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Planning to do business online

Whether you are setting up a new e-commerce business or shifting online, careful planning can make sure your offer hits the spot. Here’s an intro to doing business online.

Success depends on planning

Planning is the key to setting up a great e-commerce business. You need to define your ideal customers and work out how your products and services are unique.

It’s important to:

  • know how you compare to other businesses in the market
  • set realistic prices
  • check if people really want what you’re selling
  • set a budget
  • choose where to sell.

Good planning is worth it — it means a higher chance of success.

Define your ideal customers

Build up a picture of your ideal customers to tailor your offer to the people most likely to buy from you.

Start by learning about your real customers, then create customer personas. Personas don’t represent any single customer but help you picture them all clearly when planning your business. Using personas can help you:

  • refine your products and services
  • engage better with customers and boost sales.

Learn about your customers

If you’re already running a business, you might know quite a bit about your customers. Now’s the time to learn more, eg from a chat at the point of sale or in-depth interviews. You could use a survey to ask what your customers want, or what other businesses or products they consider alongside yours. Observing customers directly can tell you even more about how they behave. You can learn about their lifestyles and buying patterns, about cultural trends, and about the factors that affect their buying behaviour.

Sales data can help. The top 10% of your customers may generate 50% of your revenue, so learning more about them is worthwhile. Other data can give you new insights too.

For a new business, delve into what people want from similar e-commerce businesses. Read online reviews, check what products people search for, spot when there’s ‘buzz’ around something new. When setting up a new online store, look at others with something in common. You might learn what their customers care about, the basic things every store offers, and how each store stands out.

Create personas

Personas sum up your ideal customers. Once you know more about your range of customers, organise them into groups. Think about what each group needs and who to target.

Create a persona to represent each group. For example:

  • urban professionals aged 40+
  • young families struggling to organise busy lives on a budget.

“Young families struggling to organise busy lives on a budget” is not a catchy name. So create a fictional person who represents that group. For example, name that family’s mum Ara and use your insights to decide she works full time with unpredictable shifts. Ara also has to organise her kids for school and sports activities while keeping a keen eye on the household budget.

Add details

Don’t stop at a basic summary. Fill in the details using insights from surveys, conversations or other customer research. Find out what people like Ara worry about, what they wish for and how they carry out their day-to-day lives. For example, maybe Ara sticks to her budget and doesn’t spend spontaneously on things that catch her eye online. Or maybe Ara saves up for a treat once a week.

Pictures and catchphrases can be a good way to remind you of each persona. These can help you think about other characteristics when tailoring your offer to what customers need. Some business owners post personas on a wall to look at when designing products, pricing and promotions, and working on strategy.

Three customer personas

Understand customer journeys

Building customer personas helps you think about someone’s journey towards buying your product — and craft relevant messages at each step. A customer journey involves four basic steps: researching, shortlisting, choosing and buying. You can also think about:

  • what triggers a customer to start researching in the first place
  • how you can follow up a sale to encourage loyalty.

These steps can look very different depending on your brand and product. For example, your customers may:

  • carefully compare alternatives online, wanting to see details and specifications
  • look out for your latest products and services
  • be under pressure and trying to solve a problem with as little fuss or cost as possible.

It’s easier to attract customers if you understand the rational and emotional ways they behave. For example, a customer may need your product to solve a problem, or want it because they aspire to a certain lifestyle. After a sale, customers may move on quickly because their problem is solved. Or they may continue thinking about your brand as they enjoy their purchase. Finding out the specific details of your customer journeys will help you meet their needs with your products and the buying process.

It may help to get professional advice or training to deeply understand customer journeys for your business.

Improve customer journeys

Identify your unique selling point

A unique selling point is whatever sets your business apart from your competitors. It’s a statement that nudges customers to buy your product. You need to answer their ‘Why you?’ question.

A strong unique selling point helps you:

  • attract more customers
  • build customer loyalty
  • outperform your competition.

Unique won’t count for much if you focus on something your customers don’t care about. Think about your ideal customer. Choose which of their needs to solve, or which desires to satisfy. Identify the different stages of your ideal customer’s journey.

Define your ideal customers

Understand customer journeys

Be bold but true

A specific, bold and accurate claim stands out more than a vague statement. For example, you could say your product lasts longer than competitors, rather than just saying you sell high-quality products. 

You might say “Our customers demand the best and that's why they hire us”. If you have a high-quality service that’s reliably faster than your rivals, you could say “The best results — with you by next week.” A claim like this shows you believe in what you do, and are enthusiastic about it.

It’s important to live up to your claims with real-world performance.

Walk the talk

A slogan is one way to get your unique selling point across online. But your actions make or break your unique selling point.

Apply it to all areas of your business, from your returns and exchanges policy to your supply chain. Look at every way your customers encounter you, so your whole business lives up to the claims you make.

Case study

Luxury in a moment

Aroha runs a busy cafe that focuses on luxury bagels. They’re delicious and quick to prepare. They have such a good reputation that Aroha’s ready to build an online presence to help her business grow.

