Is Measuring ROI Crucial or a Waste of Time in B2B E-Commerce? - Modern Distribution Management

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Is Measuring ROI Crucial or a Waste of Time in B2B E-Commerce?

Defining ROI often depends on where companies are on their digital transformations, and there’s not a one-size-fits all definition of ROI for all distributors.
Internet business and basket design, blue digital shopping cart on black background

Distributors are faced with many choices as they transition to e-commerce platforms, but when it comes to ROI, do distributors need to calculate every use case or should they focus on  keeping it simple in order to get moving on their digital transformations?

During the MasterB2B Un-Webinar “Why do ROI calculations often fall short for B2B E-Commerce,”  hosts Andy Hoar and Brian Beck captained teams that were split up to debate how to define and quantify ROI on B2B e-commerce platforms.

Hoar, CEO of Paradigm B2B, helmed “team measure everything,” which posited that it was critical to understand the details of ROI before making investments. Joining Hoar on his team were Marta Dalton, global director of e-commerce at Unilever, and Steven Javor, global e-commerce director at Schneider Electric.

Beck, CEO of Beck Ecommerce, led “team keep it simple,” which proposed that distributors are losing a competitive advantage by measuring every aspect of ROI instead of getting to market with an e-commerce offering. Beck’s team included BigCommerce’s Meghan Stabler, vice president, global product marketing, communications and international marketing, and Michael Eichinger, COO at Bay Fastening Systems.

“I really do believe there’s time lost spending all of your time doing business cases on this stuff, and not time on building,” Beck said.

In the debate, there was a degree of agreement between some of the panelists, and between Beck and Hoar. Defining ROI often depends on where companies are on their digital transformations, and there’s not a one-size-fits all definition of ROI for all distributors.

Round 1: Defining critical ROI metrics and measurements

“How do you decide on the formula, which revenue and cost metrics do you include?” Hoar asked the panelists. Stabler, from team keep it simple, said there is some merit for looking at ROI, but a better metric would be to use KPIs for measurements. Stabler said distributors should “test and learn” about the new e-commerce channels, customers and marketplaces.

“I think we should keep it simple, because we spend too much time getting hung up on the rushed measuring of ROI,” she said. “My view is get the early numbers in there, measure the small things, use that as value to go back and show [executives] how well you’re doing. So keep it simple. Keep it short. Keep it quick and start measuring.”

Eichinger added that since digital transformations are new to most distributors, “keeping it simple really means focusing in on how well you’re transforming” as they transition from traditional business models to digital tools and platforms.

From team measure everything, Dalton said distributors couldn’t just focus on a couple of top-level metrics, or they’re going to miss the entire picture about a B2B customer’s opportunities, strengths and weaknesses.

“What Meghan did say is you have to understand the KPIs,” Javor said. “But it’s important to get as many metrics as you can. Because the B2B journey is very sophisticated. It’s much more sophisticated than the B2C journey. “I agree with Marta that we need to get broad understanding of the B2B market. But I do think from a reporting standpoint, you also don’t want to drown in metrics. You do want to have a few KPIs that you focus on for your leadership.”

The Round 1 poll question was: What does it take to measure B2B e-commerce effectively? Few metrics or many metrics? Few: 64%; Many: 36%.

Round 2: Is incremental e-commerce revenue a requirement?

The first question in the second round from Beck was whether generating incremental revenue from e-commerce (versus just revenue) a requirement for accepting an ROI calculation?

“I think that lift and shift are both required,” said team everything’s Dalton. “And honestly, the biggest complaint about calculating lift is that usually it’s too difficult to d0.”

He added, “If you’re just looking at channel shift, then it’s really hard to make a case to your executives that you’ve done any moving forward with your B2B commerce. They’re assuming they could have done the same work with their field sales or with their existing telesales.”

Bringing “lift” to the table includes explaining to executives that there’s a shopping effect and a personalization effect because customers can browse distributors’ catalogs to see promotions that they wouldn’t have seen before, according to Dalton. There’s also the savings of not having the salesforce make multiple trips to customers’ locators to nail down a sale.

Team keep it simple’s Eichinger said Bay Fastening Systems kept a close eye on its bottom line as it transitioned from a traditional channel to digital.

“We made sure that we were holding our ground, revenue-wise,” he said. “We made sure that our organization could process orders most efficiently. We got everybody to  embrace the transition. And from there, we started adding all these other metrics. In the beginning, it’s more important to take action and keep things simple and pay attention to the core piece. Top management, they’re afraid that they’re going to hurt the business, [but] they’ll  reinvest in anything that allows them to make a successful digital transformation and shows promise.”

The Round 2 poll question was: Is generating incremental revenue — versus just revenue — necessary for accepting an ROI calculation? Yes: 66%; No: 34%.

Round 3: Customer lifetime value

The third round centered on whether distributors could produce a customer lifetime value (CLV) that stands up to scrutiny. Stabler said she believed that distributors could measure CVL, but it depended on what business they were in and what they were trying to measure. As a SaaS B2B platform, Stabler said BigCommerce measures customer churn, among other measurements.

“I like to look at retention,” she said. “I like to look at upsell and cross-sell of merchants. I need to focus on the customer value. I need to focus on the customer attention. I need to focus on customer satisfaction.”

Hoer asked the panelists whether CVL should be measured at the beginning, middle or end of an e-commerce launch by distributors.

“I think you have to measure customer lifetime value, and it has to start at the beginning,” said Dalton. “Think about your customer acquisition costs in B2B. The only way you can back into a reasonable customer acquisition cost is by understanding what that customer lifetime value is.”

With digital marketing, automation and SMS, distributors can onboard customers faster and cheaper than using a traditional sales team, according to Dalton.

“I think about things like online reorders. If somebody can order online more quickly through a self-serve platform, then there’s a velocity associated with that that needs to be calculated versus calling somebody,” Hoar said in support of Dalton.

The Round 3 poll question was: Is customer lifetime value analysis worth your time when calculating B2B e-commerce?  Yes: 29%; No: 71%.

“So at the end of the day, I do think you have to have a plan,” Beck said in his closing remarks. “I think ‘keep it simple’ is important. You have got to pick the right metrics in each of these areas, but this is a good framework for folks to think about.”

Register here to listen to the webcast in its entirety. 

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