Author Archives: Jason

Are you targeting the right 7%?

Apple only has 7% market share in the mobile market yet they capture 77% of the industries profits. Clearly they are targeting the right 7% of their market.

Are you targeting the right 7% of your market?

Sure you can sell to anyone. You can build your business model around selling to anyone in your market. But are these customers the ones who really generate the profits and is your business built to ensure you capture the right profit from the right customer.

I think this comes down to the ability to say no. It comes down to the ability to clearly define what you are NOT good at and what you are NOT going to do.

And a good place to start with finding your 7% is start by defining who the other 93% are.

Using Data to Select New Brands & Products to Stock as a Retailer

We have recently decided to test out a major component of our business model:

Customers are willing to pay full price retail on baby accessories if they are receiving rock bottom prices on nappies + reliable delivery & customer service which takes care of them.

We are bringing on new brands and product lines at full price retail to test this.

At MyNappies we are like most startups – completely strapped for cash! At this point most of our sales come from products which the recommended markup can be just 6%. Seeing as we aim to be the most competitive you can imagine what our markup is, let alone how negative our margin is….

This makes the decisions around which brands and products to bring on very critical.

If the stock you bring on does not turnover as quickly as you anticipated it is cash wasted. That cash could have been better invested in other new stock or increasing the levels of stock for existing products which are growing in sales. Worst of all a poor product or brand can harm the customers trust in your business.

We decided to make the approach to adding new brands to our website a little more scientific.

1. Research which products and brands are valuable to your competitors

The best way we found to do this was by going to their homepage then viewing the source code to see which keywords they were targeting and which words they used in their meta name.

What you are looking for here is brand names and product types. For example in the second screenshot above the site clearly values the business of those customers looking for prams, strollers and baby clothing.

Their would generally only be 2 reasons why a retailer would want to target a product or brand.

1. Lots of people need or want this product or brand. It is high volume and will drive traffic. e.g. the way Big W put whole pallets of Coca-Cola at crazy prices out the front of their store a couple of times a year.

2. It is a high margin brand or product that customers already know. Once you have customers this is where you make money.

Once this is complete on the homepage you should do the same thing on each of their category pages to get a deeper picture of the products and brands which are valuable to them.

Repeat this same research process for as many competitors as are relevant to your industry or niche. At MyNappies we generally do this for 3-5 competitors.

2. Research the brands and products your competitors are targeting on a product review website.

In our case we use the the major Australian product review website –

You now type in the name of every brand, product and any individual products which you dug up while on competitor sites.

You are trying to find two things here.

Firstly, an indication of the amount of people reviewing the product or brand and the average weighting they are giving it.

Secondly, whether there is a better quality or volume product or brand in the same category your competitor is targeting.

I hope you have realised by this stage you need to be tracking all of this information. Probably in a spreadsheet. Or at least a word document to start with and later turn it into a spreadsheet once you have some resemblance of how to create consistent order.

3. Next use Google Adwords research tool to determine the search volume for each of the products and brands.

You can type in multiple words in the words or phrases box before searching. In the results the numbers you are looking for if you trade in the domestic market is the local search volume.

The volume of traffic should also give you an idea of why your competitor might be targeting a particular product. If the search volume is comparatively low it must be because the product has a high margin or is sought after by a valuable customer type.

From the keyword research you should also take note of how competitive the word is for SEO purposes.

4. Get the suppliers price list

No point second guessing. Any brand or product you have not ruled out due to them performing poorly at some point in the process so far you need to contact them. You are looking to get their price list and trade application so that you have all of the information needed in order to make an informed decision about what to products and brands you are bringing on.

Once you have the suppliers price list I would also suggest putting the products into a product review website like, Get Price or Google Shopping. This will allow you to gauge the level of price competition in the industry on price.

Concluding thoughts

So at this point you will now have the following information at your fingertips:

  • What products, brands and categories are valuable to your competitor and why.

  • The search volume and SEO competitiveness of the potential product

  • How price competitive your industry is on a particular product

  • Whether there is a superior alternative brand or product in a category your competitor is targeting

  • The customers perceived quality of the products and brands

Obviously you need to combine the above information with your particular strategy and other relevant information. For example some products our competitors target are currently out of our price-risk range – they sell for $500+ and require a larger cash investment. That’s not too say they always will be but it does affect our current decision making.

Using all of this information you should now be in a position to prioritise which products/brands/categories you are going to bring onboard. This method should result in a more efficient and effective solution – delivering more value to your customer with a more efficient cash investment for your business while taking advantage of possible weaknesses in your competitor.

Summary of Bessemer’s Top 10 Laws of E-Commerce

I thought I would share a summary I wrote after reading Bessemer’s top 10 laws of e-commerce. This was something which gave me a great understanding of e-commerce when we first launched MyNappies and we built many concepts for the business around these. For instance when it comes to being cheap we offer extremely cheap prices on nappies but plan to be a full priced retailer when it comes to other products.

It can be difficult to find resources which can give you guiding principles so I was thrilled when I first found this.

As a startup these are things you should be thinking about as your business grows, and as an established online retailer it is a great checklist to see that you are still covering the essential.