To identify her unique selling point, Aroha asks 20 regular customers what they love the most about her bagels. She gets a range of answers, but one thing comes through strong. People love to treat themselves without spending too much of their precious lunch hour in a queue. One customer summed up his experience as ‘quick decadence’.

Aroha decides to build on this unique selling point with improved branding, an online ordering system, and workplace delivery.

She also thinks about related products such as branded keep cups and bagel-shaped lunch boxes. Most importantly, she comes up with a slogan: “Make your workday decadent”.

Start with a basic version

After you research your customers and identify your point of difference, test your assumptions.

Begin your online business with a simple set-up — this is known as your minimum viable product (MVP). It’s the first working version, with just enough features and products to satisfy potential customers and let you collect feedback. Don’t spend a lot of time and money building something perfect, only to launch and find out you’ve misjudged the market.

You won’t reach every potential customer with your minimum viable product. But you’ll test your vision and see if other people share it.

Starting with the minimum viable product may achieve one or more wins:

  • Launch your business or idea quickly.
  • Test your assumptions. If you are wrong, stop or change track.
  • Learn what problems you still need to solve or what features you need to add.
  • Understand your customers and what they want.
  • Build your reputation.
  • Avoid pouring effort and money into something that won’t work.
  • Attract investors if your idea is good.

Identify your minimum viable product

Your minimum viable product will depend on what you sell.

For a range of natural beauty products, it might be a single webpage selling a multi-purpose moisturiser. Once you gain a few customers, ask them what other products they most want. Develop your range accordingly and add more products to your online store.

For a new app, it might be a simple prototype with just the core features and no fancy graphics or extras. Or a video with visual mock-ups and a voiceover explaining what the app will do. Even this might be enough to test interest and attract funding.

Your minimum viable product must:

  • show enough potential to attract interest
  • have enough immediate value that people will use it, buy it, or invest in it
  • let you gather feedback that helps you build on your idea.

Think small but have a big vision. Ask yourself:

  • What’s your riskiest assumption?
  • What’s the minimum you can do to test it?

Case study

Click and collect bagels

Aroha starts with the minimum viable product to test her idea of an online bagel business. She opens an online account with a click and collect app. This lets people order bagels from their phone and pick up in store. She tells all her regular customers about it.

For a couple of months, Aroha collects stats on which items people are ordering using the app. When people come in to pick up their orders, she asks:

  • how far away they work
  • whether they’re interested in a delivery service
  • what other café items they’d like to order using the app.

Aroha finds people love being able to order ahead — it gives them more time to enjoy their luxury lunch. And they’d like her to add a greater range of drinks to the app. No one’s interested in the delivery service, so she parks that idea.

Aroha also notices online customers often buy a local brand of cola along with a bagel. She creates a combo deal, with packaging design to match. She creates two prototype designs to test out on her regulars, then gathers feedback on which they like best. She only invests in the new packaging once she’s sure it’s worth it.

Confirm customers need what you sell

Use your minimum viable product to check if customers will buy what you want to sell. All new e-commerce business owners should do this type of research. Even if your product is the best in its market, you won’t get far if it’s not what customers need. Spend time learning what problem your customer wants to solve and how your product or service helps them.

Customers also expect other things from any product they buy or service they use. For example, they expect a service to start and finish on time, to be easy to book and pay for, and to put right any problems. Customers might take these features for granted, but not providing them is an instant fail.

Sell something and get feedback. Ask why people bought it and what they think of it, either in person or online. Real customer feedback is worth more than trying to put yourself in the customer’s shoes.

Research existing demand. Explore Google Trends for the keywords people use when looking for what you sell.

Google Trends (external link) — Google

Measure your success. Collate positive and negative feedback, assess how well your business shows up in searches, and examine your website analytics.

Refine your product or service. Use customer feedback and your other research to develop the next version or add more features. Keep building, measuring, and adapting in response to what’s working.

Case study

Testing the market

Once Aroha’s sure that people love ordering her bagels online, she creates her own branded website. At first, she keeps the website simple. She invests in a photo shoot of her luxurious bagels and lets people order just these and drinks online, along with bagel gift cards.

Next, Aroha showcases her bagel-shaped lunch boxes. She puts a prototype on her shop counter, and adds a video to her website. She asks people to show interest using an online poll and a feedback form. She also checks they are willing to pay enough that she can cover costs and make a small profit.

Once 100 people show interest, she knows it’s worth producing lunch boxes and selling them online.

Little by little, Aroha adds bagel-related products to her website. By testing the market with each new product, she hopes to slowly grow her local bagel business into a national merchandise sensation.

Understand your marketing mix

Every product has its own mix of characteristics that make up its identity and give it a position in the market. This is often called your marketing mix. Knowing where you, and your competitors, fit into the market is the key to standing out online and winning sales.

One way to look at these characteristics is to break them down into four areas.

