Ep 33: Shopify benchmarks SMB CAC; Reviews tell the story of Walmarts inventory woes; Twitter & WhatsApp now offering local business pages

Part 1 Video Starts 0:13 - Shopify CAC, Marketing Benchmarks for SMBs

Part 2 Video- Starts 7:27 - What Reviews Tell Us About How Walmart’s Supply Chain Issues

Part 3 Video- Starts 14:39 - Twitter & WhatsApp Add Local Business Directories

Reference Articles:

Shopify CAC, Marketing Benchmarks for SMBs

Is Your Customer Acquisition Cost Sustainable? Benchmarks for Every Industry

What Reviews Tell Us About How Walmart’s Supply Chain Issues

Twitter’s GMB Profile

Transcript:  EP 33

Greg: Welcome everybody to episode mystical, episode 33 of the near memo. This, uh, this has special magic power and significance. Um, uh, it's very hard to believe that we've done 33 of these, but, uh, here we are talking about the weekend, uh, search local search, social media and commerce. Again. Mike and David and I'm Greg Sterling, and we're excited to bestow upon you, our wisdom and insights.

David: Great. We got to under promise and over deliver, not the other way around.

Greg: So if you find a nugget in here that's useful, then, uh, we're, we're really grateful. All right. So. There's a lot of interesting stuff has always this week, a wide range of things going on, but we're going to focus on three things. And David, we're going to start with you and an interesting report that came out on, uh, from Shopify about customer acquisition costs.

David: Yeah. Uh, you know, full disclosure disclosure. I'm a huge Shopify fan boy. Uh, I own a small amount of Shopify stock. Um, but despite those two things I learned about this in, uh, in our newsletter from you, Greg. So I hadn't, I hadn't. A really detailed report, um, looking at the cost of acquisition, uh, by industry, uh, sort of e-commerce industry, as well as channel, um, where customers came in from.

And there were just a whole range of really interesting findings here. Um, from where I sit, I think the first thing is kudos to Shopify for, uh, taking what is traditionally a SAS metric and attempting to apply it to. Uh, e-commerce. I think that this is something that, um, that I've been advising individual businesses to do for, for some time now.

Um, if you start treating their businesses more like as companies where we really are trying to dial in, um, you know, a number of your, your key performance indicators and start thinking about the lifetime value of your customers and how much it costs to acquire them and what that percentage is. Um, which the reason I've been attempting to do that is because ads have gotten so much more expensive digital ads.

Anyway, I've gotten so much more expensive, uh, over the last several years that I think increasingly it's important that local businesses and e-commerce businesses, you know, start to try to factor in lifetime value when they think about the cost of the ad and not just think of it as a one-time sale. Um, I think that this, this mindset kind of increases the loyalty quotient in.

Typical small businesses sort of strategy, uh, business strategy mix. So, um, so I just, I love the whole concept of, of this report, uh, from Shopify, I would say a couple of things that, um, that stood out, Greg, you, you noted this in the, in the write-up in the newsletter that, you know, social media was still, uh, the top performer, both in terms of the, uh, the amount of revenue that it drove and the relatively cheap cost of acquisition relative to other.

Uh, including SEO. So interestingly SEO was one of the, I think it was the number three channel in terms of driving customers, but in terms of driving revenue was not quite as high. So, uh, I think that that kind of highlights the sort of ongoing tension between, uh, social media and SEO and what, what is actually driving leads?

I would say a huge caveat with this study is we have no idea whether this was truly SEO. Like were these stores actively optimizing. There are websites or was it just, oh, we'll take whatever search traffic Google is sending us. And that's kind of how we're evaluating this. So that was, that was one of the big things.

Um, the second thing is another kudos to Shopify. Uh, they were focused on, on very small e-commerce businesses here with, uh, four or fewer employees. And it's one of the first reports of these that I've seen with realistic marketing budgets. Um, very few of these businesses were spending, uh, on average anyway, over $10,000.

Uh, in marketing. And I think that this is just a huge segment of the, of what is a massive market, uh, market massive addressable market that is just totally unaddressed and, and totally uninteresting to, um, both SAS companies and agencies. And I think that there's the, you know, this shows to me that these guys do have real budgets.

