3D Gesture Controlled E-commerce

Just fantasizing about technology a bit today… Consider the following trends:

1.) The internet is coming to our TV’s.

2.) TV’s are getting 3-dimensional displays.

3.) Gesture control technology is becoming a useful interface.

Put those three together and what becomes possible? Well, lots of things, but one of them would be an entirely new e-commerce experience.

Picture mom shopping for shoes online.  She is sitting on the couch in front of your 65″ television looking at the latest shoe styles.  Except, the shoes are not just flat images.  They are visually popping out of the screen thanks to 3D imaging.  Ands mom doesn’t need a mouse or a remote or a keyboard.  With gesture controls, she is rotating the shoes so that she can see them from different angles and really get a feel for them, or waving past them to get to the next product, or adding them to her shopping cart for purchase…

Wild.

It’s probably a bit early to start building this sort of thing now, but…

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Published:
May 14, 2010 – 12:30 pm
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Rethinking the Sign-in or Create Account Interface

Earlier this week we upgraded changed our Sign-in or Create Account interface at Proper Cloth.

This is what it used to look like:

This functionally worked fine, but a couple things always bothered me about it.

  • During usability testing, we often saw users that were creating accounts first put their email address in the field on the left before realizing that the Create Account part of the form was on the right. This was not a fatal problem, it just meant that they had to reenter their information again on the right.  It seems to me that folks in a hurry would just scan the page, see the field for “email address” and start typing it in without fully processing all the information.
  • This design also seemed a bit visually overwhelming and intimidating.  There are 2 headings, 6 fields, 2 buttons and 3 bright purple textual messages.  It forces the user to think.  With just a glance, it might give the impression that creating an account is a big step, requiring a lot of information.  In reality, we don’t need much information at all.  All we’re trying to do is enable a way for users to save a design or size and access it later.

Our new design:

In the new design we only have two text fields.  Email address and password.  The idea is that – whether you are signing in or creating an account you will do the same thing to start – put in your email address.  I’m counting on users selective vision to see the fields and the button they are looking for and then interpret the form as being for the specific action they are looking for.

Once you enter your email address, we check to see if you have an account and then dull out the button that is not appropriate.

I like this effect – because I think it sort of surprises the user a bit with a “oh, they know me” sort of feeling.

If you don’t yet have an account, you would see the following after you entered your email address.  When the buttons change, you immediately are confirmed that you are taking the right action.

Regarding account creation:

  • We no longer ask for name information at this stage.  We ask for the persons name later – when necessary.
  • We do not ask for the password twice.  This may increase the chance that the user types the password in wrong (which I don’t think will happen all that often anyways), but we also have worked to make our reset password process much faster and easier to use (if necessary.
  • We also had to take a second look at all the possible failure modes and error messages that would show.

So, this is still very new, but I think it’s an interesting innovation on a pretty standard web process.  We’ll be monitoring how well it works. For now, you can try it out at http://propercloth.com.  Just click the “Sign In or Create Account” in the upper right.

Published:
February 16, 2010 – 6:06 pm
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6 Comments

Be Your Own Boss

Next time you’re feeling stuck, without being prompted, pretend you have a boss that wants an update on how you’re doing.  Put together a powerpoint outlining your current state of affairs, goals, concerns, recent things you learned, etc… Try to get your thoughts as organized as possible.

Then read the deck as if it was someone else’s and critique it as if you were evaluating an employee or doing diligence on a deal.  What makes sense?  Where are the holes?  What are the first questions you would ask?  Why don’t you have the answers?  Then redo the deck until it makes sense from both points of view.  Usually several obvious things pop out that you’ve been ignoring or missing.

It’s common for smart people to get hung up on stupid things -and I think this exercise forces you to be accountable to yourself and really apply your problem solving skills to the problems you’re facing.

Essentially, the idea is to be your own boss/mentor/critic, so that nobody else has to.

Published:
February 5, 2010 – 9:35 pm
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This is What Bootstrapping Feels Like (picture)

Published:
January 21, 2010 – 11:30 am
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Are “Deal” Sites Scalable?

I was reading this article in the WSJ today about how some discount websites are being accused of inflating the regular price of an item in order to make the discount amount seem more significant.

