7 Golden Rules for High Consideration Commerce Startups

Consumers are increasingly purchasing goods and services online which take more than a few minutes of reflection. Items like cars, clothes, jewelry, mattresses, eyeglasses, and even small home renovations are given more consideration because the absolute costs are higher. They also take up more space in a person’s life and home, can often be unique or bespoke, and they’re experienced over a longer duration of time. Facilitating “high consideration commerce purchases” is not just about publishing a web product catalog with features, specs, and as with vending simple goods like books or electronics. Rather, it’s about helping foster consumers through a rich buying experience. While a trend towards these types of purchases by consumers has been emerging over the past decade, it has accelerated even more recently, driven by a new wave of startups attacking existing and entirely new categories. The innovation happening in this space now is centered on the way vendors present, inform, and consummate a sale.

For us at NextView, my partners and I have been developing a strong thesis about these types of businesses, and we’ve invested in a half-dozen startups taking advantage of this high consideration commerce trend. We believe that the right approach to a category differs depending on buyer motivation. Some are solely cost driven. In these cases, applicable to automobiles and branded jewelry, the customer knows what they want. The goal is help the consumer compare and select the best option and price.

The next motivation category is consumers seeking an alternative to retail brands. In other words, customers wants a high quality replacement at an effective equal or lower cost than the branded offline alternative. Examples include mattresses, eyeglasses, and custom-fit clothing purchases. High consideration doesn’t mean it has to be a high priced good—just that the decisions require reflection and an online process to guide through this process. In this set, communicating product quality becomes more important (because it isn’t a commodity) in addition to price and selection—saving money isn’t the entire point of the purchase, but it can be a meaningful component.

The last motivation category is surprise and intrigue that shopping for the category can be done online. For example, when a consumer learns about a novel service to book someone online to paint your living room … then the ease of transaction and quality of the product end up being more important factors in a decision than solely coming down to price with booking.

Regardless of the motivation of the buyer and which category the company falls into above, there are a number of themes that are consistent across all of high consideration commerce. In recognizing hearing some of the same lessons from entrepreneurs in our portfolio, I decided to systematically interview a number of founders who lead high consideration commerce startups and heard seven consistent lessons.

1.   Market with a surgical strike, not blanket air cover.

Because high consideration purchases are less frequent, the key to marketing is less about a broad strategy, but instead targeting consumers at specific stages of the consideration-purchase cycle. Often these startups can afford more to pay for marketing channels because of the higher price and available margin to play with, but the most effective spend is actively messaging when specific purchase stages.

2.   Education first.

Consumers tend to agonize more severely over expensive purchases than they do for less risky, less expensive purchases. It’s important to provide tools and educational content which makes it easier for consumers to make these selections and then feel confident in those decisions. While it’s tempting to push potential customers to a conversion soon, forcing an action too quickly without informing the customer about the decision process and potential outcomes could result in pushing him or her away.

3.   Tailor the online product flow unique to that product.

The higher the purchase price, the more consumers want both the product itself and the buying experience to match the item to their needs. Almost by definition, all things being equal, the more expensive the item it is, the lower the conversion rate for a product—so focusing on the unique aspect of that vertical segment of the sale is key.

4.   Trust and social proof / reviews are absolutely paramount.

Early on, leveraging trust via partners / brands carried (e.g. our portfolio company PaintZen offers Benjamin Moore paint) can be a way to build credibility…but delivering an exceptional product / service for early customers and then featuring those as social proof is super important.

5.   Minimize commitment & risk.

There are many tactics, but the goal is the same—reduce a consumer’s perception about the initial obligation and uncertainty about purchasing the good. Successful strategies include giving free samples, requiring only a low first deposit, utilizing home try-on programs (e.g. Warby Parker), and offering extremely strong return policy and warranties (e.g. Casper’s 100 night trial & free return pickup).

6.   Make your customer service team an inbound sales team.

For high consideration purchases, the key is to offer a high-touch experience through multiple channels (e.g. phone, chat, email, in-person, etc.) as well as multiple interactions. The mentality about how someone purchases these items is different, so blending an online self-service experience with great human-based customer touchpoints is important. Many customers will prefer communication with someone at the company before they buy. This role should be thought of as part of the revenue-generating side of the organization driving sales, not a cost-center customer support function.

7.   Remarketing / lead capture are great tactics.

With high consideration purchases, it’s highly likely that it’s not a one session purchase, so last-click attribution and short windows aren’t going to work here. Identifying which channels are influencing behavior is very difficult but worthwhile. Given the longer sales cycle and the fact that it’s not a one-session purchase, remarketing to stay top-of-mind is a useful marketing tactic. Additionally, capturing consumer info as they’re entering the funnel via promo code offers, gated content, account creation, etc. so they can be remarketed to via email is also a powerful approach.

