Why read this? : We walk through the steps to build an e-Commerce strategy for an example pizza delivery business. Learn how an external analysis identifies opportunities, and how to plan internal capabilities. We then review the key decisions which drive the strategy. Read this to get an example of how to craft an e-Commerce strategy.
Having a clear strategy for your business is important. At the most basic level, there’s 3 key steps to creating a strategy. You :-
- analyse external influences on your business.
- plan your internal capabilities.
- decide what you need to do to win.
Despite what some strategists might tell you, it’s that simple. The strategic way points are clear. External. Internal. Decision-making.
But the route between them is often less clear. There’s lots of distractions. Lots of diversions. It’s easy to lose track of where you’re going. A good strategy process keeps you heading in the right direction.
Strategy’s a skill. You need to practice it. You’ll make mistakes along the way. But that’s OK, because getting it wrong is how you learn and get better at it.
E-Commerce strategic planning
E-Commerce is a great area to practice your strategy skills. It’s an evolving, dynamic area, with lots of opportunities and choices to make.
As our online store strategy guide shows, there are ways to go “fast” into selling online.
For example, you can use marketplaces, or print on demand to start selling products in only a few hours.
But most stores who do that skip the step of defining their strategy.
The more successful stores take more time, and take a “full” approach to strategy.
They decide who they’re going after. They define why those customers would buy from them. And they turn those key decisions into consistent actions which deliver successful results.
This article will show an example of this strategic clarity by applying different strategy tools to an example e-Commerce business.
E-Commerce Strategy Example - Sydney Pineapple Pizza Company
The example we’ll use is the Sydney Pineapple Pizza Company. It’s a made-up pizza delivery business we’ve used in other articles.
Let’s imagine we’ve just started as the new manager.
We know most of the business comes from deliveries, with the orders placed online. We have competitors also doing pizza deliveries.
The key strategic question is what do we need to do to succeed?
Sounds simple, right?
But actually, it’s not. There’s quite a journey to go through. As we’ll show with this e-Commerce strategy example, there’s some tough questions we need to answer along the way.
External analysis - start with data
Market research question areas
We start with secondary research. Looking at competitor websites and social media, for example. Looking at Google Trends. Doing keyword research to see what’s going on with online pizza deliveries.
Then we do qualitative research. We have a good idea about what online shoppers want, and would explore key research question areas like :-
- product information.
- ease and convenience.
First research question area would be on the products themselves. We want to understand what kind of range customers are looking for.
What about sizes, for example? Small, medium and large are standard. But do they want more options?
What about toppings? Classic flavour combinations like margarita or Hawaiian are around everywhere. But do customers want more exotic options like chicken tikka or burrito pizzas?
What about the crust and base? Thick, thin, stuffed, there’s lots of options.
The research answers help us firm up the product opportunity.
We also explore customer expectations about product information.
How much information do they need? What types of information do they want to see? For example, do we need to include allergy and dietary information? Are they interested in where we source the ingredients? Do they care about how the products are made?
The answers to these types of questions helps further refine the opportunity.
For the purposes of this e-Commerce strategy example, let’s say the research suggests customers don’t need a lot of information about their pizza.
But let’s also say the research tell us customers are interested in the idea of higher quality pineapple pizzas. Competitors offer pineapple pizzas, but customers aren’t happy with what they can currently get.
That’s our opportunity here.
Next, we want to dig into price perceptions.
We want to understand the prices customers are willing to pay for different pizzas. And what they’d pay more for.
Let’s say the category average pizza price is $18.
But the research tells us customers will happily pay $20 for a high quality pineapple pizza.
That $2 premium is an opportunity for us.
Ease and convenience
The last area to research is the selling experience.
We want to explore how customers place orders on competitor sites. What they like, and don’t like about their experiences.
This is usually about ease and convenience.
Most online shopping happens because it’s easier and more convenient than traditional channels.
So, we’d use the research in this e-Commerce strategy example, to tell us what customer needs aren’t being well-met in this area.
Let’s say the results show they want their pizzas to arrive with bases which haven’t gone soggy from the pineapple. And they want them to arrive within 45 minutes of placing the order.
Our research to this point is starting to identify an opportunity. But it’s not yet telling us how big it is.
Maybe it’s just a weird bunch of people in the focus group? And no-one else likes pineapple pizza?
So, we need quantitative research too. We want to speak to more customers. That will help us quantify the size of the opportunity.
This would most likely be segmentation research. We question a sample of customers in our area to find out how many fit our target profile.
How many :-
- love pineapple pizzas.
- are willing to pay $20 for a better quality pineapple pizza.
- are unhappy at getting soggy pineapple pizzas from competitors.
