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Success through performance measurement

Solving Ecommerce with a Service Marketplace

Whitepaper demonstrating how a Service Marketplace helps Merchants pick the winning team
Author
3 min read

"All businesses are in the business of making money" 

Unfortunately for online businesses making money can be the exception – specifically when teams are not organised to generate their owners profits. The IRP Service Marketplace sets out to solve this. 

After overseeing £Billions of sales for merchants to 170 countries – IRP have two fundamental beliefs about online teams:

  1. ALIGNMENT of team interests and measurement of contribution to profit is more important than technology
  2. A SERVICE MARKETPLACE can solve ecommerce performance with a quantitative data approach

This Whitepaper expands on these principles and explains how to deliver profit though a Service Marketplace.  Success then means profit and ecommerce is correctly set up in the interests of Merchant Owners . The MERCHANT FIRST approach can align teams, ensure performance and solve profitability.

PROFIT IS THE TRUE METRIC IN "MERCHANT FIRST" ECOMMERCE 

Success through performance measurement

Success in ecommerce means PROFITS. Profits are created by sales growth at a fixed CPA% traffic spend.  This combined with acceptable product margins and operating costs deliver Net Profit.  Profit must be the shared goal of the Merchant Owner and their team. This is fundamental.

According to the Harvard Business Review, the first trait of a great team is "extreme visibility of individual performance". An ecommerce team is a sales team - merchants must have realtime visibility on performance and make the individuals aware of it:

  1. Individual performance is measured by contribution to sales and profits
  2. Bonuses should be uncapped to create aligned motivation with Ecommerce Managers 
  3. Team performance should be rewarded to reduce internal friction

The ecommerce team must be measured based on profit contribution.

THE BEST TEAMS DELIVER SALES GROWTH AT THE TARGET CPA%

When a market exists - ecommerce failure stems from lack of visibility and control and an inability to measure performance & contribution to profits.

Measuring Traffic Channel Performance

Merchants must use a clear performance measurement system based solely on sales and costs. A consistent last click attribution model that is followed repeatedly solves ambiguity. The following example shows measurement of a company's Traffic Channels:

Table 1: 'Company A' example Traffic Channel performance figures

image
 

THE SERVICE MARKETPLACE BENEFITS MERCHANTS & SERVICE PROVIDERS 

Benchmarking Ecommerce Manager Performance

To benchmark individual Ecommerce Manager performance you compare your team’s results with how the rest of the Service Marketplace is performing. This gives you the performance percentile as shown in the following examples:

Table 2: Example Ecommerce Manager ranking

image

Table 3: Example Facebook Service Provider ranking

image

Using data as detailed above you can achieve a Perfomance Ranking against the market and compare growth and CPA% to a peer group for a Service, Company or an Individual Role.

This measurement and competition is the way to encourage individuals and teams to perform at their best.  Where services like PPC may be intangible to business owners - profits and results are not.  Companies should pick Service Providers based on their performance from the IRP Service Marketplace.

PROFIT COMES FROM SELECTING SERVICE PROVIDERS WHO PERFORM

How the IRP Service Marketplace solves ecommerce performance

A visiting Soviet Ambassador in London asking his British counterpart "Who organises the bread for London?" The answer was that the 'market' effectively organised the bread, and in a very resilient way. In the same way, when measurement is applied so that results can be compared and understood, a 'market' can organise the growth for companies in ecommerce.

IRP solves ecommerce with technology and a 'Service Markeplace' to deliver results, with visibilty and by continually measuring and comparing team performance.

The Service Marketplace then helps business owners pick the right players for the team.

THE SERVICE MARKEPLACE DRIVES INNOVATION & COMPETITION
FOR THE BENEFIT OF ALL

Conclusion

The concept of moral hazard can be present in ecommerce. Merchant Owners bear all of the risks – and the counterparties win regardless of the profit outcome for the Merchant Owner.

At the root of this problem is a chronic lack of clear, profit-based information.  A performance Service Marketplace with correct alignment and attribution solves this and risk becomes shared. With this "MERCHANT FIRST" approach, nothing is left to chance and companies have a much higher chance of success.

Market competition helps every participant improve - from Merchants to Ecommerce Managers to Service Providers.  Competition drives innovation and performance to the benefit of all. 

Calculating Net Profit in Realtime

Solving Ecommerce Profitability

* Note i) IRP is a neutral broker in the IRP Service Marketplace - measuring Service Providers and providing data and choice to Merchants. IRP does not benefit from any recommendations other than from the increase in Merchant Sales.

* Note ii) IRP use a Last 30 Day Click Attribution - as detailed here.  Why? Because there can only be one last click.  Companies like Facebook's attribution models are so biased that they come in at circa 10x the sales value of a Last 30 Day Click model. Meta's default attribution model should be challenged by the entire industry - or certainly by Merchant Owners - for misrepresentation. 

- COMMENTS
Anonymous - For IRP combined with the Trading Terminal to measure results - we believe this Service Marketplace fundamentally solves the core ecommerce problems of Performance and Measurement.
28 Feb 2023 18:31
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