As a software company specialising in ecommerce technology, IRP Commerce has developed a set of fundamental beliefs about online business, digital marketing, the nature of success and the optimal means of achieving growth. These beliefs underpin everything we do and provide a framework for our interactions with our partners and our customers. To date in July 2016 we have transacted over 1,000,000,000 (1 Billion) GBP in ecommerce sales for our clients and these principles have guided the approach.
Here is what IRP Commerce believes.
1. Ecommerce is a sales channel and success is measured by the sales number
IRP Commerce believes that ecommerce is fundamentally just a sales channel. The way to measure success for any sales channel is to examine the number sold through it. This underlying fact can be missed because it is a complex channel — but the complexity should not hide the goal. In any action taken in ecommerce, the fact that it is all about sales should never be forgotten.
2. A basic equation creates the sales number
Expressed mathematically, the formula is: [Number of Visitors x Conversion Rate% x Average Order Value = SALES]. This formula provides a context for any ecommerce tactics that are used to increase sales. The same equation holds true for a retail shop as for an online shop. The only things that will show up in the sales number are actions that increase one of the three elements of this equation. Tactics do follow a pattern but are used only to increase sales.
3. CPA% is the core ecommerce metric for marketing costs
Online marketing forms the basis for traffic generation. The key way to measure the performance of a marketing channel is the CPA%. The CPA% is calculated as [Cost of a channel / Sales from a channel]. For example, a £10,000 spend on Google PPC with a return of £100,000 = 10% CPA. This core overall CPA% should be set by a company for their online marketing.
4. Online costs are a cost of sale and not an overhead
This might seem like an accounting detail but it is completely fundamental to how an online operation should be run. From this it is understood that a cost of sale is always required and, while this could remain fixed per unit sale, it will increase on the balance sheet as a company grows. See this Strategy Centre article for a full explanation of this essential point.
5. Operational efficiency is key to profitability
Ultimately profits are the goal, generated through sales. In order to maximise profits, operational efficiency in all areas of a business will need to be achieved. This should remain the focus of all online organisations.
6. People are proven by sales results alone
Ecommerce lacks any serious professional qualifications. Because of this, a person in charge of the ecommerce operation will generally not be qualified by a regulated body and can come from a wide variety of backgrounds. Paralleling the management of a stock market fund, anyone can be given a portfolio of money to manage. The way to determine competency is the amount of money they have managed and the amount of growth they have achieved historically. These performance indicators over time will eventually sum up their ability. In IRP speak we call this the All Time IRP Funds Managed (ATIFM) and it forms a weighting of opinions.
7. Correct reporting, a regulated ecosystem and market comparisons are key
It is essential to measure all of the core elements of ecommerce in a repeatable manner and to compare the results with the general market. This reporting is fundamental to improving performance and decision making. IRP Commerce believes that if you cannot measure you cannot improve.
8. Features are part of ecommerce tactics but must never be an excuse for inaction
The IRP has a vast array of features and the technology is always improving. However it needs to be clearly understood by organisations that features are not the goal — sales are the goal. To use an analogy: you cannot get into a car race and refuse to try to win until the car is upgraded. You have to go flat out in the car you have. Features must not be used as an excuse for not succeeding.
9. It takes performance-rated specialist partners to succeed online
Building an online business is analogous to building a house. To build a house you require specialists such as architects, bricklayers, plumbers, electricians, roofers and so forth. If you get the wrong people, things will not go to plan. Trying to do too much yourself will cause the house to end up as a shack. In the online world, IRP Commerce believes that you must pick service providers who are proven by results and experience if you want to build a successful business. Having the right ‘digital village’ is central to success. IRP World helps to provide this.
10. Alignment of interests is the most fundamental thing
Because ecommerce is a new and very complex industry, it can be difficult to create a team structure that works. The lack of formal regulation, qualifications and agreed best practices has led to department structures that are self-regulating. But in the end, success comes down to people. People’s interests must be aligned to the success of an organisation’s sales growth — people must benefit from success and be accountable for failure. This alignment will help to create successful team structures and for good decisions to emerge. Without alignment, the complexity of ecommerce will totally defeat an organisation.