How To Increase Your Net Profit Margin By 10% in 10 Minutes — Idries Erfan | How to Combine Product and Service Upsells, Why Service Upsells Hit 40-60% Conversion, Why Extended Returns Increase Holiday Sales, Why Package Protection Converts 50-70% (#352)

In this episode of the Ecommerce Coffee Break, Idries Erfan, founder at protectmyorder.co.uk, shares actionable tips to increase net profit margins by 10% or more.

Learn how innovative service-based upsells, like stolen package protection, outperform traditional strategies and uncover quick, practical ways to optimize your Shopify store's checkout process.
 
Topics discussed in this episode: 

• What 300+ merchant interviews revealed about profit margins in the post-iOS 14 era
• How service-based upsells reach 40-60% conversion vs traditional 2-3% product upsells
• Why stolen package protection converts at 50-70% of concerned customers
• What makes optimal upsell pricing range from 2-9% of cart value
• How merchants boost profits by 10% in under 10 minutes with protection services
• Why extended return windows drive sales during Black Friday season
• What makes carbon neutral shipping a compelling modern upsell
• How to combine product and service upsells effectively
• What A/B testing shows about optimal upsell placement
• How success-based pricing eliminates risk for merchant protection services
  
  

Links & Resources

Website: https://www.protectmyorder.com/
Shopify App Store: https://apps.shopify.com/protectmyorder
LinkedIn: https://www.linkedin.com/in/idries-erfan/

Get access to more free resources by visiting the show notes at
https://t.ly/gIP5p

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Transcript

Welcome to the E-Commerce Coffee Break podcast. In today's episode, we share how you can increase your net profit margin by 10%. Joining me in the show is Idries Erfan, founder at protectmyorder.co.uk so let's dive right into it. 

This is the e-Commerce Coffee Break Coffee, a top rated Shopify Growth podcast dedicated to Shopify merchants.

And business owners looking to grow their online stores. Learn how to survive in the fast changing e commerce world with your host, Claus Lauter, and get marketing advice you can't find on Google. Welcome to the show. 

Hello and welcome to another episode of the e commerce coffee break podcast. Today we want to talk about ways on how you can increase your net profit margin by 10 percent or more.

Now, I have an expert with me and he's Idries Erfan, founder of protectmyorder. co. uk. And he had worked for brands like Sideman Clothing, Tom Brady's TB12 and other Shopify brands from 1 million to 100 million in revenue. So he's very raw. First when it comes working with Shopify merchants, and I want to like welcome them to the show.

Hi Idries, how are you today? 

I'm very good. Thanks for having me on. It's a pleasure to be here. 

Yeah, let's dive right into it. So net profit margin, obviously everyone is interested in increasing that, but you have spoken to over 300 merchants and what were one or some of the most surprising and common pain points you discovered during your calls with them?

As you said, yeah, we spoke to hundreds of merchants to come up with this idea. And I think some of the recurring themes were, um, the cost of customer acquisition, increasing massively, like obviously with iOS 14 changes, you know, it just made things very expensive for brands, um, when it comes to, when it comes to marketing, we also found that just general competition was increasing between brands selling similar products, um, which was kind of squeezing margins quite significantly.

Right. And yeah, brands, you know, we kept hearing the same thing basically that, you know, that was struggling with profitability, that profitability had become a real focus post kind of COVID boom times. And that's what kind of led us down the path of exploring ways that brands can increase profitability and kind of easy ways or quick ways.

And that brought us to where we are today. 

On that, with the results you got on there, you actually did a decision on your own brand to pivot and to go a different route. Um, what was the process to that? What happened? 

Yeah. So we started this business four years ago, technically, we had a different product for the first two years.

So we were helping Micro e commerce sellers, you know, people selling on eBay or marketplaces like that basically find cheaper shipping rates. And, uh, although that business grew, it wasn't very profitable. It was a very tough business to sell shipping rates. And so we made a decision to shut that down completely and explore new ideas.

Um, and, you know, we'd had some kind of e commerce experience or gained e commerce experience during that two year process. And so we then use that experience. Um, use some of the knowledge that we gained to, you know, took that into the hundreds of calls we did with, with e commerce merchants. And that ultimately, as I said, that helps us identify this opportunity and brought us to protect my order.

Mm hmm. Now let's talk about protect my order. It's sort of a bit of a giveaway. So we're talking today about upsells, but not the normal upsells. All this will be a bit surprised that there is a different way to do upsells and upsells obviously, uh, easy way for someone who already had. Has made a decision to buy from you to just increase the average order value.

