I learned about the minimum effective dose principle after reading Tim Ferriss’ “The Four Hour Workweek”. The concept is so simple and awesome and goes like this: the minimum effective dose is the smallest amount that will produce the desired outcome. So as an example you need to heat water to 212°F (100°C) in order for it to boil. If you heat water to 300°F than you’re wasting energy, so there’s obviously no point in doing it.
Ever since I learned about this years ago I’ve applied it to my own workflow and life in general and I suggest you you try it out (limiting your media intake is a biggie). Today though I thought I’d try to apply it to e-commerce systems in general in an attempt to weed out the junk, so here are my suggestions on eliminating waste.
1. Fraud. This is a hassle that is entirely dependent on the merchant. I’ve spoken to people that actually employ full time workers to manually research orders, then I’ve also seen companies that have zero fraud without even trying. I’m guessing that most are in between somewhere like I am. So here’s my suggestion: don’t block orders with bad billing addresses or CVV’s. Accept all orders and process them. Then as you discover fraud, analyze and set up rules to catch each one in the future. Don’t be paranoid and cancel or block all sorts of orders because they aren’t perfect, learn which ones are and which aren’t. In this case the minimum effective dose will cost some up front money as you get a few charge-backs, but think about what you’ll gain in revenue compared to if you’re just blocking everything or paying a full time employee to scan orders all day. I really feel that paranoia and the desire to block these scumbags is causing many business owners to overspend and over-analyze in this realm. The gained revenue can in many cases cover the cost of the added fraud.
2. Quantity of products offered. The more products you offer the more information you’ll need to maintain. In most cases you won’t have a selection of 100% bestsellers. How much time are you spending maintaining product and inventory information that doesn’t even generate revenue? If you’re looking to shrink your workload, remove your bottom performers and save yourself the hassle.
3. Advertising. Obviously when you’re running Adword campaigns you can’t be wasteful. But what if you consistently removed the lower 50% of keywords? How much revenue would you actually lose? Go ahead, calculate it. Keeping your cost down is of course the main benefit, but allocating that cash to trying new keyword sets and then doing it all over will consistently increase the effectiveness and keep your campaigns lean.
4. Software. Are you paying for software that can do all sorts of amazing things, but you’re not actually doing those amazing things? Or maybe you feel like you’re locked into some software, and it’s too big a pain to cancel it and migrate somewhere else? Or maybe everybody is using some tool so you think you have to as well? Be honest with yourself. Do the math. What is working and what is not? We add software so quickly nowadays it takes a concerted effort to trim the software we don’t need.
5. Inventory. This is the obvious one that everyone is always thinking about. You don’t want to dump your cash into items that will sit on a shelf and won’t sell. So maybe you don’t even need to stock it. Can you set it up on a “just in time” schedule? Or can you extend the lead-time to allow for ordering the item only after you’ve received an order? Or maybe it’s not worth carrying the line because they don’t dropship? Question every stock purchase as if you were spending your last dime on it. Is it really necessary to buy this right now? Or will it barely affect sales?
So those are some of my ideas on cutting back. What areas can you add to this? Let me know in the comments.