I recently wrote a contributed piece for TechCrunch titled,?“A Venture Capitalist’s E-Commerce Shopping List.”
E-Commerce is a sector in which I’m intensely focused as an investor and I continue to look for exciting companies that have learned how to master the 4A’s– either as merchants, marketplaces or technology enablers. I often try to approach e-commerce investments from the mindset of an operator/entrepreneur given the many years I spent in those roles. When invited to do so, I work closely with our firm’s e-commerce portfolio companies to turn these high-level concepts into concrete plans and executables.
Despite all of the technological changes and innovations we have seen in e-commerce over the last dozen years, I have noticed that the 4A’s of the Consumer Life cycle rules have not changed at all—in fact, they have become much more critical. To be successful, it is now mandatory that these companies delight customers and nail these 4 A’s.
I have received a number of questions in response to my TechCrunch article, and I’ve answered these questions more thoroughly in this NVP blog post. Hopefully this feedback will trigger even more questions and spur additional dialogue.
Q1: ?Doesn’t the “A” you focus on change depending on the stage of the company??
A1: ?Not really. ?Great companies tend to build their services with complete obsession around total customer satisfaction. ?Even the last A (Amplitude) should ideally be thought through from the beginning. ?Like most virally-focused social companies, e-commerce businesses should think of Amplitude and Social spread from day one. ?Having said that, building a great brand with significant mindshare takes a lot of time and effort. ?Most great e-commerce brands gain the trust of the consumer only after many positive interactions. ?When analyzing the success of the 4A’s, it is important to look at the amount of time that has passed since a certain set of consumers first became engaged or active on the site.? This is commonly known as the “consumer cohort.”? Older consumer cohorts will typically display much more activity around the latter A’s (e.g. Addiction and Amplitude), while the more recent consumer cohorts may be too new to be considered fully “Active” or “Addicted.” Therefore, the latter A’s may be less relevant. The best e-commerce companies minimize disappointment and delight at every consumer touch point.
Q2: Are the 4A’s unique to e-commerce companies? ?It seems like this framework could be used in other sectors, too.
A2: Yes. ?I do think the notion of delighting consumers and driving them toward “Addiction” is not unique to e-commerce. ?In fact, many gaming and freemium services in which we invest? tend to be masters at this. ?For example, Rafter and Lumosity are in different sectors but both are exceptional at the analytics and management of the consumer life cycle. The operational differences will be around the types of metrics and tactics used, which really depend on the audience, service and sector.? Predictive Analytics via “big data” is an increasingly important technology.? Companies like InsightsOne are pioneering in this field.
Q3: What other companies exhibit best practices around e-commerce– as technology or service enablers, marketplaces or merchants?
A3: ?There are many great companies that enable the 4A’s for merchants or marketplaces. ?On the Awareness and Activation sides, RetailMeNot (WhaleShark Media) is highly proficient at attracting consumers. ?Also, SundaySky is a company that enables videos, which help consumers become more comfortable with e-commerce. ?Freeshipping.com is another great enabler that removes the barriers around shipping and therefore drives Activation. ?Rafter is a company that has mastered the convenience of local commerce. ?The company enables easy pick-up and drop-off educational materials locally within university bookstores. ?As for Amplitude, there are several great enabling technologies which help with social spread in different ways. Extole is fantastic, as well as Kenshoo, Nanigans, Adaptly and Buddy Media.
Q4: What about the emergence of mobile and how it plays into the 4A’s?
A4: ?I am a big believer that mobile will accelerate all the 4A’s and help e-commerce brands to be created much faster with less need for brand-building time and capital. ?In particular, I like the “iPhone form factor” to drive Awareness, and the “iPad form factor” is perfect to drive Activation and Addiction. If the apps are architected correctly, they should enhance delight, accelerate Activation and Addiction and ultimately create larger and faster Amplitude. ?For more on this topic, take a look at my recent?Wall Street Journal/AllThingsD post, “E-Commerce Accelerating Due to Personalization, Pinterest and iPad.” ?
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