The Ecommerce Equation: 4 Levers CEOs Use to Drive Marketplace Revenue
Developing your ecommerce strategy for digital marketplaces like Amazon, Tmall, and Alibaba gets complicated fast—there’s a lot to think about, including marketplace SEO, product photography, advertising tactics, distribution logistics, managing ratings and reviews, and more. It can be overwhelming for brands, especially those with small teams, to know which behaviors to optimize for for the highest gains in profitability.
The good news? Revenue performance all comes down to data. Pattern was built on a data science approach to ecommerce success. We find the patterns that drive profitability, then apply those patterns to strategies that boost our brand partners’ revenue on ecommerce channels.
One of the key patterns we follow for all brands on digital marketplaces is the ecommerce equation: revenue = traffic x conversions x price x availability. As brands zero in on these four pieces of the equation, they can simplify and focus their efforts to reach truly profitable ecommerce growth.
1. Drive Traffic to Your Listings
The first part of the equation is traffic—you need to get people to see your listings if you want to generate sales. There are two ways to drive traffic to your products: through organic search and paid search. Striking the right balance between both for your brands is crucial to driving enough of the right traffic to your products, ultimately increasing your ecommerce revenue.
Knowing this, Pattern provides the resources and technology needed to drive traffic to your product listings. Our brand management team, advertising specialists, and SEO technicians work in harmony to create a unified strategy to boost your brand’s organic profile and balance that with a paid advertising approach that works for your brand and listings.
2. Create Content that Converts
Getting customers to your product listing is only half the battle. Next, you need customers to convert. Conversion is key to the ecommerce equation because it leads to real product purchases and revenue. Traffic without conversion leads to more time and ad spend without the ROI.
Optimizing your images, product description, bulleted details, and customer reviews is key to successful conversion. If you’re going to spend time and effort driving traffic, you should make sure customers can easily and clearly find what they’re looking for when they arrive at your listing.
While your imagery and descriptions are important, you also need to build customer trust to drive conversions. Studies show that your customer service efforts matter too—84% of people trust online reviews as much as those from friends, making strong reviews an important factor in increasing conversions on marketplaces.
The good news is this—as you provide a quality product and a great marketplace experience, you’ll build brand equity, increasing your customer loyalty. Then, as your reputation, reviews, and traffic grow positively, marketplace algorithms will recognize your popularity and improve your rank accordingly. Rank drives both traffic and conversions, helping you to optimize your performance further. As your brand equity grows, your conversions will continue to grow with it.
3. Control Your Price
While setting a strategic price is an important step in your ecommerce strategy, it takes more than that to truly control your price on marketplaces.
Without proper control and with wide distribution, your product could end up in the hands of disjointed sellers who lower your marketplace price to sell their inventory and make quick profits. When one seller lowers your product price online, other authorized sellers and retail partners are forced to lower their prices to compete, creating price erosion and sending your brand down the Profitability Death Spiral.
This Death Spiral damages brand equity, hurts conversions, and can lead to Buy Box Suppression on Amazon, hindering traffic as well. And as prices get lower and lower, your profit margin withers away, decreasing your overall revenue.
Using our data-driven insights and Pattern’s eControl partner Vorys, we help brands implement narrow distribution, identify and take down unauthorized sellers, eliminate price erosion, and control their price online. Focusing on price control, Pattern helped LifeSeasons, a premium supplement company, take back 91% control of the Buy Box on Amazon.
4. Optimize Your Product Availability
The last piece of the ecommerce equation is availability. It makes sense to think of availability as a contributing factor in conversion, but we felt that it’s important enough to call out on its own—you can fully optimize your traffic, conversion, and price, but without having product available to sell, you can’t grow revenue for your brand.
A lack of availability leads to stock outs, losing conversions to competitors, losing possession of the buy box, poor customer reviews, a decrease in traffic…the list goes on. The best-performing brands on ecommerce digital marketplaces optimize their availability with high-end technology and strategize aroudn both their cash on hand and inventory time on hand to keep the ecommerce equation powered and working in their favor.
How Pattern Drives Revenue Using the Ecommerce Equation
Pattern is committed to solving the ecommerce equation. We partner with brands to provide access to the expertise, resources, and technology needed to drive traffic, create content that converts, protect price, maintain availability, and ultimately accelerate ecommerce revenue and profitable growth.
Interested in improving the results of your ecommerce equation? Contact us.