Especially given consumers platform shift to mobile usage with an inherently personal device which can uniquely facilitate multiple interactions with a brand, there is now a real opportunity for startups to bring commerce online to high consideration categories that have previously been immune to online startup disruption. We’ve been looking to consumer spending categories here at NextView to guide our thinking about the largest areas ripe with opportunity. All of them, though, are benefiting from following the above principles to guide their approach.

Special thanks in particular to Mike Russell, Seth Rosen, Brian Waldman, and Eric Horndahl who helped me craft this post.

David Beisel

David Beisel is a co-founder and Partner at NextView Ventures. He has been focused on early stage Internet startups his entire career, both as an entrepreneur and venture capitalist. As an investor in the digital media space, David was most recently a Vice President at Venrock and previously a Principal at Masthead Venture Partners. Prior to becoming a venture capitalist, David co-founded Sombasa Media, an e-mail marketing company best known for its flagship product BargainDog. Sombasa was successfully acquired by where David served as Vice President of Marketing. David holds an MBA from the Stanford Graduate School of Business and an AB in Economics, magna cum laude and Phi Beta Kappa, from Duke University. He also founded and leads the Boston Innovators Group, an organization which holds quarterly entrepreneur events drawing a thousand attendees.

5 responses to “7 Golden Rules for High Consideration Commerce Startups”

  1. I run a conversion rate optimization firm, and we have several clients which have the types of purchase patterns you describe above. The data from our split testing efforts for them supports the points you make above. The one thing I would not agree with is email lead capture – it’s often been really hard to get an email address in these situations, unless you can provide a reason to give one other than a discount or “keep up with the latest”, eg save your preferences, start the process, etc. Facebook has generally been a pretty good customer acquisition channel for these types of companies as well since it’s possible to be very surgical in your approach, and as you get your funnel efficiency up, you can be less surgical but still positive-ROI and get more sales or lead volume.

    • David Beisel says:

      Thanks, Chris. Interesting to hear your experience on email lead capture. We’ve found that the best way to do it is offer some educational content behind the wall as the best way to entice people. Since the high-consideration purchases often involve a lot of new learnings & research for consumers, promise of this additional useful information can a way to overcome that hurdle.

  2. Michael Magnuson says:

    Hi David, I came across this article and found it to be a great read. We are in one of the high consideration categories you mention (mattresses) and I have definitely seen all 7 of your strategies put to effective use by companies in our category.

    Two additional strategies I would add that have been extremely effective in our category are:

    1) PR — As you mentioned in your first point, untargeted media is simply not cost-effective for companies selling sporadically purchased products. So, in addition to pursuing highly targeted exposure as you proposed (which is actually one of the things that our company provides), the other successful alternative is pursuing “earned” (aka, free) media. The most successful upstarts in our category have been extremely (some might even say mind-blowingly) effective at selling their story to the press. Although this exposure is highly untargeted, it has still be extremely cost-effective. And their success on this front has also been instrumental in helping them address point #4 in your list — trust and social proof.

    2) Referral marketing — Most of the initial hyper-growth of these startups that wasn’t fueled by PR was fueled by people sharing affiliate codes with their friends. Once again, this tactic simultaneously provided a way around the high cost of untargeted media (due to its performance-based nature), and delivered valuable social proof along the way.

    The only other point I would raise is that I’m not sure I agree that there are really three distinct motivation categories as you laid out at the beginning of the article. I guess my feeling is that all high-consideration categories will end up looking like your first category eventually — where helping consumers compare and select the best option and price is what is most needed. The other two feel just feel like temporary conditions to me.

    For example, today I might be surprised and delighted to learn that I can contract a painter online, but a year from now I won’t be, and in 5 years I would expect that the majority of consumers won’t be. So yes, if you time your market entry right, that consumer motivation may provide a great way to get a toehold in the market. However, unless you have phenomenal stickiness, I’m not sure you can build a successful long-term strategy around that.

    Likewise, in mattresses, as you pointed out, a number of upstart sellers have found great success marketing themselves as an alternative to the traditional retail experience — a mattress choice that will “stick it to the man.” But as dozens of other upstarts quickly follow them into the market, being an “alternative to retail” ceases to be a differentiator in the first place. So unless you can manage to create huge customer loyalty (something that is extremely hard to do in the mattress category), anyone building a long-term business will need to have a strategy and market positioning that will survive as their customer base becomes dominated by people who are “comparing and selecting the best option and price.”

    Thanks again for the good read.

  3. Aaron says:

    Chris’s point about it being difficult to convince clients to create quality content in exchange for a user’s email address is a perennial problem in the consultancy world. In my experience you just have to try a few things to see what resonates with your audience (so start cheaply and move up from there). We’re just about to launch a new business that falls into this high consideration category and have spent some time trying to find the right balance in creating quality content worthy of someone’s email address without going overboard. Of course, it’s easy to forget that these quality digital assets can often be reused/recycled once created. On another note, I attended BiG for the fist time last night. Thanks for a great event David. Cheers.

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