E-Commerce Moneyball: Chasing the Market Leader

  |  May 18, 2012   |  Comments

How an underdog became the market leader in the online marketing space.

A couple of weeks ago, I had the honor to speak at the exclusive Acceller Summit in Miami. Some readers may remember Acceller from the case study I wrote about it and its CEO Steve McKean in my book "Always Be Testing." Steve explained:

"A culture of testing and optimization cannot happen in a vacuum, nor can it be mandated. You need a team that understands and believes in the principles. You need to communicate a strategic execution plan, and you need to create an atmosphere that encourages and enables the ongoing changes dictated by applying this strategy."

There were several amazing speakers at the conference, but I wanted to share what Matt Vinnola, director of baseball operations for the Texas Rangers, illuminated in his insider's view presentation on "Moneyball" and how this applies to online marketing. "Moneyball: The Art of Winning an Unfair Game" is the popular book/movie about Oakland A's manager Billy Beane and how he took a new look at the data in front of him and created new analytics and the processes to create a winning baseball organization even when the financial situation of the team was in crisis.

The Texas Rangers have also created an amazing baseball organization recently, even appearing in the World Series the last couple of years. The Rangers have done it by developing their own metrics, that are simple for the whole organization to use and have gone beyond the simple sabermetrics first explained in "Moneyball." They needed to find a way to compete with the likes of the New York Yankees with the largest payroll in baseball when they were losing their home-developed talents because they couldn't pay the salaries that a team like the Yankees could.

This won't be a column about baseball though, and I can't share all the details he shared during this exclusive summit. However, let me show you how this was done in front of your eyes in the online marketing space and continues to happen on a regular basis.

The company went live with its website in 1995. Throughout the dot-com bubble of the late '90s, the company struggled to make a profit. By 2001, it generated a small profit, proving its business model, and has never looked back. The company managed to pile up $3 billion in losses between 1995 and 2003. Of course, I am talking about Amazon.com. What right did this small, struggling business have to dominate e-commerce today when it had to battle retail behemoths such as Walmart and Barnes and Noble in its early days? How did Amazon apply "Moneyball" principles to win this unfair game?

Amazon built a true data-driven organization served by great execution and innovation. It optimized for everything but not at the expense of customer experience. It optimized its supply chain, making sure the products customers demanded were available and were shipped as quickly and inexpensively as possible. Amazon was the first to leverage social commerce with reviews but it continuously optimized how they were gathered, displayed, and used, where others just had reviews lying around as a site feature. Amazon optimized the site experience endlessly, having around 200 tests going on at any given time. It even optimized how it delivered customer service, and that is one reason people love Amazon. All these efficiencies helped the company offer the lowest price on products while optimizing for margin as well. Amazon is the master of leveraging its big data and enhancing and personalizing the customer experience. The company didn't start off that way, but it built it into its organization. It had to build and learn how to use all these tools itself.

Today, you don't have that challenge. Many of the tools that Amazon built for its personal use have been developed by others; many leverage big data and use advanced algorithms so that you don't have to figure it out yourself. In the near future I'll deconstruct the Amazon experience and show you how to catch up and compete with Amazon.com with some of the tools that are available today.

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ABOUT THE AUTHOR

Bryan Eisenberg

Bryan Eisenberg is coauthor of the Wall Street Journal, Amazon, BusinessWeek, and New York Times bestselling books "Call to Action," "Waiting For Your Cat to Bark?," and "Always Be Testing." Bryan is a professional marketing speaker and has keynoted conferences globally such as SES, Shop.org, Direct Marketing Association, MarketingSherpa, Econsultancy, Webcom, SEM Konferansen Norway, the Canadian Marketing Association, and others. In 2010, Bryan was named a winner of the Direct Marketing Educational Foundation's Rising Stars Awards, which recognizes the most talented professionals 40 years of age or younger in the field of direct/interactive marketing. He is also cofounder and chairman emeritus of the Web Analytics Association. Bryan serves as an advisory board member of SES Conference & Expo, the eMetrics Marketing Optimization Summit, and several venture capital backed companies. He works with his coauthor and brother Jeffrey Eisenberg. You can find them at BryanEisenberg.com.

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