They are bringing in real, they are real businesses. They are bringing in real revenue. Um, and this was a great peek under the hood that. Um, you know, what, what the mix of customers that, that these budgets are bringing in. So I thought it was just a great report. I highly encourage everybody to check it out in our weekly newsletter or semi-weekly newsletter, um, and, uh, take a full look at the Shopify website, thrice weekly.

What's the word for that? Try, try weekly. It doesn't really make sense, so,

Greg: right. Yeah. So, so like you, I was struck by the, the, the social media, um, Uh, ranking at the top for both, um, for both categories. I mean, it, it really seems like small businesses, you know, social media has one, these businesses, I question how accurate the understanding.

I mean, you would assume that in the aggregate you're going to get pretty, pretty accurate data, but I, I questioned the attribution accuracy of, of this. Um, and as you say, you know, with, with, with respect to SEO, are they. They really understanding what's going on there. Are they really doing an optimization program?

Are they just, you know, tracking their traffic? But nonetheless, I agree. It was really interesting. It was a really interesting report and I just continue to be struck by how successful primarily Facebook, but not exclusively has been in capturing these businesses, hearts and minds and convincing them that it's the most effective channel.

It's it's, uh, you know, I, I don't think that that's necessarily true. I mean, I think if you're a pro maybe, but for just random businesses, I think that's gotta be not true, but,

Mike: you know, I was thinking about that question because they, we did a small business interview the other day with a company that was founded in 2013.

Right around the time Instagram was taking off and they, and they're very visual company. They built band, uh, penance and banners, and they leveraged Instagram into great success. It was, it was a great story of timing and compatibility between the visual nature of Instagram and their business. Right. If they were starting today, I think that would be a different story and they wouldn't have that same success and they don't view it as sort of time.

Timing I did. I just thought their success was largely driven by when they chose to use Instagram and how quickly they were able to add followers and a visual their stuff was, and it worked for them. So there are some success stories there, but I think it's, like you said, probably not as much as people think or as much as they buy in.

Greg: Yeah. I mean, there's a lot more to say on this, but I think, um, you know, we'll, we'll, we'll this theme of where are small businesses putting their budgets is going to be an ongoing discussion for us, but I want to, in the interest of time, move on to you, Mike, and you wrote a great piece this week, um, under our analysis tab on, um, what reviews of Wal-Mart's consumer reviews of Walmart are reflecting about supply and chain.

That they're having an and the larger subject of how to use reviews as a business, sort of in your strategic thinking and processing.

Mike: Yeah, so it was an interesting case study for me because I had access to gather up and I loaded in 101 Walmarts from around the country to get a good sample. And I looked at 185,000 reviews for the last 10 months.

And I had, because they come into my feet every day. I had no. Comments about shortages and empty shelves. And I'd also seen that Walmart had owned up to this in our last two quarterly meetings where they had noted. So that was a good opportunity to test the validity of my theory that these reviews in quantity over time can provide business insights.

And so what we saw was a very close, like November, December and January of last year, review sentiment around the topic. Stock was very positive and they were very few of them. And as these conditions worsened, the complaints went up and the ratings went down. You could see when Walmart started to fix them, the reviews got a little better, but then they sort of plateaued and started dropping off again.

So, and this is confirmed by Walmart corporate and their core quarterly meetings. So I think it elevates in my mind the possibility of using. Not just for sentiment, not just for quality and customer relations, but as a business insights tool that provides a great insight in it. I've been tracking a number of other elements amongst major retailers, and I'm going to go back and look at them.

I'm even tracking like 30 or 40 businesses in a region. And I want to see if reviews might track with ethnic. Uptick or downtick. So it's interesting. The last 10 months or 20 months, rather of you were in the upstream and then downstream and then an upstream and do re can reviews be used to predict volume.

For example, I think they might be with the right, with the right of the data, but I'm not sure. So I just think it opens up all kinds of possibilities for analysts competitors. Businesses to gain additional insight today and really thought about,

Greg: let me, let me ask you Mike. Cause I mean, you know, this isn't, this isn't, this is something that, that I've had conversations with with different people for a long time about the insights that you can gain from reviews.

But my sense is that most businesses don't use reviews in that way. They're, they're, they're approaching reviews and a purely utilitarian way. We need to do them for ranking. We need to respond to them because consumers have an expectation. You know, they're going to read them and they want to see what the response is, but they're not really seeing them as an asset such as you're describing.

