their Chinaware arrives in a black trash bag, then get pissed off and never order again. They desperately need new customers. If they run out of new customers, it’s game over. Then they usually start a new store and jump on the next opportunity.
In contrast, if we sell good products that people buy again and again and again, our CLTV will be a multiple of the average order value. We need to acquire fewer new customers on a daily basis because our existing customers keep buying from us. Our business is stable and sustainable. Instead of quitting and jumping into a new business venture, we can sell our business for seven or even eight figures when the time is right.
The higher your CLTV is, the more you can spend on ads to acquire one customer. Coming back to the example above, if our CLTV is $150 on average and our profit margin is 50%, we can afford to spend up to $75 to acquire one single customer!
For comparison: the cost to acquire a customer for a $50 product is somewhere between $10 and $30 if you are using Facebook and Instagram ads.
Selling good products pays off in the long run. Who would’ve thought?
The Customer Lifetime Value is only one of many positive effects a happy customer (and a good product) has on your bottom line.
So far, we have only looked at what a single acquired customer is worth to you. It’s the sum of all their purchases over the course of their entire life, a.k.a. their CLTV.
What we haven’t factored in, though, is this: all your customers are social human beings. They have friends, family, acquaintances, and colleagues at work. People they share stuff with.
It is safe to assume that if you satisfy your customers with the products you sold to them, they will tell other people about it. They will spread the message. They will engage in word-of-mouth marketing. Not only in the real world, but also online. They will promote your products in forums, on social media, on reddit – wherever it is relevant.
Word-of-mouth marketing is still extremely powerful. If you sell a good product that does exactly what it promises, your customers will be happy. If your customers are happy, they are more likely to tell other people about it. Your customer’s friends will tell their friends, and so on. It’s one gigantic snowball effect.
That means that a single customer that you acquire through paid ads is actually worth more than his own CLTV. He is worth his own CLTV + the CLTV of everyone he also got hooked on your products.
The spillover effect on Branding and Sales
Each one of the three pillars has a positive spillover effect on the other two pillars.
If you sell a good product, it will be much easier to give it a high-quality branding that is congruent. Try branding a crap product as high-end and luxurious. It won’t work for very long.
A good product also allows you to come up with various different marketing angles that you can use in your branding and ads.
A good product solves a problem or satisfies a desire. It’s much easier to come up with persuasive ads if your product is actually solving a pressing problem.
A good product also leads to positive reviews in the comments section of ads. This will add immensely powerful social proof to all your ads and thus making your ads much more profitable. Just imagine seeing an ad for a product that would solve a problem you have or satisfy a desire of yours. Then you scroll through hundreds of positive, real reviews right in the comment section of this ad.
How would that affect your buying decision? I can tell you exactly how it would affect you. All the objections you had in the back of your mind regarding this product will be annihilated in a matter of a few seconds. That’s the power of real social proof, not just some fake testimonials on the sales page.
The goals of the 1st pillar
To summarize, we can say that you ought to sell a product that:
- Is so good that it satisfies your customers
- who will buy it again and again and again
- and tell other people about it
This will lead to:
- A high CLTV and
- Word-of-mouth sales, that allow you to
- Spend more money on ads per acquired customer than your competition, and
- Completely dominate your niche
The 2nd pillar: Branding
Click here to read about the second pillar of my e-commerce marketing philosophy.