Give you a bit of an idea of upsells in general and then what you are doing differently. 

Yeah, for sure. So, you know, the, the classic e commerce upset is, you know, like a, you may also like section in the e commerce merchants cards, um, you know, where they try and upsell complimentary products to the shopper.

It's a really interesting one. Like when we spoke to customers, we'd get some customers who'd say, you know, we're relatively happy with, with this kind of traditional option approach that we might get five to 10 percent of customers buying a complimentary product. And often those were merchants. Who sold products where there was an obvious complimentary product that you could then upsell um, but in most cases When I ask the question, like what's your attachment rate to your to your product upsell?

I'd hear, you know, two percent of orders three percent of orders And it's just not really moving the needle for for that many brands so like, you know, I think brands often feel like they need to do product upsells because You know, it's kind of what everyone does but it doesn't always move the needle and have that big of a of a business Um impact and I think the reason that makes sense like what are the chances that you as a shopper are buying a pair of shoes um, and you also want to buy some socks, but there's probably some customers who want to do that, but The majority are not looking for that.

They just want that pair of shoes Um, so it makes sense when we when we looked into this we found that there's a whole nother type of upsells, which I don't think really gets enough airtime and that is um The service upsell. Um, and for some services, there's a large group, a large percentage of customers who find that service valuable.

So, for example, stolen package cover is one of the services that a lot of our merchants upset at checkout. We know that between 50 to 70 percent of customers are worried about deliveries going wrong. You know, they've had a bad experience in the past. And so when you upsell that checkout, you're catering to a big percentage of your customer base.

Um, and that's why often you're going to get much higher attachment rates for that kind of upsell. So we routinely see brands getting, you know, 40, 50, 60 percent of customers buy or pay for stolen package cover at checkout. So, yeah. You know, there's, there's a whole nother world of upsells out there beyond just the product upsell.

The service upsell is definitely one to explore. 

So how do you identify which services consumers value enough to, to pay for it? 

Yeah, great question. So when we speak to a new brand, we do, you know, basically a website with it. So we'll talk to them, see what they're offering at the moment to their customers and see what type of products they're selling, see what type of customers they have.

Um, and then based on that, we then come back to them with, you know, a couple of options with the type of premium up so that they should be upselling at checkout. So the stolen package cover is, is a really popular one because Most brands have customers who are worried about deliveries being stolen because unfortunately it's, it's such a widespread problem in today's world.

Um, pretty much every brand is going to have customers who are worried about something being stolen off the delivery. Um, so that's one that we, we, we often recommend to brands. Carbon neutral shipping is another popular upsell that you might include. Um, again, that really depends on the type of brand that you are and the type of customers you have, right?

But it's not right for every brand, but it's it's certainly an upsell that is quite popular Um, another one is is an extended returns window so You know, most brands are offering a 30 day return window and that's great. But um, We've seen a lot of success where if you offer a 60 day return window, especially around Black Friday, Southern Monday, that can get quite a lot of uptake from customers who, who, who want to pay for the peace of mind that if delivery takes a long time, for example, or that they're then able to, to return their, to return their items to the merchant.

So we have, um, over 10 different Kind of upsells that merchants can include and it's very much a process of consulting with the merchant and just trying to understand their business and then recommending the best approach. 

Now, let's talk about the practical implementation. I think probably the checkout is the best place to implement that.

Um, share some insights on how you implement this kind of workflow into the checkout process. 

Yeah. So checkout is, is, is the best place for it. From what we've seen, you get the highest uptake if it's, if it's at checkout, um, carts also works quite well. So, I mean, there are, there's a small difference between checkout and cart from what we see in terms of the percentage of customers that buy the upsell.

Um, but we do recommend checkout just because it's, it's closer to the kind of the actual purchase. And then in terms of the implementation, you know, if you're on Shopify. It's very quick, like it's just downloading the app. We set up the widget for the merchant on a giraffe theme. Um, it literally takes the merchant nine clicks of their mouse to get set up.

So we like to say that you can boost your margin by 10 percent in 10 minutes. And so, yeah, it's very straightforward to set up. If you're not on Shopify, then we have like a custom integration, custom API. Obviously, that does take a bit longer. But fundamentally, because it's just a lightweight, widget. It's, it's not, you know, a huge integration compared to most other tech solutions out there.

Let's talk about on, on the pricing. What's, what are really, what are customers willing to pay for these extra services? 

Yeah, it's a great question. The answer is it really depends on so many factors. So, you know, it depends on what you're including in the upsell. It depends on the type of products you sell, the type of customers that you have.

