The 5 Biggest Mindset Issues That Hold Store Owners Back
This week's blog post is provided by our good friend Nick Disabato of Draft.
In the past 6 years that we at Draft have worked with store owners to grow their conversion rate, AOV, and customer lifetime value, we’ve noticed a lot of things that hold store owners back from growth.
Competition, ripoffs, shipping issues, and sudden downtime can always hurt stores. But those are usually easy problems in the grand scheme of things, because you can look at them, identify the problem, rally the team, and take steps to fix it.
Instead, the biggest thing we see holding store owners back is something much fuzzier: their mindset. In short, your own biases about your store can hold it back from the kind of success that you want. Lots of decision-making is counterintuitive, and your lizard brain can hold your business back.
There are a lot of studies on growth versus fixed mindsets, and although most of them apply to personal achievement, you can absolutely start thinking about your business’s growth in terms of how you think about it.
In short, thinking like a business owner is scary. But a good mindset makes for good business. In this post, we’ll talk about the 5 biggest mindset traps that people fall into when growing their stores, and how you can beat every single one of them.
Confirmation bias is the tendency for humans to fit new events into their own prior mental models, and for us to interpret new information in a way that confirms something we already previously believed.
Confirmation bias is the source of many new business owners’ poor decisions, because as new business owners we often fit business decisions into the framework of our personal lives. We don’t yet know how to think as business owners, and we don’t even know what it means to think as business owners – or that there’s even a difference in the first place.
Above all, a business owner’s mindset favors growth and investment. Understanding where to invest your resources over the long term, and understanding your own appetite for risk, can allow you to get past your old perspectives and start treating your business’s finances more like they belong to an actual business.
Josh Kaufman’s The Personal MBA goes into great detail on how a business’s resources should ideally be managed, and it provides a great start for any new store owners to think like business owners.
Short-term thinking is what happens when you quickly respond to small changes to the detriment of the big picture. For example, if you’ve ever rolled something out on your store, waited a day, seen a small drop in conversion rate, and rolled it back, you’ve probably dealt with short-term thinking.
Unless the change is catastrophically large, several standard deviations beyond the mean, single-day changes are never enough to make confident decisions. Your store could have just had a bad day at the same time that you rolled out a new change. That’s not good or bad, it’s just the vagaries of business.
The way past short-term thinking is twofold.
First, look closely at the global short-term trends in your store, and not exclusively at the specific interval of time since you made our change.
Then, look at whether the numbers you’re seeing reflect a high likelihood of continued future performance. If statistics don’t bear out the change you’re seeing, you need to wait longer – probably an uncomfortably long period of time – to know for sure.
It may also be that your change is dramatic enough that subtler changes are necessary. If you overhaul your add-to-cart mechanism on mobile, for example, there may be edge cases for specific operating systems or platforms that can easily be identified in Google Analytics and fixed accordingly.
For millions of years, we evolved to avoid predators, seek food, find safety, and live long enough to create another generation of humans. Today, you’re probably reading this in a reasonably safe environment, somewhere in civilization. It gives me great pleasure to report that a wolf is unlikely to attack and eat you today, tomorrow, or literally ever.
But you still hold within yourself the memory of past generations that had very real reason to worry about things like wolves. And that worry manifests in the form of catastrophic thinking, or the tendency for people to dramatically magnify anything remotely bad that could potentially happen to us.
Applied to your own business, for example, take a negative support incident with a customer. If we’re new to owning a store, we’re more likely to take the incident personally, or inflate its consequences for the long-term health of the store. As a result, we’re more likely to focus on that incident, and build it into the culture of our store as we grow. This could result in a reliance on vanity metrics, or metrics that don’t actually reflect the health of the business.
When you notice yourself panicking about the consequences of an isolated incident in your business, the best thing you can do is to notice it, examine why, and figure out what to do – and whether to act in the first place. It’s hard to keep a cool head in situations like these, but successful, growing businesses find a way to act rationally and clearly, even in the face of significant adversity.
Following the leader: the bandwagon effect
It’s one thing to keep abreast of new developments in technology, and it’s another thing entirely to blindly follow what internet-famous people are doing. The bandwagon effect happens when specific trends are adopted at an ever-faster rate after increasingly many people do them. But the more people hop on the bandwagon for any specific tactic, the less likely it is to work for any one of them.
Remember when it seemed like every single online store put a roulette wheel on their home pages, because one startup did it and proved that it provided a huge win for their customers?
Instead, try coming up with your own creative solutions to the real problems that your customers are facing on your store. Through researching your store’s pain points, acting on specific issues, and incrementally improving your customer experience, you’ll forge your own path – and capture more revenue in the process.
Hope springs eternal: the overconfidence effect
The overconfidence effect is a phenomenon where we tend to overestimate the results of what’s happening in order to fit our prior expectations of what happens.
This especially happens in A/B testing. Let’s say you run an experiment that happens to increase average revenue per user by 33% at 81% confidence. This looks like a huge win on the face of things, but 81% confidence is actually extremely low. In reality, if you roll the variant out to your customers, you might not move the needle much at all – and you might even hurt yourself in the long run.
For a lot of fancy statistical reasons, A/B tests should only be rolled out if they win at 95% confidence or higher. Still, we want the test to win, because we want every test to win. So we fit our mental model to the numbers that are being reported, think hope springs eternal, and roll out the variant.
If any of these sound like things you’ve done before, know that you can manage each and every one of them going forward. There’s no time like the present to take responsibility for your own personal growth. Every time you notice your lizard brain taking over, notice it and move on. You can still do the right thing for your business, even though it’s scary – possibly because it’s scary.
Running an independent business isn’t easy. The goal is to grow and help others, of course – but the path is never direct, and it’s often counterintuitive. With knowledge of each one of these mindset traps, you should be able to recognize them when they happen, and slowly change your habits to grow your store.