If the Black Friday, Cyber Monday (BFCM) season is important for your brand, you really need to start planning for it in July. Even if your brand is new, or BFCM isn’t a peak, you still need to consider how this season will impact you.
Before we get into it, I want to thank this week's sponsor: WorkMagic. WorkMagic is a measurement platform that uses automated incrementality testing to calibrate attribution and MMM, giving brands accurate full-funnel insights based on true incremental impact.
A lot of eCom “best practices” are driven by consumer behavior. You want to swim with the current of default behavior, not against it. We’re not salmon here.
In this week’s free issue I’m going to explain how BFCM and Holiday changes consumer behavior, the common pitfalls many brands make during this season, and how you can avoid them.
In next week’s members-only issue I am going to share my proven tactics for maximizing BFMC and holiday revenue and profit. Click here to become a member.
BFCM & “Holiday” Dynamics
“Holiday” (aka mid to late December) is a period when we’ve collectively decided as a society to give each other gifts. Even if you don’t celebrate Christmas or Hanukkah, if you live in the US, you’re going to be expected to tip your service providers, give small gifts to your kids’ teachers, participate in the workplace gift swap, etc.
TL;DR–(most) people be shopping. And when you start shopping for others, it’s easy to start thinking about shopping for yourself. All of this shopping leads to a surge in “in market” demand.
Conversion rates go up as mental barriers go down. People get caught up in a frenzy. In for a penny, in for a pound. My credit card bill isn’t due until January. Etc.
But this isn’t a magic money printer, because the cost of digital advertising rises right along with demand. Starting in late October, CPMs rise across the board, especially for in-market audiences. For the average brand, the increase in costs more than offsets the increase in demand.
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When the sales have ended and the Christmas trees have been dragged out to the curb, many brands find that they actually lose money during the Holiday period, despite strong sales.
Why does this happen? Media costs shoot up into the stratosphere.
If you want a profitable Holiday season, now is the time to understand the true incremental impact of your marketing channels and campaigns.
If you're doing at least $10M/year in revenue, WorkMagic can help you do it.
WorkMagic doesn't simply run incrementality tests. It helps you translate those tests into an action plan with two unique analytics tools: Incrementality-Adjusted Attribution and an Incrementality-Calibrated MMM (iMMM).
Brands like True Classic and LiquidIV trust WorkMagic to help them scale new channels like TikTok and understand how Meta spend impacts sales on Amazon, so they don't waste a single marketing dollar.
If your brand's growth is being held back by in-platform analytics and spreadsheets, click here to book a call with WorkMagic.
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There is another aspect of consumer behavior that brands need to keep in mind: the customers you acquire during Holiday are going to be some of the lowest quality, lowest LTV buyers you’ll get all year.
Not only do these customers typically enter the brand via deep discounts, they’re also more likely to be casual customers who will forget about you when the Holiday frenzy fades.
Go run an analysis of customer LTV by month of first purchase if you don’t believe me. December has been the loser for EVERY brand I’ve analyzed, and I’ve analyzed dozens of brands across every product category, including fashion.
Macro vs Micro - Ignore The Competition
BFCM is the ultimate illustration of the need to build multiple growth peaks into your business. Many of the biggest, loudest brands in apparel have not done this, so they run deep promotions and then pay through the nose to blast them out across the internet.
If you are running a stage one or stage two brand, you probably don’t need to worry about the promos your competitors are running. I’ve heard stories of brands with holiday “war rooms”, where offers are updated multiple times per day based on hourly sales and competitor activity. Please don’t do this.
When you’re stage one or stage two, you are competing for in-market demand, not market share. Nike, Coach, Old Navy, etc. aren’t your direct competitors. You don’t need to react to them.
The macro factor that will potentially impact your sales is consumer sentiment. It’s worth reviewing Holiday consumer spending projections from a number of sources and taking these into account while planning inventory. These usually come out between July and September.
Why Many Brands Lose Money During BFCM
Brands lose money during BFCM when they make at least one (and often all three) of these very common mistakes:
#1 Act Like A “Holiday Brand” When They’re Not
Some brands are more gift-able than others. These are the brands that are most likely to acquire new customers during Holiday.
I’ll give you an example from my career: BFCM/Holiday was not a big peak for Tibi while I worked there but it was our peak season at Coach and Kate Spade.
Tibi is a niche brand that primarily sells apparel. Coach is a globally recognized mass status symbol that sells lots of giftables like keychains, wallets, perfume, etc.
BFCM/Holiday is a rising tide that does not lift all boats equally.
#2 Rely Too Much On Acquisition
As mentioned above, in-market audiences become really expensive to reach during Holiday. If you are relying on new customer acquisition to hit your numbers or move inventory, it's easy to wind up in a situation where you are acquiring customers at a loss.
Being a giftable brand and/or a status symbol with a really compelling offer (big discount), helps offset the cost of ads inventory.
#3 Don’t Update Their Unit Economics & KPIs
Markdowns and promotions are variable costs. When variable costs go up, your breakeven ROAS also goes up. Failing to account for this is how many brands lose money.
The One Analysis You MUST Run
If you have historical data (at least one prior BFCM), log in to Shopify and analyze your new v repeat customer sales breakdown for these periods:
- Black Friday
- Cyber Monday
- The entire BFCM period
- Black Friday through that year’s Christmas shipping cutoff
- The duration of any specific sales and promotions you ran
If your events used promo codes, break down the utilization by new vs repeat customers. If you sold any special Holiday SKUs (gift sets, bundles, etc), do the same analysis.
These analyses will help you understand if Holiday is an acquisition or retention event for your brand, and which specific aspects of your strategy appealed to new vs repeat customers.
You should also go back and analyze how profitable your acquisition spend was during this period, especially if holiday has been an acquisition event for you.
Basically, if your brand has been operating based on a false understanding of how Holiday “works” for your business, you want to correct that and build a strategy that helps you work with your real consumer behavior patterns.
In next week’s members-only issue I’ll provide my proven tactics for designing compelling acquisition and retention offers. Click here to become a member.