And we see big, big differences. You know, it could be anything from 2 percent of cart value to some of our brands are charging, you know, 8%, 9 percent of cart value. And actually that's one of our really big value ads is we help merchants figure out the best price for the upsell by running loads of AB tests, basically.

And that has a massive impact on how much profit a merchant generates through the upsell. I like to say that when you upsell something like this at checkout, because such a high percentage of your customers are going to buy it, it quickly becomes probably one of the most popular products on your website.

And if you're, if you're not, you know, optimizing the price of that, Then you're, you're leaving a lot of money on the table and that's where we come in and basically help brands to find the best price. 

Okay, so my old strategy is to increase by 50 cents until people don't take it up anymore and then you know that you have reached a pain level and that's probably the highest you can take.

But that's like an old school pricing test and probably you have some more advanced strategies there. When it comes to, when it comes to, um, the perceived value. Um, obviously there's a little bit of customer education in there because some customers might think is like, why do you charge me extra? Um, others have this already included.

How do you communicate this kind of value to, to the customer? 

We've, we've spoken to over a hundred shoppers about this to really understand why they buy something like stolen package cover. And what we find is it's often not because they've had bad experience with, with your brands. It's because they've had a bad experience with a, with a different brand in the past.

And so they are just generally worried about it. You know, they generally have concerns about things going, getting stolen. Um, you know, a common scenario that I've heard is I got it delivered to the mail room of my apartment block. I went to pick it up. I was excited. It was nowhere to be seen. I went back and forth with the merchant.

It took, you know, a week. It took hours of my time to, you know, go back and forth with them. And then eventually I got compensation. So, you know, that is a, it's a painful process for a consumer and for a consumer to pay a small fee, um, for the promise of going to get compensation. So for that peace of mind, um, and also for a faster, more efficient resolution to their They're quite happy to do that and they don't see it as a reflection on the brand because they know that, you know, it's beyond the brand's control, whether something gets stolen from their mailroom or from a safe place.

So, um, I like to say that it's, it's a kind of a common misconception. Brands think it's some brands think that, um, consumers will perceive it in a negative way, but actually it's, it's quite the opposite. Consumers really like to pay for it. Um, in fact, Whenever I speak to merchants, I often hear stories where a consumer will have forgotten to pay for the upsell and contacts customer service saying, Hey, can you add this in for me because I really want it and the customer service just adds it in for free as a gesture of goodwill.

Um, so yeah, the consumer really wants to pay for that peace of mind. Um, that's, that's what we see whenever we, we speak to them and whenever we run tests. 

Okay, so what happens if we're not open that have been often, but literally somebody comes back and say it has not arrived, has been stolen whatsoever.

Um, you as a merchant, how do you control that in the back end and what are the process steps to find a resolution for this? 

Yeah. So the merchant, we basically provide best practices for the merchant and the merchant, um, basically puts together a kind of terms and conditions for how they're going to run their compensation process.

The consumer will get in contact with the merchant and whereas the merchant would have spent You know, time asking for evidence, contacting the courier, getting the courier's response. Um, and then going back and forth to the shopper when a, when a consumer buys, protect my order because the merchant generates so much profit through the upsell, they can afford to be quite liberal and quite relaxed with the shopper and therefore provide a much faster resolution to the shopper than they ordinarily would have done.

Um, so yeah, instead of asking for evidence or contacting couriers. The merchant will, will be very quick to compensate, um, the customer because they can afford to do that. 

Yeah. That makes perfectly sense. I mean, if you just can increase your revenue by 10%, um, then you have a bit more of levy in there to, to deal with these things.

Now, obviously you don't want to miss out on the old form of doing upsells. Um, how can you combine like your shoes and socks with protect by order? What, how does that work with other apps? Um, what's the workflow there? 

Yeah. Most of the brands that use us. do the traditional product upsells as well. Um, and it works very well successfully.

Um, you know, it's, it's two different upsells in the eyes of the consumer. Um, and so they can work very nicely together. We often have brands. Who in the carts show complementary products, you know, sometimes in the cart draw They'll show, you know recommender products bar and then a bit further down the cart just above the checkout button There'll be our upsell so it works well on you know together in the cart draw Another way to do it is is you use the carts for your recommender product upsells and then you put Our kind of service upsell at checkout and that can work quite nicely as well You can separate them out a bit What we do is We have quite a sophisticated AB testing system.

Um, and what we often suggest to brands is that they, they test this. So, you know, try having both your recommended products upsell upsell in the cart draw, um, and then AB test that with, um, Um, placing it in checkout, for example, so that that can work. So that's, it's a kind of data driven process rather than just putting it there and, uh, yeah, basically not being data driven.

