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The convergence of social media and commerce has never been more exciting than now. Accelerated by the pandemic, direct to consumer ecommerce has become a top priority for creators, small businesses and legacy players looking to diversify their revenue streams.
Pinterest, TikTok, Instagram, Snapchat, Facebook and more will continue to create more ways for businesses to acquire customers, but what happens when these attention models get too expensive? How will ecommerce merchants acquire their first sales? Their first 100 or 1,000? How will merchants create a reproducible sales model? The answer is community. Community is the unique untapped advantage and potential moat that exists for every ecommerce merchant. Shopify is your ecommerce back office, and community is your defensibility. This is a helpful framework that we’ll discuss throughout this article, and we’ll assume you have an understanding of Shopify.
Let’s start with ‘day 1’ merchants. Explicitly, entrepreneurs that have just published their ecommerce website and don’t have any sales yet. As a Shopify merchant, your first sale usually comes from friends and family, but thereafter it can be difficult to acquire new customers. Logically, for years, founders have paid ‘rent’ to social networks to capture the attention of thousands of potential customers. It’s an effective way to acquire customers, especially if you know who your buyer personas are. Companies like Facebook are so good at finding you customers that you can literally put your credit card in and their machine learning will find and optimize ad units for consumers on their network. At scale, attention-based business models are the most powerful on the internet, and it’s clear why Shopify does everything in their power to play nice with Facebook, Snap, TikTok and others. The downside to turning to social networks for customer acquisition has always been cost effectiveness. Ecommerce merchants are often faced with tough decisions around reproducible customer acquisition costs and rising competition causing CPMs to rise significantly. On the flip side, there have never been more destinations to acquire customers from.
Social platforms continue to make it friendly and easy for ecommerce merchants to drive sales, but it can still be daunting. Paying hundreds of dollars every day on a Facebook ad is a lot more than paying $29/mo to Shopify to run your entire website. With that being said, day one merchants have an alternative method to customer acquisition at scale — Influencers. Influencers are two things: great storytellers and they have an audience. Theoretically, if merchants can find the right influencer, they could get to their first sale (and more) quicker.
In both situations (ads and influencer marketing), the purchase behavior is concentrated at the beginning and then begins to trail off almost immediately until the audience is re-engaged once again. How do you increase retention? And, increase repeat purchasing and reduce your overall marketing costs?
Now that we’ve set the stage, let’s talk about community. Community is not a network or audience. A community is a group of people with a particular characteristic in common. A healthy community is aligned on value and values. Members are able to participate in repeating shared experiences and build relationships. Sounds a lot like what you would want to capture with your ecommerce experience, doesn’t it? We think so.
Definitions aside, ‘community’ is easy to explain, but difficult to implement. The functional units of ecommerce communities are:
- Monetary incentives
- Member to member interactions
Recruiting. Breaking this down piece by piece, you will need a destination for potential community members to apply. Other effective methods are giving status to members where they can invite other people that align with the mission of the collective.
Monetary incentives. One of the best things about ecommerce communities is that you can align monetary incentives across your members. Referrals are the easiest way to structure incentives, but there are many more ways to create economic opportunities based on participation and advocacy.
Member to member interactions. Good and great communities differ because of meeting frequency. If your community members are not meeting each other, you don’t have an audience. It’s important to schedule regular meetings and encourage members to meet with each other. Regular meetings can focus on economic opportunities, how to sell, product suggestions, feedback and more.
At this point, if you’re not convinced that community should be at the core of your marketing strategy, here are the business cases for the above (h/t Erik Torenberg):
- increase retention of existing customers, esp. high value ones
- increase repeat purchases
- reduce marketing costs
- feedback / idea generation
- reduce customer service costs
- new sales leads
- employee recruiting / retention
Influencer marketing and community
At this point, you may be asking what the role of influencer marketing is. The problem for many is their definition of an influencer. Influencers are those that influence decisions. It could be someone with one follower or 100M followers. The larger the sphere of influence, the faster your community will grow. That is, assuming that the people you accept into your community align with the values of your business. Influencers are a catalyst, not a starting point or end point. Just like a Facebook advertisement, they are access to attention, but the difference is that they have powerful storytelling skills and incredible content creation skills.
Community and Shopify
Shopify has a number of challenges that community helps to solve. For starters, if day one merchants are not successful, they will lose paying customers. Next up, if merchants can’t scale/lower their customer acquisition costs, Shopify won’t be able to increase their revenue per customer (subscription tiers and take on GMV). Given the increasing rate of SMB closures and Shopify’s new merchant sign-ups during the global pandemic, it’s clear that Shopify will need to continue to focus on cheaper customer acquisition methods, retention and longevity. Community strategies like those detailed above can significantly help merchants scale their businesses irregardless of stage.