It was written by the folks at Bessemer Venture Partners in October 2010 but it still reads as relevant today. They are an old VC firm who have funded retailers from Staples to Blue Nile and – they know their stuff!

You can download the entire PDF here. I would recommend you take the time to read this document it if you are interested in e-commerce. It is about 30 minutes to read. Following is the summary.

The Summary Bessemer top 10 laws of ecommerce:

  1. You must build a brand, but not through brand advertising (link)
  2. Customer Lifetime Value (CLTV) is your new pulse (link)
  3. The 6 “Cs” are your vital signs: Ignore them at your peril! (link)
  4. Your goal: cheap, fast and free (link)
  5. It’s the service, stupid (link)
  6. Only lemmings focus on last-click marketing (link)
  7. Affiliates are risky. Don’t let them pick your pocket. (link)
  8. WWAD (What Would Amazon Do)? (link)
  9. Identify your best customers, encourage customer loyalty, and motivate the evangelicals (link)
  10. Keep it social, but keep your data too (link)

1. You must build a brand, but not through brand advertising

  • Build penny by penny through direct response advertising that can be quantified and measured.
  • CLTV is your growth and profit engine machine.
  • all marketing should be measurable and profitable

2. Customer Lifetime Value (CLTV) is your new pulse

  • NPV of profit from customer purchases
  • all sales from repeat visits less any associated costs to service the resulting orders (including variable costs like COGS, credit cards processing fees, shipping and warehouse processing)
  • CLTV needs to be > CAC (Customer acquisition cost)
  • Spend until CAC approaches CLTC of your next incremental customer
  • If you are not fully confident you have a handle on this, instead spend right up to the average, fully-loaded gross profit of a customers first order.
  • Scale will allow more data so better cross sells, better margins from vendors and a broader selection of slow moving high margin goods
  • This kicks off a virtuous cycle: CLTC goes up; you can afford to spend more money on marketing; you start to grow faster; you get more scale — and on and on and on.

3. The 6 “Cs” are your vital signs: Ignore them at your peril!

  • Company Net Promoter Score or NPS: is a customer loyalty metric.
    • This score is This score is determined by posing a simple question to consumers; it’s a query designed to screen for customer loyalty. Consumers are asked, “On a scale of 0 to 10, how likely is it that you would recommend our company to a friend or colleague?” Consumers offering a rating of 9 or 10 are anointed “promoters”, implying they are likely to promote the company to others. Those who give a rating of 7-8 are “passives”— they probably won’t discuss the company with anyone. Those at the lower end of the scale, with ratings of 0-6, are dubbed “detractors,”
    • You should calculate the overall net promoter score for your company
    • Should ask this to every customer after receiving shipment
    • to compare to other brands like Google etc
  • Customer Lifetime Value Contribution (CLTC) see part 2
  • Customer acquisition cost (CAC). Fully loaded average cost to acquire a customer
  • Conversion rate. % of new visitors who convert buyers. Streamlined landing pages and fast page load times are king here.
  • Churn. % of customers who never come back. Also track returning customers over and appropriate period.
  • Cash-conversion cycle and return on capital. Cash is king. You want to get paid by customers before paying suppliers. Positive cash cycle generally indicates a high valuation multiple.

4. Your goal: cheap, fast and free

  • Cheap – You don’t need to be the cheapest on all products all the time. But you should be rock bottom on those items your customers will use to judge you.
  • Fast – biggest disadvantage to shopping online is delayed gratification. Quick delivery is the key to delighting customers.
  • Free – consumers expect free shipping

5. It’s the service, stupid

  • Customers need an extraordinary experience
  • If you can answer 90% of customer calls in 120 seconds you are doing well
  • monitor customer service metrics

6. Only lemmings focus on last-click marketing

  • last click is merely the referral source which closes the deal
  • Good is a navigational engine as much as it is a search
  • Measuring last click discount the classic “marketing funnel”. The introducer, the influencer and the closer
  • Convertro is an example of a company doing it different

7. Affiliates are risky. Don’t let them pick your pocket.

  • Watch out for spyware and other scams
  • Don’t let them bid against you
  • Everyone claims credit (multiple affiliates)

8. WWAD (What Would Amazon Do)?

  • Amazon are the leaders
  • metrics orientated culture
  • Obsession with page-load times
  • Keeping “fit” – a customised equation which incorporates the most important metrics for a particular group and reports it to Jeff Bezos.
  • Keep it simple. Amazon teams are never more than “no bigger than you can feed with two pizzas”.

9. Identify your best customers, encourage customer loyalty, and motivate the evangelicals

  • motivate your evangelicals.

10. Keep it social, but keep your data too

  • Cautions social media as it allows competitors insights into your customer and possibly the ability to target them – not all too relevant to me.
  • I don’t put much weigh into this last point

A Long Way From Yesterday and Tomorrow

We are miles from success.

And we are miles from where we began.

We can’t measure how far we have come and we certainly have no way of knowing how far we have to go.

This is certainly one of the best things about being in a startup. Your absolute best bet is to enjoy the ride. If you are using your next goal as a yardstick for measuring your success, telling yourself you will breathe when you reach it, than you are setting yourself up for fleeting happiness.

Embrace the journey and enjoy the experience.