Intro

The business of online retail is a complicated and difficult beast to tame. There are many entrepreneurs that try their luck in this arena and only so few will find success. Failure is often not due to poor ideas however, it is more often than not due to poor execution. If someone owns or manages an ecommerce business, chances are the products they sell, or services they offer are of quality and there is a demand in the market for them.

 

Intro: Part One, The Art of eCommerce Marketing

That is of course assuming before anyone put the effort into starting an online business, they would have first determined there is a need/want for it. Like the sayings go: You can’t easily sell a sailboat in the dessert or an icebox in the arctic.So that begs the question: If certain products or services are wanted, and few people would start selling products and services that no one cared for, then why do so many online businesses fail? You would imagine that a greater number would be successful, or rather, not have such a difficult time staying afloat. Now there are of course a multitude of possible reasons here, which include but are not limited to: Competition, Public Relations, Brand Awareness, Brand Recognition (there is a difference between being aware of something and recognizing it), Brand Reputation, Site Design, User Experience, Pricing, Website Health, Search Engine Rankings, Paid Advertising, Affiliates, Management, and on and on and on.

But for every single reason that something may go awry there is one common thread interwoven throughout them all, and that is at some point, wrong thinking which resulted in performing wrong actions occurred. It’s unlikely that any single mistake or misstep made would be crippling, but cumulatively over time, many mistakes can easily take down the most entrenched and seemingly successful business. The problem is, managers may not recognize their mistakes, or worse yet, not appreciate or accept them until it’s too late.

Logical fallacies and cognitive errors affect our personal everyday lives, both to a great extent and unknowingly, so it only makes sense that similar mistakes would be made in our dealings with the business and ecommerce world. People frequently make systematic errors in judgment due to certain barriers of their logic, often repeating the same action expecting different results. These errors occur time after time, and eventually it will appear as though they are outside of your control since they occur so often. But don’t fool yourself, nearly any problem you come across online can be remedied and countless anecdotes exist of businesses perhaps not seeking out a solution, but merely stumbling across it. Many times finding a solution to a problem they didn’t even know existed or was in their control. This point obviously should not be hoped for, just don’t expect fortune to favor you and provide solutions to fall in your lap. Understand that you have far more influence online than you may actually appreciate and likely make numerous cognitive errors that you’re not even realizing exist.

Notes To Keep In Mind

Before we light this firecracker, here are a few points to keep in mind. The errors and fallacies included in this series are not, nor will they ever be, complete—simply because the topic is so vast, and new ideas and concepts can arise seemingly overnight. We will continually update this series with new parts, introducing both new ideas as well as well-known cognitive errors as they relate to business and ecommerce. So keep checking back in. The grand majority of these errors are related to one another, so as you read on and discover more, the idea of logical fallacies in business dealings become ever more apparent and easier to understand, predict, and protect yourself against.

You may find many of the points made within this series to be common sense, and if you do that is wonderful! But I would urge the reader to explore the ideas herein further for both themselves and their businesses. Remember that biases, logical fallacies, and cognitive errors occur without warning and rather are often times completely counterintuitive, making them extremely hard to identify especially upon self-reflection. It’s always easier to call out the errors when you see them in others as opposed to yourself.

This is all to say that the more you know and the better you understand your own cognitive missteps, or the possibility for them, the better off your ecommerce business will likely be. This series will by no means be a “12-steps to running an error free business” piece. Cognitive errors are deeply engrained, often times for good reason (as they are all mostly evolutionary traits), so going against what could easily simply be called nature is difficult at times. Like holding your breath underwater, you can do it, but not for long. Eventually you need to come up for air. But in time, and with practice, you can dramatically lengthen the time you spend underwater holding your breath. The same will be true for learning your own peculiar logical fallacies. You’ll try to contain and restrain them, be ever watchful and aware… but eventually you’ll likely mess up again. One will slip through. But this is expected, and the most anyone could ever do is to try and be aware of their existence. To understand that cognitive errors do exist, logical fallacies do make a difference, and they are well worth the time it takes to learn them.

