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Sean Wheller
Home arrow My Blog arrow The sales volume business model
Dec 29 2007
The sales volume business model
Saturday, 29 December 2007

I get many requests to build people websites. Most want some kind of e-commerce functionality. I've found that when I build websites, they generally don't get used to their full potential. It's almost like people think, "Build it and they will come."

I reality, even on the Internet, this is not the case. Having a website with e-commerce support is not that much different to owning a shop in a mall. People visit the mall everyday and hundreds of feet pass through the mall corridors, but how many will enter the door or your shop and how many of those leave having made a purchase?

It's crazy to think that a website with a shopping cart will just bring in the orders. I've first hand experience that it does not work this way. Here's how it goes.

A client asks me to build them a website, which we do, building in all the best online sales tools and techniques we can. They pay us a fair fee for doing this and then they go on their way, ready to do business on the Internet. Now to do this they've had to obtain hosting, open a merchant account and a facility with a switching provider. These things carry a cost and if no sales are made via the website, it means that the web store actually made a loss.

Anyway, off they go and in a few months they come back with a confused look on their face. Wondering why they have not sold as much as they thought. When I ask, "Have you done anything to the website?" they say "No". So I ask whether they have done any promotions to let people know about the website. Simple things like adding their URL to business cards, adverts in local papers. The answer is generally, "No." So I ask, "Have you contacted customers by email to promote products via the website?" Again, the answer is "No."

I've experienced this scenario more times that I care to and am way beyond any feelings of shock or surprise. People think they have a website and so sales will come. They don't. You have to make sales happen. It's just like having a store in the mall. You need to advertise and promote and let people know that you are there.

So I got to thinking how I could solve this problem. I began to think that perhaps the solution is to build them a website and run it for them. By run it for them I mean do the promotions, handle the shop, get visitors and convert them to sales. I tried this approach on a few websites and found that it worked, although my initial business model needed some tweaking.

Since we already have a merchant account with our bank and a switching facility, my thinking was to build customers a website for free, no cost to them, in exchange for 20-25% of turnover. This in effect makes us a reseller of their product instead of just web developers. All sales are transacted through our merchant account and the supplier is paid less our 20-25%. The supplier is still responsible for order completion, making sure that goods are shipped. We concern ourselves with Internet marketing and promotion to increase the sales volume.

To some extent this model has worked with the websites we have done. Clients have liked the option of not having to pay for hosting, development or maintenance of their website. they are also relived that they don't have to learn anything about the running or process of the website and the task of tracking transactions. Where the model has not worked is that clients think that we will promote just for the sake of promoting, that we will develop promotions and execute them. We have to drag new content out of them and urge them to think of promotional ideas. We really have to become their online marketing department and to do so we must get information about new products and promotions. If we don't them our feed of deals soon runs dry and sales will not reach more than an average rate.

So I am now considering making some changes to the business model. The current model sees all the risk and effort sitting with us and, while suppliers should be eager to generate new sales, they do not go out of their way to build promotional ideas because it does not cost them anything if they don't.

One model under consideration is to charge combination of flat fee or percentage of sales, which ever is higher. If a website reaches sales target then clients pay a percentage of sales. If it does not, then they pay a flat fee. In this way I hope people will be more inclined to realise that they must work with us to promote sales or end up paying the flat fee which will inevitably be greater than the amount they would pay had they made sales target and so be billed 20-25% of sales.

Let's see if this works. If it does it will cost certainly increase revenues for all while ensuring that we cover our costs of operation. Clients forget that when we host, build, manage and promote the website, that we are incurring costs.

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Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved.

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