- want delivery within 45 minutes.
We then refine this into a detailed customer profile, including information on their :-
- demographics – e.g. mums aged 30-45 order the most pizzas (for their families).
- occasions – e.g. most orders are on a Friday or Saturday night.
- attitudes – e.g. they really like speedy deliveries when they’re hungry.
Let’s assume we’ve now got enough information about the target customers.
We’ve got an idea of the opportunity size. But now we need to decide if it’s really big enough to go after.
We start by looking at how many customers fit our profile from the quant research.
Let’s say it was 20% of those we surveyed. And we know the suburb has a population of 50,000. That means there’s 10,000 customers we could go after.
At this stage, we do an attractiveness model for the different segments. We want to make sure we’re going after the right segment. That’s driven by data like the size of the segment, the price it’s willing to pay and how competitive it is.
To keep it simple, let’s assume our initial segment still looks attractive after doing that. That’s going to be our target audience.
We then start to put together a business case, which focuses on :-
- forecasts – how many customers we think we can get, and how often they’ll order.
- profit and loss – a financial model covering the expected sales, costs and profits.
We also factor our competitiveness into the business case. What can we do better than anyone else? We show our competitive advantage with our chosen target audience.
Our earlier research showed us what customers think of competitors. We do a quick SWOT analysis on each competitor. That collates the insights we have on them. We use that to work out our competitive strategy.
Generally, most competitive strategies are about cost leadership, differentiation or focus. Cost leadership is about being the best value. Differentiation is about being better than competitors at something other than price. And niche is when you offer something unique, which customers can’t get anywhere else.
Based on what we’ve already covered, differentiation is our best choice here. There’s enough customers willing to pay a premium for a better quality pineapple pizza and faster deliveries.
We also want to make sure we can meet the customer need. That means reviewing our capabilities. What we already have, and where we need to improve.
For our pizza business, the capability focus is on creating experiences and selling online. In particular, that means :-
- product expertise (non soggy pizzas).
- service expertise (the delivery within 45 minutes).
- D2C experience expertise.
We discover competitor pineapple pizzas go soggy because they’re prepared too far in advance. The pineapple juice seeps into the base if left too long.
Our pizza-making process needs to avoid that. The pineapple has to go on at the last minute so the base stays un-soggy.
We could even take a picture of this happening, and send it to the customer when the order goes out. That would reassure customers they won’t get a soggy base.
That would also fit with the need for speedy delivery.
To deliver our non-soggy, quickly delivered pineapple pizzas, we’d apply the same principles as modern factory production lines. The ingredients would be added just in time. The team would practice each step until it became automatic. From the order being received to it being delivered.
In terms of D2C experience, we’d also work through each step of the customer journey.
We’d make sure we were as capable as or better than our competitors at each step.
Reviewing the customer feedback from the research would help us work this out.
An easier to use website, for example. Better payment options. Delivery tracking. Guaranteed delivery times. An easier way to contact customer service.
All these could make us more competitive.
But to keep it simple, let’s stick with the 45 minute delivery time as the key service part of this e-Commerce strategy example.
There’s lots of different elements of our strategy coming together from this external and internal analysis. Now it’s time to start pulling them together. To start making more decisions.
One of the key ways to do is to create your positioning statement.
This collates different elements of your external and internal analysis. It guides you through key decisions about your strategy.
It’s built on a template which looks like this :-
To (Target Audience), (your brand) is the (frame of reference) that (benefit) because (Reason Why and Reason to believe).
We already identified the target audience from our earlier research and targeting decisions.
The brand, the Sydney Pineapple Pizza Company is clear. The frame of reference is how we define the category we compete in. For this positioning, we define it as pizza deliveries in our target suburb.
We’ve also broadly identified the benefit we’ll lead with. Non-soggy pizzas, delivered within 45 minutes.
That leaves us with the rationale – the Reason Why and Reason to Believe. That’s partly defined by the process we use – adding the pineapple at the last minute.
But it also needs to include the 45 minute delivery window. We’d need to co-ordinate the delivery service so it could always deliver within 45 minutes. For example, that would affect the number of drivers we use. The areas we cover. And the efficiency of our pick-up and delivery processes.
From the brand positioning, we’d then start to refine our brand identity. In reality, parts of this like the customer profile will already have been done.
However, we’d still have to build our brand assets. For example, intangible brand assets like our essence, values and personality. And tangible assets like our logo, colour palette and typography.
These all need to be consistent with the other choices we’ve made. They need to be relevant and appealing to the target audience, for example. They need to highlight the benefit. Reinforce the reason why and reason to believe.
All this work comes together in the brand identity. That defines who the brand is going to be.