So without further ado, let’s get into it… or rather let’s get intuit. Because really we’re working towards understanding these points intuitively. Otherwise you’ll fail to ever see them coming. The subterfuge of cognitive errors knows no bounds. Prepare yourself…

Part 1. Successfulness Bias

Study Failed Businesses, Not Successful Ones

You see successful ecommerce businesses everywhere online. They have sleek designs. Engaging content. Impeccable navigation. Desirable products. Attractive advertisements. Enticing promotions. Compelling stories. Above all… they seemingly have found success. But remember that there are a thousand more businesses that have failed for every one that has succeeded. We only happen to see those that are successful due to our daily use of and exposure to them. Rarely will people ever consider businesses that have failed, and even rarer still, to actually go back and perhaps study why they failed.

For every successful website, there’s 100 that eventually had to shut down. For every website that had to shut down, there’s 100 that never went live. For every website that failed to go live, there’s 100 that never entered the development stage. Imagine the odds of that then… is it 1000 – 1 for a website to be successful? 5,000 – 1? 10,000 – 1? Really, the numbers can become rather frightening to consider, especially if you own or manage an ecommerce store. Of course you would have already ran much of the gauntlet of odds-n-chance if you have a website up and running… thus making your odds moving forward significantly better. So that should, in the least, be a bit of uplifting news.

But keep in mind people recognize and remember success far more easily than failure. It stands out more, calls for our attention as we all think success begets success right? Emulate those that have done it well before, attempt to improve upon that, and positive progress being made towards achieving your own success is guaranteed… But numbers alone here should raise an alarm that a cognitive misstep is occurring. If a thousand businesses failed, all seemingly attempting to do the same thing (run a successful ecommerce store), why study the one fortunate enough to actually succeed? After all, what exactly are you expecting to learn from studying success that can then be quickly turned around and implemented in your own business? Where would you even begin? Is it even possible? These are important questions to consider.

Let’s give a brief example here. Everyone knows Walmart and for the sake of this example let’s assume Walmart is the success story you’ve chosen to study and emulate (Obviously these are brick and mortar stores, with a little ecommerce, but the example suffices). What would you say is Walmart’s greatest factor for success? Is it their warehouse operations and product delivery? Is it their ability to sell at a low cost? Is it their customer service? Is it their public brand perception? Is it their marketing advertisements of slashing prices and being family-oriented? Or how about the quality, skill, and knowledge of their employees? We can go on and on, and sadly if you were to study Walmart you could easily be led in the wrong direction. Walmart has been insanely successful (Here’s proof: http://projects.flowingdata.com/walmart/). From 1962 – 2010 Walmart had opened nearly 4,400 stores across the U.S. But… success isn’t linear nor does it rely on any single factor. Walmart has an exceedingly large number of short comings for being a successful business, but all the same they are successful. You can even consider Comcast here as well, a seemingly successful business with terrible public relations, becoming ever worse as the days pass. A quick check online about Comcast and customer service will show a hailstorm of complaints by users. Literally… as far as public relations go, it’s raining brimstone and fire.

Now let’s give a different example of success, one that everyone under the sun online attempts to emulate: Google. Real quick before we even start though, complete a search in Google and then in Bing… notice anything similar? Google’s success comes from a very simple formula. Keep it neat, clean, cool, calm, useful, trustworthy, and hassle-free. Their formula for success 100% relied on the fact that they truly valued their users, offered extremely useful free services, extremely useful paid-for services, kept things rather basic for both ease of use and being easy on the eye, and all the while continually proving to the world that they were indeed ethical, had moral fiber, and overall were just a really great company. Businesses continually try to act like Google, but that’s exactly it…. An act. It’s not genuine, or real. Why does Bing’s search results look like Google?s? Because they’re acting. But everyone knows it’s an act, certainly not the first one for Microsoft. As such… Google has some 85% of the online search market share. And is there any surprise as to why?