In one example:

“Members-only site Beyond the Rack offered a pair of suede Adalene pumps from the two-year-old designer label Pour La Victoire for $129, posting a “compare it” price of $275 for the shoes. Gap Inc.’s online retailer Piperlime simultaneously offered the same pumps for $149.99, but with a suggested retail price of $220.”

If you pay attention to what’s going on here you might get the feeling that for any mainstream fashion product: Today’s suggested retail prices are total bullshit. You begin to wonder if anybody is actually buying those shoes for $220 or $275.

When I see an offer like “40% off”, I like to think that through my own connections, or dumb luck of being in the right place at the right time, or willingness to buy last seasons merchandise, I am somehow capturing more value for my money.

I think this feeling comes from my past experiences.  You used to have to be something of an insider to find the “sample sales” that would pop up around Manhattan.  I remember (living in San Diego) you had to drive half-way to Palm Springs to get to the designer outlets.  If major discounting ever occurred in large city stores (or online) the inventory and size selection would be minimal.  In one way or another, getting a “deal” usually meant some extra inconvenience.

But with the recession and the online outlet stores, “deals” are becoming increasingly accessible.  Sample shopping sites such as Gilt, Haute Look, Groupon and Woot seem unstoppable.

As these deal sites scale, going from early adopters to mainstream markets, they must inevitably become less exclusive (right?).  Their objective must be to make their deals more accessible to more people – to remove the inconvenience factor.

Meanwhile the internet makes information move faster and consumers smarter.  Price checking is getting easier.

“Members only” loses meaning when everyone is a member.  “Today only” loses meaning when those days become every day.  At what point does a deal stop being a deal?

Published:
January 19, 2010 – 4:23 pm
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Viral Sharing and Customer Acquisition Cost

I’ve been thinking about customer acquisition cost a lot lately.  From an economics standpoint, most startups seeking explosive growth (including Proper Cloth) are seeking one thing: customer acquisition cost < customer value.

(Theoretically) when this is realized, the startup can quickly scale by “buying” more customers, making a profit on each one.

Proving that you’ve achieved this (or creating a compelling story that you will be able to achieve this) significantly increases your valuation, increases your revenues, and increases the number of  VC’s that want to take you out to lunch.

There are probably great books on this topic that I have not read, but from my own experience, this is how I see it.  (I appreciate comments to clarify/correct my approach.)  The simple way to calculate customer acquisition cost is:

Cacq = A/( Ttotal*Rconv)

Cacq = Customer Acquisition Cost. How much you spend to get a new customer.

A = Advertising budget.  How much you spend to drive traffic to your site to get new customers

Rconv = Conversion rate from traffic to customers. The percentage of your site’s visitors that you are able to monetize.

Ttotal = Total traffic to your site in some unit of time.  Let’s say, per month.

Good so far, but we should also consider that a site typically gets traffic from a variety of sources each having different costs and effects. For this post, I want to focus on how viral sharing affects customer acquisition cost, so I’ll introduce the following variables.

Tbase= Traffic that comes to your site from organic search, press coverage, bloggers, gift guides, product directories or really any other links to your site that you don’t need to pay for.

Tpaid= Traffic that comes to your site as a direct result of your advertising.

Cpc= The effective cost per click you spend by advertising.  Advertising may be purchased as CPM, but you can still calculate the cost per click by dividing the amount you spent by the number of clicks that resulted.

Twom= Traffic to your site as a result of ordinary users sharing it with their friends (word of mouth).  They find it interesting and email a link to someone, post it on their Facebook or Twitter profiles or mention it to someone at a bar.

Based on these new variables, define the following:

Tpaid = A/Cpc

Ttotal = Tbase+Tpaid+Twom

Furthermore, seeking a better understanding of of Twom, we would see that it is probably a function of how many visitors our site has and some viral coefficient “V”

V = Viral coefficient.  Practically speaking this is the average number of additional visitors that each visitor recruits.

Twom= (Tbase+Tpaid)*V

Solving for Total Traffic, we get:

Ttotal = (Tbase+Tpaid)(1+ V)

Thus, solving for Customer Acquisition Cost, we could say:

Cacq= A/(Rconv* (Tbase+Tpaid)(1+ V))

Identically:

Cacq= (A/(Rconv* (Tbase+Tpaid)))*(1/(1+ V))

Now – that was a lot of math – but if you think about this equation a little bit, you can see the huge value that customers word of mouth brings to the table.

