When done right, B2B Ecommerce can drive enormous return on investment (ROI). So why do companies often miss the mark in both the value drivers and costs in their ROI calculations?
Do B2B firms spend too much time generating business cases versus getting to actually executing? Is time lost to delays getting to market even more important than ROI?
Team Keep It Simple
Michael Eichinger, Chief Operations Officer at Bay Fastening Systems
Meghan Stabler, Vice President, Global Product Marketing & Communications for BigCommerce
Team Detailed ROI
Steven Javor, Global eCommerce Director (North America) for Schneider Electric
Marta Dalton, Global Director of B2B & B2B2C eCommerce for Unilever
KEY TAKEAWAYS
The biggest question isn’t if you should measure ROI, it’s when do you start getting more detailed. Meghan Stabler said that collectively we spend too much time having to prove ROI. She suggests starting by looking at the number of customers, number of orders, Average Order Value, and what’s coming through each channel. She added that companies should ask if there are there quick wins they can get by just measuring KPIs. Don’t be beholden to a financial team because you’re a big old stodgy company. Keep it simple, measure quickly and prove your value.
But if you are going to build an ROI business case, you need to start at the beginning. Marta Dalton suggests that the only way to you’ll understand whether your eCommerce operation is making an impact is to dig down and understand all of the inputs, starting at the beginning of the project. B2B is such an interconnected world, you can’t just focus on a couple of top-level metrics or you’ll miss the complexity of the entire picture. Even if you do measure from the beginning, Steven Javor notes that you should be careful about not drowning your senior leadership in metrics that they don’t fully understand.
Even if you don’t measure the ROI fully, you should still try to get a sense of the impact the site has on the total business. Javor said that customers in different roles come to the site but they convert at very different rates. Some of those sales may not be going through the shopping cart or e-procurement solutions. “60% of the orders our distributors get are through email POs, even if they’re starting their journey online.” He added that with one of their larger partners, only 2% of their sales are online, but they know that’s undercounting the impact the online channel has on total revenue. Brian Beck suggested that “one of the most powerful metrics is share of wallet. If you’re spending too much time on measurement and not on execution, you’re losing ground.”
Measuring both lift and shift can help you get more investment. When asked if you should measure just revenue or revenue and channel shift, Dalton said that both are required. She cautioned that if you’re just looking at channel shift, it’s hard to make a case to your executives. When you bring lift to the table, it’s a great way to get more funding from executives to help you continue to grow. Michael Eichinger disagreed, saying that in the beginning it’s more vital to focus on growing digital adoption than it is to try to measure lift. Those numbers will increase as you become more digitally mature.
Though building variable and fixed costs into your ROI equation can be helpful, there’s also power in simplicity. Stabler discussed how she’s been successful just keeping the measurement high level, by focusing on customers. “Anything that you do that will add value for your customers and distributors is the right thing to do. How are you attracting these customers to your site and changing your website to make it easier for them to purchase. Then measure those simple steps.” Dalton – who believes strongly in measuring in a detailed way from the very beginning – argued that you have to measure variable and fixed osts, because it’s the fixed costs that your execs will understand for where you can reduce costs first. “I’m not for firing salespeople – we’re repurposing them so we can serve more customers at lower costs. It’s a lot easier to have a conversation – especially if you’re in a more traditional company – to talk about fixed costs and about how one sales exec can serve 20, 30% more accounts if we invest in eCommerce.”
Regardless of whether you take a simple or detailed ROI calculation approach, a focus on customer retention can have a significant impact. Stabler noted that she likes to look at churn and retention and cross-sell & upsell – she discussed a study from Bain consulting showing that a 5% increase in retention leads to a 20% increase in profitability. Eichinger, too, said that he works on measuring customer retention before he tries to measure lifetime value. Dalton, though, doubled down on building out your model from the beginning, saying that the only way to back into profitable customer acquisition costs is to understand the lifetime value. And that the only way to show that the investment is worth it is to prove out those costs.