But, we’re not quite done. Because we still need to decide what the brand is going to do.
Strategy needs to lead to action.
So to finish this e-Commerce strategy example, let’s look at where our strategy will drive actions.
The marketing plan is where you decide what marketing activities the business will do for the next 6-18 months.
The heart of the plan is the marketing mix.
These are the product, price, place and promotion parts of our marketing activity.
Thankfully, we don’t have to start from scratch on these. Here’s some starter thoughts we’d have going into marketing planning.
We already defined our hero product. It’s the non-soggy pineapple pizzas delivered to the customer in less than 45 minutes.
But, we could also look at further innovation to broaden our product range.
Maybe we do an Ansoff Matrix, for example? That could help us work out if we should expand our product or market offer. Or if diversifying might be an option.
Maybe we look at setting up some online exclusives? So, we could offer customers a choice of different types of pineapple. So, they can choose Abacaxi, red Spanish or Smooth Cayenne pineapples rather than the competitor’s generic “pineapple” option. This would make our offer more unique.
We already have some price benchmarks from our earlier research. Some customers are willing to pay a $2 premium for a better quality of product and delivery, remember?.
But we’d also want to explore other price areas like discounts, and loyalty rewards.
Would extra discounts on quieter weeknights work, for example?
Could we offer regular customers extra savings once they spend over a certain amount? Say, a $10 discount for every $50 spent.
Or, we could add bonus products or services to drive engagement. For example, we send out a limited edition branded pizza slicer with every order over $100.
(see our advanced e-Commerce techniques for more of these sorts of selling ideas).
Place is normally a physical location. In this case, that could mean the restaurant side of our pizza business.
But as this is an e-Commerce strategy example, we’ll focus on the “place” as the online D2C experience.
That’s mainly going to be the website, and its role within the overall customer journey. It needs to be able to do everything the customers and the brand need it to do.
There’s some hygiene factors it needs to cover, for example. It needs to be SEO optimised. Mobile friendly. And easy to navigate and understand.
But, it also needs to bring our positioning and brand identity to life. It needs to be clear who it’s for (the target audience) and highlight our benefit, reason why and reason to believe.
The website would show off our key brand assets like our logo, colour palette and typography. But it would also use images and words to bring to life the essence, values and personality of our brand.
Finally, in the marketing plan would be the promotion. This is how we find customers. How we tell them about our offer.
So, it’s our advertising and digital media, for example. Key messages which interest and engage customers. And a clear call to action which makes them want to find out more.
It’s also the public relations work we do to raise our brand’s profile.
And it’s our CRM program which makes sure we’re in regular contact with our most loyal customers.
This area is usually where marketers spend the most amount of time. Writing briefs and working with different types of agency to help create stronger connections with customers.
It’s the most obvious and visible activity in marketing. But it only happens after many other strategic elements have fallen into place.
Conclusion - e-Commerce strategy example
Strategy building can be a complex process, but it needs to have simple outputs. The easier it is to explain your strategy, the easier it will be to turn it into meaningful actions.
As we’ve covered in this e-Commerce strategy example, there’s 3 major steps in the process.
First, you look external. You do market research. Speak to customers and gather feedback. Look at competitors. The goal is to find a customer need you can meet better than anyone else.
Then, you go internal. You look at your capabilities. Decide on a competitive strategy. Build your brand identity and positioning.
The positioning summarises which customers you’ll go after, and how you’ll go after them. It’s the launch pad for all your marketing plan and brand activation decisions. It’s how you decide on your marketing mix. How you decide what you will and won’t do.
In this example, our pizza shop chose to differentiate on the quality of its products (non-soggy pineapple pizzas) and the speed of it’s delivery (within 45 minutes). That strategy drove how we set up our operations, and the key actions in our marketing plan.
Check out our online store strategy guide for more on this. Or contact us if you need help applying the lessons from this e-Commerce strategy example to your own business.
Question Mark on Tree : Photo by Evan Dennis on Unsplash
Lens : Photo by Paul Skorupskas on Unsplash
Hawaiian Pizza : Photo by bckfwd on Unsplash
Visa card and laptop : Photo by Anastasiia Ostapovych on Unsplash
Food delivery cyclist : Photo by Brett Jordan on Unsplash
Pie segmentation : Photo by Dilyara Garifullina on Unsplash
Man looking at ceiling : Photo by Anton Danilov on Unsplash
You got this : Photo by Ava Sol on Unsplash
Person holding compass : Photo by Aron Visuals on Unsplash
Wooden Gavel : Photo by Tingey Injury Law Firm on Unsplash
Online shopping with phone and credit card : Photo by PhotoMIX Company from Pexels
Shout : Photo by Jason Rosewell on Unsplash