I’ve always liked the Joel Test. It’s 12 yes-or-no questions that help assess how well your software team is setup. No, wait! Don’t follow that link! It’s for software developers and you’re here to understand how to improve your digital sales.
So this is my set of 12 questions to help you assess how well you’re managing your digital business. It takes about 2 minutes to complete and - best of all - gives you some obvious actions you and your team can take to improve.
|The Charles Test|
|1. Is your digital sales data for yesterday and today accessible right now?|
|2. Do you know the names of the top 3 sources of your visitors?|
|3. Do you know your current conversion rate?|
|4. Does the leadership team review digital sales performance at least weekly?|
|5. Do you know how many clicks and form fields are needed for a sale?|
|6. Is your digital marketing spend directly aligned with your business goals?|
|7. Do you have customer- and channel-level profitability?|
|8. Do you know how long it takes for your customers to get your product in their hands?|
|9. Do you ask your customers how happy they are with your product?|
|10. Do you run A/B tests regularly - at least monthly?|
|11. Do all of your team involved in digital sales work together every day?|
|12. Do you treat digital marketing spend as a contra-revenue?|
Give yourself 1 point for each “yes” answer. A score of 12 is perfect, 10-11 is OK, but 9 or lower and you’ve got some obvious problems to fix.
It’s important to note that a score of 12 doesn’t mean your business is going to take over the world - there are other factors like the quality of your product or service and how it’s priced. What a score of 12 does mean is that you have a well managed and disciplined approach to digital sales that stacks the odds of building a successful business in your favour.
1. Is your digital sales data for yesterday and today accessible right now?
There really is no reason not to have real-time sales data. And as the heartbeat of your digital business it’s a pretty important metric to have readily available.
Google Analytics is a good start for tracking sales - although you’ll want to watch for discrepancies between GA and actual sales as GA doesn’t track cancelled orders and refunds.
It’s not just sales right now that’s important: you need over-time comparison - this week versus last week, this month versus the same month prior year. And you should probably have a plan: what sales are you expecting and how does actual performance compare?
2. Do you know the names of the top 3 sources of your visitors?
At an eCommerce site I worked on we saw big spikes in visitor volumes on certain days during the year. The spikes were 10x - 50x our normal volumes and seemed to happen at random. When we looked further we discovered the source of our visitors was a single blog from an influencer. When this person posted a positive review of our product we saw a massive jump in visits and sales. This led to us advertising with this influencer and making sure we let them know when new products launched. Whenever this person wanted an interview we were always available.
This example was for a multi-million dollar business - it’s not just small sites that are subject to highly concentrated influencer referrals.
You may not have such an dominant source - but you probably have 3-5 that far outweigh others. What’s your plan to work with these sources?
3. Do you know your current conversion rate?
The full funnel performance from marketing channel through to business sale is one of the critical metrics you should be managing - and is where many business leave money on the table.
You and your team should be looking at the conversion rate at every stage of the sales journey. These conversion rates give you a critical signal about where to hunt for improvements. High cart abandonment rate? Review your check-out journey, your shipping fees, your payment flow. Time spent at each stage of the funnel is another useful metric - showing where prospects are potentially struggling to complete a step.
One company I worked with had a sales website where the ‘Buy’ button was almost invisible in some browser versions due to poorly implemented styling. We spotted it by looking at conversion rates split by browser type. If you’re seeing big differences in conversion results - particularly between mobile and desktop clients - it’s time to dig in.
4. Do the leadership team review digital sales performance at least weekly?
Trading performance is closely monitored by most successful management teams - with the weekly sales meeting a critical review point.
If you’re primarily an online business and the top team aren’t reviewing digital sales at least weekly you’re likely not giving it the right attention. If you’re a multi-channel business this should include digital sales performance alongside other channels - unless it’s a really small part of your sales mix.
What should you the team review during the sales meeting? You need a consistent set of metrics that cover both inputs like page visits and outputs like sales. Inputs are more directly controllable by the leadership team and can provide good early warning signals.
5. Do you know how many clicks and form fields are needed for a sale?
You and your team should obsess over simplifying the sales journey for your customers - and you should know exactly how many steps there are in your sales flow and how this compares to your competitors. It seems super-obvious: less friction for your customers means more conversions and sales.
An example of just how big the differences in clicks and form fields from the world of UK banking. Current accounts are highly regulated products so you might think that the sales journeys would be similar. In reality there are huge differences: the easiest online sign-up is from challenger bank Revolut requiring just 24 clicks to complete the application journey. The most complex requires 120 clicks - an astounding 5 times more clicks to complete1.
There’s a lot you can do to minimise friction and someone on your team should be focused on this. As a leader you should consider stretch goals to minimise the number of clicks or taps to complete an action.