So you talk a bit on how you help, help your customers with onboarding. Tell me a bit about the onboarding process and who your perfect customer is. 

In terms of onboarding, you know, if you're a Shopify merchant, all you have to do is download our app. It takes nine clicks of the mouse. We then request collaborator access to your store, and we will duplicate your live theme, install the widget on your duplicate theme, and then once that's ready, You can review it, make sure you're happy with it and then push it live.

So it's very easy, very quick. And obviously before that process, we will consult with the brand and decide which upsells they want to include. And yeah, it's, it's a very straightforward process for the merchant. Um, obviously if it's, if it's a custom integration, it does depend. Um, but again, it's, it's often quite simple because we're just pasting in a couple of lines of code into the, into the checkout or the carts.

Um, it's, it's very lightweight. 

I have implemented around two, three years, sort of a manual light version of what you're offering. Unfortunately, you are not around that. I think you have the perfect solution there now. And it was a complete pain in the neck to create this within Shopify. So I'm glad to hear that you offer now an app, um, which protect my audit that makes it so much easier and, um, takes all the pain away and has a ton of features in there to increase your average order value.

Now tell me a little bit about the pricing. How does that work? How do you charge? 

Yeah, so we just charge a success fee, so we just charge 20 percent of the upsell revenue. So if a merchant makes 1, we charge 20 cents and that's it. We have no contract, we have no fixed costs. The merchant cancel anytime they want where our kind of ethos is that we don't want to tie merchants into things.

We want them to be so happy with our products and what we're delivering in terms of value that they're happy to keep using us. They want to keep using us, um, not because of the contract, just because of the product being so good. So yeah, just a success beat and that makes it. You know, again, quite enticing for brands because it's, uh, they're not paying anything upfront as a fixed costs.

It's just a success fee. And often because it's not actually, you know, we're generating additional revenue and then taking a cut of that. So it's, in some ways it can be perceived as almost free for a brand, um, that, that 20%. 

Yes. I think it's absolutely no brainer. I mean, you can only win. And from my own experience, adding a service based upsell, um, is such an easy way to make more money out of your existing business.

So, and, um, as I have experienced as myself in my own store, it's, it's absolutely no brainer. Everyone should have that. Um, so I think you have an awesome app there. Before we come to the end of the coffee break today, is there anything that you want to share that we haven't covered yet? 

Um, I think, I think there's one thing I think, um, in terms of, you know, distribution, you know, as, as a Shopify app, you know, there's probably a lot of brands listening today and probably a couple of Shopify app developers as well.

And, you know, whenever I speak to brands, I hear that they get absolutely bombarded with cold emails from, from Shopify app vendors and, you know, to such an extent that, you know, often those emails are just not even read. Um, and I think it's, it's really interesting because, you know, you've got products like instant, um, legal AI, which allow you to send out thousands of cold emails, um, to leads.

So I think what we found is, is cold outreaches is really not working, um, in terms of like getting in front of brands. And what we've seen is. Um, the most successful way we've done it is by finding individuals in the e commerce ecosystem who, you know, have like a really good network, um, or whose opinion are really well respected, um, and getting them, um, kind of onboarded as part of our team as a partner, um, and then getting them to kind of recommend our products to their network.

Um, that's been really successful. I think the other thing as well is. Is, is LinkedIn content, um, you know, whenever we do a LinkedIn post, we usually get at least one person, one or two people, um, DMing us asking for more information. Um, so I think, yeah, it's gonna be quite interesting. Like there's, we've definitely seen a shift from cold outreach to more kind of like partnership and, and content based selling, um, that's what far better for us.

Yeah. No, I would agree. So I hope that a lot of, um, merchants and online sellers, um, discover your app through the podcast today, because as I said, that's the easiest way to make more money with your store and with your pricing structure, there's literally no risk involved. So where can people go and find out more about you guys?

Yeah. Our website, um, protectmyorder. com or co. uk, um, is a good place to start. And then you can find me on LinkedIn as well. Um, just search for my, for my name there. Okay. 

Cool. I will put the links in the show notes as always. Then you just one click away. It is. I hope that a lot of people will reach out to you.

Um, great app, great solution. So easy to make more money. And I hope a lot of people will click through and get in touch with you. Thanks so much for your time today. Thank you very much. Hey, Klaus here. Thank you for joining me on another episode of the e commerce coffee break podcast. Before you go, I'd like to ask two things from you.

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Have a good one.