Is that, is that a fair sense of where the market is or is that, am

Mike: I wrong? Yeah, I think the unique company, the better companies, the top 20% are using it. As I'm describing, but also from a customer feedback point of view, when you asked for first party reviews, you're typically at four or five X, the volume, they get a Google reviews.

So you get a much bigger data set. So even smaller companies than Walmart can get great data sets when they do first party. And those that are doing that assertively consistently a clean juice comes to mind or are able to extract meaningful data. They were able to fix COVID release. Hygiene issues in some of their stores by looking at reviews and that's like, that's powerful.

Um, but you're right. The bulk of them are very tactical and approach and I, and it's. It's just such a small part of the story that it's a tragedy, but,

Greg: well, what, why, why do you think that is? I mean, Y Y you know, this has been written about, and people like you and others are out there sort of advising companies that they need to think differently about re reviews.

Why do you think it's so hard for, for companies to sort of come around to this perspective? Is it just a, an internal kind of inertia thing? Or what, what, what do you think is going on? Okay. I

Mike: think in some businesses they're too big, right? The targets of the world don't have time to. Bother with this. The little guys are so tactically focused.

Um, and also I think a lot of the advice they get from agencies is very tactically focused. So I think throughout the ecosystem, there's some limit some way that prevents them, you know, and ranking kind of always drives thinking. It's kind of like link building. You got to get more links, uh, you know, because links scale rank.

I mean, it, it kind of puts the cart before the horse. It reframes the problem. In a way that doesn't make sense to me. And in which everybody suffers, if you're just getting more reviews and you're not really leveraging, but I don't, it's part of the part and parcel of the SEO industry, I think is part of the problem as well.

David: I have a theory on the, on the two big notion, Mike, I, I agree that there are some companies that are, you know, too big for this, you know, for them to be able to truly engage with reviews as a, as a business intelligence. I also think that they're, they're too siloed. So frequently you have the customer experience team or whatever.

That's using some super bloated, you know, 15 page Qualtrics survey to assess, you know, consumer, uh, sentiment around their business and around, you know, slider bars for every possible metric that they're looking to do. Um, internally and those just suck as a consumer. I mean, I actually filled a couple out this past week.

I'm just like, you know, guys, what I really want to do is just send you an email. This is a company that I actually really like. Um, and I had a couple of problems with, and I was like, I really just want to send you an email saying this is where you need to fix, and this is what you need to fix. And so there's this like

Mike: shaking my head in total agreement here.

David: Yeah. There's this. There's this very like, you know, it's like, oh, this must have been taught at the Harvard MBA school 30 years ago, that this is the way to do it. And there's this, there's a lack of adjustment to the modern world of like no consumers want to be able to, you know, very, I think very much go the apple reviews route of like thumbs up thumbs down on, you know, 10 criteria and then write whatever they want to write.

Um, and so I think that they're that, that number one, it's a problem of the, of the. Uh, the mindset of how to collect this data and the lack of the lack of realization that customers are already leaving you, this data, you know, in a, in a, in a completely different silo. Um, and so I think that on the two big side of things, I think that's those, those are my theories on, on, you know, where the, the, the failure happens.

Greg: So well for sure big organizations are siloed and using different tools. That's, that's, uh, that's an absolutely. Um, on any of those kind of Qualtrics, uh, surveys that you get, you know, it's like when I get to question six or seven, I pretty much abandoned. As many of them are just too long. Um, so you, you alluded to, uh, to, to link links just a moment ago, something we're not going to talk about, but I think it's really worth of a future conversation is Rand fish.

Fishkins article about the disappearance. From the, from the web, I think that's a really big topic and really interesting about all the walled gardens that want to keep you inside and don't want you to link out. And the, the, you know, we, Mike, uh, you, you showed us the piece you wrote, uh, got, got mentioned in media posts, the Walmart piece that we just talked about, and there was no link back to the original story, um, which is pretty common for them.

So it's, it's, it's, it's interesting, you know, the web is sort of changing fundamentally privacy. And advertising technology changes. And now maybe the reduction in, in linking is, is having some pretty fundamental impacts on the way things are playing out. You know, that's a, that's a big topic that we'll come back to in the

Mike: future.

Oh, Google has to say is you're going to get ranking improvement if you link out. Yeah.

Greg: It's true. It shows you that that shows you their dominance. Right, right. Then that statement right there, and then

Mike: they need.