6. Is your digital marketing spend directly aligned with your business goals?
I was involved in optimising online credit card sales a few years back for a US business. We wanted to align the marketing money we were paying for site visitors with our business goals.
We changed what we paid for: initially we were paying for site visitors. We moved to paying for application starts, then to application completes, then further to approved applications. Our final move was to pay for an active credit card in use by our customers. The amount we paid per customer went up - but with the last step there was 100% alignment between our business goal and our marketing spend.
7. Do you have customer- and channel-level profitability?
There’s often a bit of work required to get to customer and channel level profitability and - in my experience - the insights generated far outweigh the effort required.
You’ll need to understand your product margins, your acquisition costs including items like marketing, payment processing and fulfilment costs. You may also need to figure out how to allocate shared costs by channel.
When you get profitability data at a channel and customer level there is often an ‘aha’ moment when businesses realise they have very substantial differences in economic attractiveness by segment - allowing for more focus and better business performance.
8. Do you know how long it takes for your customers to get your product in their hands?
Once you’ve nailed the sale, you must nail the delivery. And nailing the delivery means making it fast and reliable. A recent survey2 of consumers in 24 countries asked what was important when shopping online. ‘Fast and reliable delivery’ was ranked first or second to ‘stock availability’ in 20 out of 24 of those countries.
You should be monitoring delivery, providing your customers with visibility of the product throughout the delivery process, and minimising delivery time variability. Delivery options can help too - such as same day delivery (particularly for millenials), pick up in-store or pick up from a designated location. There’s a reason Amazon Prime’s ‘Unlimited free delivery’ is so successful.
A related metric here is returns rate. A high returns rate not only indicates a problem in the sales or delivery process, it’s likely terrible for your margins. The owner of an online consumer goods business told me recently how desperate he was to avoid returns because the return processing cost was substantially more than the margin on the product. He would far rather send a replacement product in the event of a problem rather than manage a return.
9. Do you ask your customers how happy they are with your product?
Customer feedback is a gift for all businesses. The great thing about feedback is that customers will tell you for free how happy they are - you just have to ask them.
At a mobile team I led we received around 100 pieces of written feedback every day. This was reviewed by us and was a critical input into our two-weekly development cycle. This feedback was great at identifying new problems - such as issues with a new version of iOS or Android as well as longer-running issues we needed to fix.
If you’re not asking your customers for feedback you’re missing an easy signal about what to improve.
10. Do you run A/B tests regularly - at least monthly?
One of the joys of digital retail is just how easy and low cost it is to make changes. In physical retail, changing store layouts involves planograms and many people working many hours to refit stores. Digital changes - and A/B tests - should be close to effortless.
That said, not every company has the right set up to make regular changes. Can you make rapid content changes on your site - in less than an hour? More importantly, can you A/B test easily?
What should you be testing - well pretty much everything. Do you have a high converting landing page, what types of behavioural biases work best such as social validation, independent authorities or product scarcity, what add-on products cross-sell best?
An example from the leisure sector: this company tested an alternative purchase flow for its services. The result - conversion increased 4x from around 2% to 8% over 4 months.
11. Do all of your team involved in digital sales work together every day?
Driving a successful digital business requires a lot of different skillsets. Typically you’ll have a team including copywriters, marketeers, data and analytics specialists, product owners and sales optimisation leads.
One company I worked with had the required skills but the individuals had different reporting lines and didn’t work together daily. Three of the team had local market reporting to different leaders covering product and pricing, marketing, and acquisition. Two of the team had regional reporting for data & analytics, and content. The final person responsible for building new tools had a global role and reporting. Unsurprisingly with this combination of market, regional and global reporting it was a challenge to create a high performing team driving a single outcome.
12. Do you treat digital marketing spend as a contra-revenue?
As long as newly acquired customers are profitable you want to keep the marketing tap on. It wouldn’t make sense to turn the tap off as this would reduce profitability. That said, that’s exactly what many companies do in the face of budget cuts - marketing gets cut because it looks like an easy expense to go after.
An example from a previous employer: the budget was set in December for the following year. Around March or April the cuts would come in and we would work hard to reduce marketing spend - often by 30-50%. Then around October - November we’d realise we had exceeded the annual profitability target and would try to ramp up the marketing spend in the last months of the year. This see-sawing of marketing spend led to big inefficiencies and ultimately increased our average acquisition cost.
Treating marketing spend as a contra-revenue can help. Viewed this way, the way to grow revenue implies a level of marketing spend so the business incentive to grow is aligned to the expectation of marketing to achieve this growth.
I’ve used ‘digital sales’ as opposed to ‘eCommerce’ throughout to encompass all digital sales including sales through mobile apps and websites, as well as the purchase of services as well as physical goods.
Thanks to Ray Dogra for feedback on a draft of this.