—how to implement the powerful growth strategy that’s hidden in plain sight
—includes a ready-to-use template in Google Sheets
“Monopoly is the condition of every successful business.”—Peter Thiel, venture capitalist and co-founder of PayPal.
(This is one of a series of articles, the first of which is here.)
For almost ten years, we have been urging companies to dominate their markets. In fact, that’s one of the main things that we help our clients to do. Many of them are now leaders in their verticals. In this article, we describe a ridiculously effective strategy for domination. It’s based around a major conversion killer: “lack of interest.”
Here’s what we mean by “lack of interest”:
- Visitors to your website can’t find what they want.
- Maybe because you don’t even offer it.
- So they leave.
What can you do about that? Should you do anything about that?
The following section explains why it’s imperative that you do something about it. And then we go on to describe a step-by-step process for implementing this strategy—a strategy by which many companies wipe out their competitors.
How hypermarkets—and Amazon—use this principle to gain a formidable advantage
Most hypermarkets sell a huge number of products. If a visitor wants bananas then, yes, the hypermarket has bananas. If a visitor wants pet insurance then, yes, the hypermarket sells that too. And if a visitor wants children’s T-shirts then, yes, it sells those too. By satisfying all of the visitors’ intentions and desires, the store mops up more of the money that the visitors are willing to spend.
The above approach has a huge impact. If you can satisfy twice as many of your visitors’ intentions, you effectively halve the cost of acquiring a customer. (Because the cost of acquisition gets divided over twice as many purchases.) Plus, if a visitor can get everything they want from you, they are less likely to visit one of your competitors.
For contrast, let’s look at a company that can’t easily adopt this strategy: Heinz. Heinz Baked Beans could be the best in the world, but there is a reason that the “House of Heinz” store is a tiny building. A store can’t become large if it sells only Heinz products. Because few people want all of their weekly groceries to be Heinz products.
There’s a limit to how large you can grow if you don’t satisfy most of your visitors’ intentions. Amazon began to do this early, presumably because many of its senior team members were from the retail industry, so they understood this economic imperative. So if you visit Amazon.com and search for a book called “Soils of Outer Mongolia,” you will find what you need.
Amazon created Amazon Marketplace to ensure that whatever a visitor wants, Amazon can provide (even if it’s via a marketplace seller). Amazon understands the importance of giving visitors whatever they want. It’s good for financial reasons, but it’s also great for the visitor experience. And it means that Amazon is often the first place that Amazon’s customers look—to the extent that some people forget that there are alternatives. Amazon is now nicknamed “The Everything Store”—and that was by strategy, not by chance.
It’s crucial that your company becomes the dominant player in its industry. If it doesn’t, another business will take that space, capture those economies of scale and push your company out.
How to do gap analysis for visitor intentions: a practical process that can generate breakthrough results
We use the following process to identify—and quantify—the opportunities for satisfying a website’s visitor intentions. Begin by using an on-page survey to ask your visitors why they visited your website. (While you are creating surveys, you might like to see our talk about “golden questions.”):
Wait till you have collected at least a hundred responses. Then create a table with the following columns:
You can access a ready-to-use template of the table here.
- Column 1: Your visitors’ intentions. In this column, list all the responses to the question “What did you come to our website to do?” Of course, no two responses are the same, so you’ll need to group all the responses that had similar meanings. (For example, if one response was “Buy pet insurance” and another was “To see if I should get pet insurance,” you might want to categorize them both as “Pet insurance.”)
- Column 2: Percentage of all visits (%). Enter the percentage of visitors who gave each response.
- Column 3: Do we satisfy this intention? Enter a yes or a no, depending on whether this is a visitor intention that your website satisfies. For the example above, if you did sell pet insurance, you’d write “Yes.” If you didn’t, you’d write “No.”
Most companies don’t think beyond this point. If the visitor wants pet insurance, and the website doesn’t offer pet insurance, the company dismisses the visitor as having been unqualified.
However the opportunity comes when you add the following two columns:
- Column 4: How do we currently monetize this intention? How could we monetize this intention?
- Column 5: How much revenue do we currently generate from this? How much revenue could we generate from this?
Columns 4 and 5 allow you to estimate the opportunity cost, revealing how you could increase your profit per visitor. For new products, you will have to estimate the value for Column 5. You can base your estimates on knowledge of your competitors’ sales; information from suppliers; sales figures from a trial run; or calculations based on the survey responses, making assumptions about conversion rates.
Why is it so important to increase the profit per visitor? Because for many websites, the key metric is the acceptable cost per acquisition (aCPA), which is how much you can afford to spend on acquiring each visitor. And that figure depends on how much profit you can generate from each visitor. So…
- …if you can increase your profit-per-visitor…
- …you can afford to spend more per visitor…
- …and thus outbid your competitors on ads…
- …which means you get the lion’s share of the traffic.
Of course, conversely, if your competitors can monetize your visitors better than you can, then there’s a good chance they can do the same to you.
(It might sound mercenary to talk about “monetizing visitors.” However, from a visitor’s-eye view, monetization tends to be a good thing; as a consumer, you’ll find that there’s a large correlation between the companies you like and the ones you give money to.)
How to populate Column 4—an easy way to generate ideas for monetizing visitor intentions
The following methods may help you identify products and services that would satisfy your visitors’ intentions:
- Method 1: Temporarily add a Google AdSense box to the page. AdSense is powered by auction bidding, so the ads that are shown will be those that the advertisers (and Google) are confident will persuade your visitors to spend money. Once the ads are live on your website, study which products and services they promote.
- Method 2: Look at which products and services your competitors offer—particularly those that they push hard.
- Method 3: Identify companies that have similar economics to yours, and look at which products they cross-sell. Perhaps your company sells a B2B commodity, like safety signage. If so, look for other companies that sell B2B commodities, and see what other products and services they offer. You may be inspired to discover that the domain registrar GoDaddy cross-sells office productivity software. Or that the printing company Vistaprint cross-sells an email-marketing service. Not only will this reveal products you should be cross-selling, but you may also discover that the similar companies (like GoDaddy)—or even the cross-sold companies (like the office software)—should be cross-selling your products.
An easy, risk-free way to add products and services
If your research reveals that you should be selling pet insurance, you don’t need to set up an insurance company overnight. The following process allows you to explore tentatively how you could offer a new product range. The steps are listed in terms of increasing risk and commitment:
- Continue running ads on your page: If the ads are generating significant revenues, you could continue to run them. Some of our clients make a significant fraction of their revenue from displaying ads.
- Continue advertising other companies’ products, but bypass the ad network: Contact companies that are advertising on your page, and do deals with them directly. They can pay you on a cost-per-impression (CPI) basis, or on a performance basis with a cost-per-acquisition (CPA) deal or a cost-per-lead (CPL) deal.
- If you believe that it would be strategically wise, you may choose to handle more of the value chain in-house—by stopping the ads and instead designing, manufacturing or providing a similar product or service yourself.
An example of creating additional product ranges
We helped one of our clients, Morphsuits, to become the 18th-fastest-growing company in the UK. While studying Morphsuits’ analytics, we noticed that many visitors were searching for a type of suit that didn’t exist. Armed with the data, Morphsuits started manufacturing the new type of suit that the visitors were searching for, safe in the knowledge that there was zero risk in creating it. The new suit became a top seller. We weren’t surprised. We even knew approximately how many it would sell.
The Morphsuits team are extremely dynamic and have taken this principle far. Over the past few years, they have rebranded into MorphCostumes and increased their number of suits from 71 to over 300.
What you should do now
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