Suppose you have a viral coefficient of 1, meaning each site visitor recruits just one additional visitor. The result is that you cut your customer acquisition cost in half.

IN HALF!

(*Note1: This is even before we take into account the second order effects of referred people referring even more people.  A viral coefficient greater than 1 would theoretically result in a naturally exponential growth – so called “viral growth”.  Depending on the time delay between referrals, and your target growth rate, this could potentially drive your customer acquisition cost to zero. )

(*Note2: You might point out that this equation calculates “average” customer acquisition cost, rather than your marginal customer acquisition cost.  This is correct, as you scale up advertising, Tbase+Tpaid will approach Tpaid, so you could calculate marginal costs this way to be more precise.)

(*Note3: Please excuse the implication that Rconv is a constant.  I realize that it tends to vary widely depending on the nature of the traffic and corresponding intent.  However, for this exercise let’s assume a general, mass-market conversion rate.)

It can come down to pennies per customer, but for many startups this can be the difference between having an exciting, scalable startup and a failure.

Just 5 years ago (ok maybe 10), Word of Mouth for most people meant sending an email or actually mentioning something face to face.  A good analytical marketing person might have even ignored the Twom component because it was so small – better to just consider it a nice little bonus.

However, things are changing.  With the growing influence of social networks, this viral coefficient is becoming increasingly significant.  It’s increasingly convenient to post things on Facebook and the average person’s number of friends and followers is also growing.  We may be more choosy with what we share to our friends, but with more followers, an AVERAGE person’s post on Facebook or Twitter can now generate your site hundreds of additional visitors.

Two recent startups that have shown explosive growth: Groupon and Zynga are great examples.  While their ability to monetize customers is itself very awesome, without a doubt they are relying on fairly large viral coefficients to keep their average customer acquisition costs low.  If you’ve played with their products, you’ll see that they aggressively push you to refer additional people to their services.

Of course, we cannot forget about SEO, press, usability design, conversion funnels and optimizing ad campaigns, but I predict that increasingly this viral coefficient will be the metric that startups rely on to justify the economics of their businesses.

Published:
January 12, 2010 – 4:50 pm
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“Do you think people would pay for this?”

An entrepreneur describes his idea and then asks “Do you think people would pay for it?”.  It’s practically implied in the question that “people” is a single homogeneous entity.  The answer they are looking for is “yes – people would pay for that”, or “no – people won’t pay for that”.  The entrepreneur might ask 10, even 50 people this question before deciding if the idea has merit.

Fundamentally, for ANY product or startup idea, there is someone who will pay it.  People are just that diverse.  We come from different backgrounds.  We have different financial resources.  We have different hobbies.   We have different value systems.  It is highly likely that somewhere out there, some group of people that are faced with the problem your product solves, have been unsuccessfully looking for a solution and are willing to pay you real $$ for your product.  Just consider the $14,000 coffee machines, and $10,000 scooters.  There are markets for these items.  That doesn’t make them good business ventures though.

The right question to ask, is more complicated.  “Are there enough people that would pay for my product, and do I have the ability to reach them cost effectively?” Not as simple to answer.  This is why understanding your total addressable market size is so important.  It’s also why you want to really understand your customer acquisition cost.

Things are never as black and white as we like to make them seem, but it’s human nature to be drawn to extremes.  There are benefits to telling a story that takes a strong point of view.  It makes information easier to process and remember.  It makes us feel like we know what’s going on. We over simplify things all the time.  Either a person is good or bad, a price is a good deal or a bad deal, the economy is growing or shrinking.

Problem is, it’s not true.  For a lot of things in life, it’s not that big of a deal.  But when your startup’s success depends on it, you better understand the issues inside and out.

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Published:
January 11, 2010 – 10:06 pm
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Speed

Everyone pays attention to the direction things are going, but as an entrepreneur you need to pay very close attention to how fast they are moving.

Your startup has a shorter runway than any company you’ve ever worked for.

Maybe you are getting new leads – but how many per week?  Maybe your revenue is growing – but how fast?  Maybe the market is growing – but when will it become big enough?

As an entrepreneur, “eventually” is not an acceptable answer because you just don’t have that long.  Timing is often everything.

Published:
January 7, 2010 – 5:34 pm
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Why aren’t we already there?

