eRPM's placement in e-Commerce

If you’re looking for a software solution that supports your e-Commerce revenue growth strategy, pay attention to each vendor’s value proposition. These statements usually describe the best any particular supplier can do – but is that good enough for you?

Key Takeaways:

  • Value propositions are a key indicator of a product’s value potential
  • Avoid implied or value-by-proxy propositions
  • There are no silver bullets; instead, focus on sustainable value

Value proposition meets real results

Whether from your first marketing professor or Morpheus himself (The Matrix), I’m sure you’ve heard the phrase, ‘perception is reality’.

In today’s saturated and hyper-competitive e-Commerce software marketplace, vendors are sparing no expense to create a positive perception of their products. Figuratively speaking, a particular vendor’s value proposition is the ‘tip of the spear’ in marketing communications: it defines what they aspire to deliver to their customers. Logically, that value proposition will be used to define what you can expect to achieve by employing the vendor’s solution.

Let’s assume that every vendor’s value proposition reflects reality and perform a common-sense comparison between key elements of each statement to help you better understand the nature of the marketplace and formulate your revenue growth strategy.

Value #1: Increase in conversion rate

One common theme amongst virtually all A/B or multivariate testing solutions is the promise of an increase in conversion rate. Understandably, most people subconsciously draw a parallel between conversion and e-Commerce sales or revenue growth.

Website testing solutions originated outside of the e-Commerce space where with close cousins such as landing page optimization (LPO), testing vendors have demonstrated the potential for improved performance. In the commerce-free arena, testing vendors deal with simpler use cases and typically no (or implied) monetary transaction. Conversion goals are typically achieved in a single, low-commitment step, and visitors tend to be well-segmented and motivated. e-Commerce, by contrast, raises the stakes significantly – the probability to succeed with traditional testing quickly deteriorates by an order of magnitude for several reasons, including:

  • Conversion lifts do not always correlate to improved revenue: conversions could be moderated by average order value or a number of different factors, lending to a decrease in overall revenue in situations where conversions increase but order value decreases.
  • e-Commerce visitor behavior is always changing: the Achilles’ heel for e-Commerce testing is the assumption that test results are in any way indicative of future outcomes – we’ve described why in our recently-published blog post, ‘A/B and multivariate testing does not work on e-Commerce sites’.
  • Conversion rate optimization does not represent an end-to-end result: traditional testing solutions are typically used to test a single web page – this works with landing page testing, but not for e-Commerce. In e-Commerce, visitors are navigating through a complex sales funnel and every detail at every step in the funnel can be of critical importance. The only way to ensure an overall revenue lift, is to optimize the entire funnel all at once.

Value #2: Increase in average order value

Product recommendation solutions frequently promise an increase in Average Order Value (or AOV). As with conversion rate, some marketers instinctively draw a parallel between this metric and overall sales.

However, there are few critical cases that you should keep in mind before selecting products that promise a lift in AOV:

  • An increase in average order value does not always correlate to increase in revenue: there’s potential for an inverse relationship between AOV and conversion rate, resulting in lifts to AOV but decreases in conversion rate. This is common in luxury or niche brands with high-value or otherwise expensive products.
  • Determining whether product recommendation solutions actually work: sometimes, product recommendation vendors report metrics related to customers that utilized the recommendations and therefore take credit for all the revenue generated by visitors exposed to their engine. This could be quite misleading since some (if not most) sales would still occur even if product recommendation did not exist.

Value #3: Personalized customer experience

Personalization vendors work to ensure an enhanced shopping experience. Since marketing dogma preaches that enhanced experiences (e.g., personalized messaging or segmentation and targeting) always result in improved revenue, most professionals consider personalization a general best practice. This attitude is so well-entrenched that few people challenge vendors to prove their ROI in measurable revenue lifts.

In theory, personalization can be a big winner; in practice, it could be a ‘road to hell paved with good intentions’. Here’s why:

  • Nobody can predict visitor reactions: being able to segment and target unique visitors with different offers and messages is a powerful capability, but bears no guarantee for success. In order to determine what actually produces results, you should experiment with a wide range of different messaging.
  • Visitor behavior is changing: a targeted offering or message will most likely have a limited shelf life, and you should be careful with how it is used. Your competitors might imitate your message or do something (like launch a promotion or sale) that introduces a third-party variable.
  • Everything interacts with everything else: e-Commerce sites have a lot of moving parts. Any changes to content, layout, style, or web applications, will impact your personalization efforts.
  • The exact end-to-end results are not measurable: in a typical real-life situation, there are multiple personalization campaigns running in parallel – one application might promote products, the other, targets visitors with banner offers, and yet another might add badges on your product detail pages. The implications of these activities to your bottom line are often implied (e.g., ‘this banner produced x% lift), or obfuscated through claims that visitors who clicked on the content presented by personalization solution, have generated ‘x’ amount in new revenue. What is really necessary is the ability to measure new revenue against the baseline (whose ongoing performance is measured in the absence  of any of the personalization solutions).

eRPM value proposition: Sustainable revenue growth

e-Commerce Revenue Performance Management, or eRPM for short, is the new kid on the block with a value proposition defined by sustainable revenue growth. You can view eRPM as the next step in the evolution of technologies aimed to empower e-Commerce professionals to effectively manage the performance of their sites. In this way, eRPM blends the core values of testing and personalization products to create a new disruptive technology category capable of enabling each of these key dimensions:

  • Sustainable: to deliver sustainable results, eRPM solutions use real-time optimization algorithms that can adapt to web visitor preferences at all times. While testing solutions ignore the time-varying nature of visitor behavior and personalization solutions rely on rules-based targeting and “gut instinct”, eRPM solutions use machine intelligence to determine which of the many available options will produce the best results at any given point in time. These solutions do this by continually learning and adapting. In this way, eRPM solutions are able to ‘squeeze more juice’ out of the same e-Commerce site and web traffic.
  • Revenue: Brand experience is important. To that end, eRPM empowers brand owners to freely experiment with any aspect of their brand’s site-wide identity, including images, fonts, layout, and messaging. By doing this, they will receive direct visitor feedback about the impact of each of these branding ideas. eRPM can even go a step further and enable all the branding, merchandizing, testing, or personalization campaigns to be done under the umbrella of a single campaign with measurable results reflecting the impact of each initiative.
  • Growth: eRPM’s real-time optimization, in combination with multivariate experimentation, provides change-specific feedback that empowers e-Commerce professionals to continually learn and enhance the options used by the optimization engine. This data-driven improvement process has the highest probability to produce your desired revenue growth.

Conclusion

Vendor value propositions matter! We’d like to encourage you to carefully examine each value proposition before you dedicate time and money researching product features or vendor market reputation. This litmus test will allow you to quickly match vendors to your needs, rather than leaving you susceptible to feature-speak or marketing dogma.