Product — what the customer needs from your product or service, how they use it, whether it’s basic or full of features, and how it’s different from competing products.

Place — where customers typically go to buy this type of product, and the advantages or disadvantages of focusing on e-commerce.

Choose where to sell

Price — eg, aiming to be cheapest or charging more because you offer more value.

Set prices

Promotion — eg the best way to reach the customers you’re targeting, such as choosing the online channel where they’re most likely to see your marketing.

Advertising to online customers

This combination of product, place, price, and promotion is one way to define your marketing mix.

To set your prices, you need to understand your customers, know your competitors, and accurately evaluate what you offer.

Selling online means customers may also learn online about your brand, product, and pricing. This makes it easy for them to compare options. If customers compare your product against a list of competitors, they may pick the cheapest seller they trust. If your product has characteristics that set it apart, customers will expect pricing to match.

The right approach to pricing helps make the most of your business. Setting the right prices for individual products plays a part in your sales numbers, profits, and how people think about your brand.

Your pricing strategy needs to help you find the sweet spot that offers the most value for everyone involved:

  • You make money from each sale after accounting for all your costs.
  • Your customers can afford your product or service and feel they get value from buying it.
  • Your suppliers and other collaborators get value from working with you.
It’s important to attract customers without undervaluing your product. For example, you might start with a higher price and discount it to test how customers respond. This helps create perceived value, and makes it easier for you to adjust future prices by changing the discount.

Choose where to sell

Where you sell your product or service can influence who finds it and buys it. Selling online might mean your own e-commerce website, using a shared marketplace such as Trade Me, or both. And different products might target customers in different regions.

Choose your online platform

Customers need to discover your product, service, or business before they can buy it. Promote your business in a place that fits your ideal customers, eg online directories, Google Maps, or social media.

When selling online, you still need to tailor your products and services to where most of your customers are. For example, meet local tastes with products and services that stack up well next to local competitors. And build up your local profile and reputation in the region you want to focus on.

Advertising to online customers 

Selling online means you can focus on where your customers are. Also consider where to locate the rest of your operations. For example, you might want to deliver far and wide, so need access to a fast courier service. Or you might manufacture locally to fit a “buy local” trend or to keep an eye on your processes and quality.

Location, location, location

Set your budget

Setting up online costs money, so set a budget.

As well as costs involved in creating what you sell, consider website fees, design or technical help, and advertising. You’ll likely need the majority of your budget for digital marketing.

Four popular ways to set your budget are:

  • spend to cover tasks and achieve objectives
  • limit yourself to what feels affordable
  • spend based on sales
  • spend to match competitors.

Spending to cover tasks and achieve objectives is the most logical method of budgeting, as long as you can get the planning sorted. For example, you might want to identify 200 potential customers, show 300 people a video about your brand on social media, or give an introductory discount on the first 10 sales of your new product.

If you know what you want to achieve, you can set a marketing budget to cover it. For example, making your video might cost $500, and promoting it online to reach 300 viewers might cost a further $60. If the budget looks too steep, you can revise your targets.

Target your marketing dollars on activities that boost your takings the most. You can usually expect:

  • up to 80% of revenue from pay-per-click adverts, eg Google Ads
  • 40–80% to eventually come from making content easy to find, using search engine optimisation
  • 10–30% from email marketing
  • 0–10% from social media marketing.

Google Ads are good for a new online business because you see results straight away. You’ll also learn what keywords customers are using to find you, helping you develop your content so you rank higher in search results.

Make web content easy to find

Using Google Ads

Selling other people's products: dropshipping

You don’t necessarily need a unique product or service to start an online business. It’s possible to make money by offering a select range of other people’s products. You don’t store, handle, or deliver the products — instead you focus on marketing and customer service. This is called dropshipping.

When a customer buys from your online store, the order forwards to your dropshipping supplier. They then package and deliver the product.

You make money by charging customers more for the product than your supplier charges you. Because you don’t have to keep products in stock, it’s a low-cost way to start a business. It can also be a useful addition to an existing business, letting you test customer interest in new products.

Pros

Cons

  • Fairly quick and easy to get started.
  • Minimal investment needed, with low ongoing costs.
  • Easily test out products and see what’s popular.
  • Choose from and offer a wide selection of products.
  • Grow your business easily once up and running.
  • Work from anywhere.
  • Little control over disruptions to freight, supplier errors or inventory issues.
  • Lots of competition.
  • You make only a small amount of money on each thing you sell.
  • When things go wrong, it’s you who needs to fix it.

Dropshipping is simple in principle, but do your research before you start. You need to make good decisions, such as what to sell and which suppliers to partner with. Read Shopify’s guide to get a good overview.

The ultimate guide to dropshipping (external link) — Shopify

References to specific businesses

At times business.govt.nz refers to specific businesses to make our resources more effective and easier to understand. We do this on the advice of our independent expert partners, including the New Zealand Business Performance Panel. However, we do not endorse any third-party private-sector businesses.

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