Sometimes I lose focus and start to feel like I’m not getting anything done.  This frustration usually leads to the following dialogue:

  • What do I want?
    • The next business goal or objective.
  • How do I think I can get there?
    • Take a step back and look at the original business plan.
  • Why am I not already there?
    • What is preventing me from reaching that objective now.

I think the last question is critical to constantly consider.  It’s so easy to be satisfied with the “we’re making progress and eventually will get there” attitude – and sometimes you should be – but I think the CEO always needs to be prepared to push things harder and faster.

Ultimately, businesses are not simply judged on what they are able to accomplish – but on how quickly they accomplish it.  “Eventually” does not win races.  Business is always a race.

Asking this question identifies the bottleneck of the situation and (in my opinion) the CEO or program manager should always be focused on the bottleneck.

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Published:
May 24, 2009 – 11:15 am
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How to Decide What Business to Start

It’s a really, really tough question that I can’t hope to answer in a short essay.  Nonetheless, something I get asked about and think about a lot – so here goes.

Research

You need to know who the competitors are, what their products look like, who the customers are, what their buying processes are, what the industry experts say, how the macro economic environment is effecting everything, how your own solution would work (roughly), who your partners would be, etc.  This is serious research.  It’s important to write out a complete business plan (and have other people read it), interview people in the industry, recruit advisers, model out your financials, pitch to everyone that will listen, begin the product design, maybe even prototype a beta version.  I think good entrepreneurs can do this quickly so hustle through this like its your job.  You can’t make good decisions without good data – it’s the assumptions that will screw you later.

“Reasonably Viable”

All of this research needs to suggest that you have a “reasonably viable” startup opportunity.

It’s You vs. The World

Deciding something is reasonably viable requires both a solid business background (know the world) and a solid understanding of yourself (know yourself).  You’re basically trying to estimate how hard something will be to do and how good you will be at doing it.  For me, the process of looking at lots of different ideas, boiling them down to their core challenges and taking the first few steps at building those businesses was very helpful.  Continuously listening to, talking to, and reading about entrepreneurs also helped.  Finally, studying business case studies and theories (innovators dilemma) has been insightful.

Get Ready to Commit

I’m a pretty non-committal type of person myself so I can sympathize if you get hung up at this stage, but (as an ex-girlfriend used to say) you’ll never have anything significant if you can’t get past this point.  I think you need to:

  • be able to realistically visualize yourself going through the series of steps that ultimately lead to success
  • accept that it won’t be “easy money” (if it seems too easy you need to do more research)
  • accept that there is no such thing as “easy money” (lest you get distracted when the next idea comes along)

Nothing is Certain
At this point you may find yourself trying to dissect exactly HOW viable something is.  This is inevitable and worth thinking about, but at some stage it becomes pointless analysis-paralysis.  Even the most thorough research is inaccurate or will be inaccurate 6-months from now.  If your business plan is truly “reasonably viable” then this won’t matter.  Suppose it turns out the market is $1.5B instead of $2B?  It just doesn’t matter to your tiny little startup.

Trust Your Gut

If you have multiple, reasonably viable ideas or are trying to decide if you should commit to one in particular, I think it’s time to go with your instincts and ask yourself the following questions:

  • Do I like the industry?   -assuming you understand it
  • Does the industry move at the right pace for me?  -nuclear technology moves too slow, social media moves too fast
  • Do I enjoy the sorts of people in the industry?   -if you can’t stand engineers then don’t start a tech company
  • Do people in this industry value what I value/have to offer? -graphic artists probably should not start solar companies
  • Does the risk/reward match my own risk/reward style?  -some ideas have binary results (either $0, or $1B) and some scale more smoothly (maybe $100K, maybe $500K, maybe $1M, maybe $5M, maybe more?)
  • Do I feel like the product is a worthwhile product? -helps to feel like you’re making the world a better place – otherwise, porn is very profitable
  • Will I be able to play the role I want to play?  -there are no fresh MBA’s running venture funded cleantech startups

Doing what you love in life is super important and if you try to be too analytical about your options you’ll probably end up in a job you hate.  If you hate your job, you probably won’t stick with it through the tough times.  If you can’t stick with it through the tough times then your odds of success will be diminished.  And we don’t want that…

Good luck.

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Published:
May 6, 2009 – 7:40 pm
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3 Comments