Greg: Yeah, you, you can testify before the, uh, the, uh, DOJ, uh, and to, to Google's dominance in that one when that's a metaphor.

Anyway. Um, so my, my, uh, my topic today, um, is, is really about sort of the emergence of, of a couple of new, uh, directories. Um, we wrote about this week, Twitter, you know, Twitter introduced professional profiles in April, I believe. And now they're promoting the idea of an about module for physical businesses gives you address information, uh, directions.

There's a directions button and a contact button that you can, you can sort of put anything behind that. And so the idea, the use cases that you're going to see the business on Twitter, you're going to reach out to them. You're going to go go physically, visit, visit. Um, through the directions link. Um, so there's that, and then WhatsApp, more or less simultaneously started promoting in, I think it's only in Brazil right now, but it seems like a global effort, a, a new, a new directory.

So they they're they're um, they've got an in-app business directory of all the businesses on WhatsApp and they've been making the WhatsApp profiles much more actionable co you know, commerce enabled contact details. They've been doing that over to. So we've got two new, potentially two new local search, uh, opportunities here, WhatsApp and Twitter, Twitter, my business, um, of the two of them.

WhatsApp seems much more viable and much more serious, especially outside the U S um, so what do you think, what do you think about this? Are these are these two things going to have any traction I'm skeptical about Twitter? Because I don't really see. Consumers searching for businesses on Twitter. That doesn't seem to be a way to do that.

It's like if you follow a business or you happen upon a business, maybe you'll use it, but I don't see it being a major consumer utility.

David: Totally agree. There's only a handful of businesses where I've seen them, you know, using Twitter well, and they're typically like mobile food cards. Uh, and so that actually would be a perfect use case, but it's a really small, really small segment of the.

Population. I think that the natural use case for WhatsApp is, is much more substantial given it's, um, sort of defacto status as almost like a, you know, communication channel between customers and businesses in the developing world and could very well be taking off with respect to payments. I haven't been following kind of what what's doing and

Greg: that's fine.

And that's how Facebook has been positioning it as this is the

David: communication channel. Yep. So I think that. Oh, go ahead. Go

Mike: ahead, Mike. I was going to say Twitter's historic lack of execution leaves one. I mean, firstly, it's not a market they currently are serving. Why would they be able to serve it? All of a sudden it's gonna S it's hard to imagine that businesses will take it up and thus it will get dropped.

I am curious from a technical point of view whose mapping software they're using, but other than that, Found a failure.

David: I don't know, Mike, uh, here is the one that brings to mind, but, uh that's. Yeah, it would that's right. But I didn't see it in the reports, uh, at all who, who was behind it

Greg: apps, but I think you can put other mapping. I think you could put other mapping apps behind it. But, um, but I think WhatsApp is really an interesting one to watch and it is viable and it could be quite a significant driver of small business, uh, contact revenue engagement, um, going forward. And, and I could imagine people using it to search for.

Um, very easily, you know, cause it's already so well established and Twitter I think is, uh, unlikely to move the needle at all. As you say, Mike. Um, so today is background noise day here at

Mike: motorcycles out my window, sir.

Greg: And my dog was just barking. So, uh, hopefully we didn't get too much of that

Mike: on the recording.

David should bring his child in for guest appearance, myself. Okay.

Greg: All right. So to

David: coordinate our next recording with, uh, with her nap schedule a little better.

Greg: All right. So we're, we're we're at time. Um, thanks again, everybody. Um, uh, I'm going to the local ecology event in LA, much against my better judgment next week.

And that'll be sort of a gathering the first gathering of, of these, uh, local SMB SAS types that I've been at it for a long time. So there, I may have a few interesting things to say. Uh, uh, next week or maybe not, you know, I, I suspect the sessions wealthy, well, attended people be outside doing networking mostly, but, uh, that's coming up for me.

Any last thoughts or comments?

David: No, stay safe and, uh, say hi to everyone that Mike and I will not have seen for coming up on two years.

Greg: So, yes. Yeah, yeah. It should. It should be interesting. I mean, I'm, it'll, it'll be a little bit weird, but, um, you know, I'm going nonetheless. All right. So.

David: Very good. Have a great weekend or week whenever you happen to be listening to the near memo.

Okay.

Greg: Bye-bye.