Here is a personal anecdote. I worked with a marketing and development company once and you would always hear chatter from their upper management about how Google’s employees were so happy working for their company. At the time, this particular company?s morale amongst its employees was dreadfully low, with people quitting left and right. So management would continually seek out ways to offer Google-like incentives and benefits since everyone talked about how great they were. Now, Google employees enjoy free lunches, daycare, spa trips, laundry services, extended vacations, and on and on and on. All of which comes at a rather great expense to Google. In contrast, in this company?s office, you would hear these managers asking employees what could be done better, how could they be more like Google? Sadly this isn’t even a joke. The employees would say their bit, and it was exactly as you would assume. “I’d like more vacation days.” “I’d like to work fewer hours in the day.” “I’d like my transportation to work to be compensated.” “I’d like to receive a gym membership.” “I’d like a weekly house cleaning.” “I’d like better health benefits, perhaps dental and vision.” “I’d like the opportunity to learn new skills and further hone existing ones through education.” Management asked… they not only opened Pandora?s box but assumed all the pain of mankind wouldn’t rush out at them when they all of a sudden couldn’t close it. They expected they could emulate what Google was doing, perhaps even in part. They also made their employees happy and excited for a moment when they believed something nice was going to happen, that positive change was going to occur. But of course, this company couldn’t afford nearly anything that was being proposed. So after being asked what they could do to be more like Google and raise employee morale, how do you imagine everyone felt when their ideas were systematically shot down and ignored? It was abysmal. Employees starting leaving faster than before, and even new hires took notice and quit. It was the closest thing I had ever seen to an exodus in a business. In the end, do you know what they offered after all this “trying to be like Google”? Nothing. Absolutely nothing. They attempted to emulate success and failed miserably. They realized that to please one person?s request, they would not be fulfilling all the others and decided instead to do nothing, as though doing that at least kept everyone equally unhappy. The worst bit was… the company made fistfuls of cash but was so poorly managed that at least some of the requests should have been possible. But they weren’t.

The reason for these examples was to highlight that success stories for businesses are abound, but that doesn’t mean you know where to attribute their success! Or whether doing the same yourself is even possible. Remember it is the victors who write history and are most remembered. Sadly, you’d be hard pressed to find failed websites online since those sites are no longer live. It’s difficult to study what no longer exists. You can at least see a failed brick and mortar store, meaning you were exposed and aware that failure had occurred. But online, we’re mostly exposed to success because failure quickly vanishes out of sight, and out of mind. I would challenge the reader to name 5 websites that they once frequented but no longer exist. Likely it’ll be a difficult task. But rest assured they did once exist… and in droves.

There’s far more to be gained by studying failure than success. It’s easier to avoid performing certain actions than it is to attempt to accomplish other successful ones. You study failed businesses because there is much more to learn about what not to do, which is far easier to implement, than learning how to do what other businesses have done well. Now this is not to say you shouldn’t look at what other businesses are doing successfully, that being especially true for your competition. Just be aware that the Successful Bias may be at work, distorting your view of the actual possibility of it and its usefulness. The point is you should try not to fall prey to this logical fallacy and attempt the nearly impossible because it seems to be working wonders for others. Reasons for success are often complex, and if you misunderstand them, misconstrue them, and formulate a plan based on that, you can easily become worse off than had you not tried anything to begin with.

One final point about the Successful Bias, this fallacy becomes all the more dangerous when you are actually the one who is successful. Not only is it foolish to make assumptions as to why your own success occurred (collect and study the data to accurately know better), but if your success is the result of coincidence, which many times it is, you’ll attempt to discover what it was that caused success by comparing it to other similar successes. In essence you’ll be forcing a comparison in order to find what the “success factors” might be so that you can later use them again. But if you study and looked at all the failed businesses of the past and what their traits, beliefs, and characteristics were you’ll likely find that they possessed many of the same attributes you do. This is all to say, Successfulness Bias means that ecommerce owners, marketers, and managers systematically overestimate their chances for success. Especially when attempting to emulate the success of others. You would gain more from studying failures, better still as they’re occurring, to learn what not to do rather than attempting to mimic, copy, emulate, and/or act like something your business is not or cannot be.

This certainly may sound sobering, but there is no point in not being realistic. Don’t confuse the idea of what success is with how it arises. Don’t copy, mimic, act, or emulate other businesses success, but genuinely and authentically create it yourself. In the end you may find that the two are identical, that the planning and execution were the same, but that doesn’t mean they were necessarily going to be. Considering that failed ecommerce businesses are no longer viewable online, study businesses that you know are struggling or are likely to shut down soon. Look up case studies online about why certain websites or businesses failed. Success is often more unique where failure is more often universal. Obviously, otherwise if success was universal, no business would ever shut down. That is all to say, create your own successes, note the success of others as it is in the least worth noting, but vigilantly study all the ways failure arises for other businesses in order to understand how to avoid making the same mistakes. Like a moth to the flame… don’t let your biases drift you towards studying only successful businesses when there’s so much to be learned elsewhere.