Beyond Black Friday
As Black Friday and Cyber Monday approached, we saw retailers scrambling to prepare for the official start of holiday shopping. The stakes are high and competition is fierce. Everyone from Wal-Mart to Macy's leaked their best deals well in advance of the big weekend (see www.blackfriday.com), and retailers such as Target, J.C. Penney, Toys R Us and Best Buy opened their doors on Black Friday Eve (previously known as Thanksgiving Day) for additional sales.
With all the mass discounting in the market, must targeted marketing campaigns follow suit? How can direct marketing programs participate (and win) during this essential season? In this article, we highlight a few alternatives to deep discounting that may boost your targeted marketing program beyond Black Friday and Cyber Monday and support continual growth well beyond December.
The Pitfalls of Deep Discounting
Deep discounting through mass channels for Black Friday and Cyber Monday are now table-stakes for many businesses; if you skimp here, you are out of the game. These deep discounts can hurt a business as well. At Analytic Partners, we worked with a multichannel, high-end retailer developing a targeted strategy for Black Friday and Cyber Monday.
In previous years, they had participated in the industry-norm of deep discounting, but results were not favorable. The strategy led to inconsistent profitability for the retailer; in some years the deep discounts hurt margins far enough that the return on investment was unacceptable. In addition, research showed the high-end image of the brand was tarnished somewhat by these deep discounts, even during this promotion-heavy weekend. Over time, it appears new customers brought in through these promotions were less valuable to the company overall and suffered a shortened lifespan with the brand, further decreasing their lifetime value. We have witnessed similar concerns within apparel and electronics industries as well.
Alternatives to Deep Discounting
Marketers can leverage other motivations to incent consumer engagement that mass channels cannot. Take a step back and consider the consumer pull of Black Friday discounts. Typically, the offer is extremely limited in duration, supplies are limited, and consumers know that this is a one-time-only offer. Offers are simple in nature, as marketers recognize the limited attention span of the Black Friday shopper. These factors all combine to promote a sense of urgency for consumers to commit to the sale.
We encourage our clients to look at targeted promotions to evaluate if they adhere to any of those same guidelines during this crucial week. Given the data we have about our consumers and their shopping preferences, there is ample opportunity to provide that same call-to-action for specific customer segments, but without the deep discounts. Value proposition does not always equate to price; compelling offers may be centered on service, quality or limited supply as well.
Reward Best Customers With Experience
One alternative strategy is rewarding your best customers with a unique experience, rather than a discount. One retailer offered a unique in-store experience to their very best customers that had the same one-time-only feel of Black Friday. The copy of this offer (distributed via email and direct mail, with limited mobile touch points) thanked loyal customers for their business and explicitly stated this was a unique opportunity only for their most valued shoppers. It was positioned as a benefit of being a great customer rather than a typical "Black Friday" event.
Rather than investing in discounts, the company invested in customer service to ensure flawless execution of the events and exceptional customer satisfaction. This approach was very successful for the retailer, driving an increase in topline sales (over 15 percent year-on-year), and a significant increase in bottom-line profit due to reduced discounting from the previous heavy discount year. Equity research demonstrated that they maintained the brand image of high-end products while still remaining competitive with lower-tier competition that focused exclusively on deep discounts that weekend.
Create Urgency for Mid-Tier Customers
Another targeted strategy to consider in lieu of deep discounting is to provide a limited-time offer to drive urgency for mid-tier customer segments. In another case, we found mid-tier customers valued and purchased the core product offerings at a retailer, but were reluctant to purchase the accessories and additional sublines as well. These accessories had high margins, so the company decided to offer modest discounts through email on those accessories, but with the added value that many accessories were available for a limited time in November (while supplies last). This approach met the value needs of these consumer segments with marginal discounts, and appealed to the Black Friday sense of urgency. Results of this approach were favorable. In the short-term, the retailer saw 10 percent to 15 percent lift in topline revenue from this approach. But the long-term impact was even greater, as the effort pushed many mid-tier customers up the value chain as they expanded their purchases into accessories.
Save Deep Discounting for Developing Segments Only
Finally, I do not recommend that you completely disregard deep discounting in targeted marketing; save this approach for your under-developed customer segments. For one apparel manufacturer, we used customer segmentation to identify a "High Potential" group of customers that, based on their shopping history, appeared on the cusp of becoming avid purchasers for the brand. When developing their Black Friday direct mail and email campaigns, the manufacturer customized the deeper discounts for only this under-developed segment to draw them in for the holiday season.
Results of this strategy were very positive, creating a 40 percent sales lift versus prior year and substantial savings from limiting discounts to the other segments. We continue to monitor the long-term impact on the developing customers, but initial analysis suggests that the customers remained engaged throughout the year and have made highly profitable purchases since this Black Friday promotion.
Although deep discounting has become the norm for many wishing to cash in on the Black Friday and Cyber Monday buzz, there is ample opportunity within your targeted marketing program to go beyond a singular strategy.