Cyber Week: How Not to Squander Margins

cyber weekend

So, here we are again. Cyber Monday and Black Friday are fast approaching, and we’re just days away from the official kickoff for the seven-day period that encases these two mega events in the ecommerce calendar: Cyber Week.

From our own analysis of the global retail landscape, we predict much lower levels of discounting this year as labor shortages impact stock levels in several key markets. According Adobe, out-of-stock items are up 172% from 2020. The main culprit? The availability of truckers against the demand for their skills, which is currently at 1:8.

Not all retailers are feeling the burden of lower stock, though, and some will inevitably find a way to “take 20% off” during the now traditional landgrab for new customers over Cyber Week.

Indeed, we expect many brands to slash their prices in the usual race to the bottom during peak holiday season. When they do, they contribute to what I describe as the conundrum: blanket discounts, designed to increase sales, but reduce profitability.

Questions like ‘Is Black Friday a Spectacular Own Goal for Retailers?’ have been asked since the early 2010s. Yet, in certain corners, the discounts keep getting fatter, and the margins slimmer.

Nod your head if you recognize any one of these three scenarios:

  • When a discount causes the purchase to fall below your expectations for margin.
  • When the tradition of a Cyber Week sale conditions customers to only purchase with a deal.
  • When your promotion only entices “one-and-done” customers who buy a low-margin item and never return.

Thankfully, it is relatively simple to structure your promotions in a way that safeguards your margins. Here’s how I’d go about flipping the script on Cyber Week:

Avoid Mass Discounting

Your starting point is to abandon any promotion that can apply to every single cart and customer on your site. That’s the biggest threat to margins over Cyber Week – one big discount, available to all.

That doesn’t mean you cannot advertise “20% off” in scenarios where you really want to drive a sale. It just means that customers falling short of your new criteria won’t qualify for the biggest discounts, and therefore won’t chip away at your margin.

Work Everything Back to a Business Goal

Your next move is to be selective and tie everything back to your goals for the conversion, like more new customers or sales of a certain product line.

Some of the most common points of focus include:

  • Customers: As brand loyalists are more likely to purchase without a discount, a popular choice is to focus on new shoppers that meet a certain level of spend.
  • Stock: Applying your promotions to distressed inventory is a great way to move unsold stock, particularly if you’re running low on best sellers.
  • Products: Margins tend to vary by product. By cross-selling customers with deals on items that meet your requirements for a discount, you can ensure greater margin.
  • Value: Taking 20% off a $10 order could result in an unprofitable sale. Motivating your customer to ‘spend $40 more to get 20% off’ is a much better option.

Once you’ve decided on your goals, all you need is a way of delivering deals on the basis of each customer’s unique value, which brings us onto our next point.

Focus On Your On-Site Play

With 63% of US shoppers identifying as ‘deal seekers’, it’s no wonder coupon sites see huge spikes in traffic over cyber week. Your focus should be less on these partners and more on your own site for a couple of valid reasons.

For one, much of the traffic heading to coupon sites is from customers that visit your site, fill a cart, and go in search of your brand’s discount codes. Tactics like PPC are invaluable for recapturing some of this traffic and delivering personalized offers that reflect the customer’s value to your brand.

Secondly, only your site has the required first-party data to properly identify customers and give them offers they can actually redeem. If your brand loyalists are bombarded with first-purchase offers, it makes for an incredibly bad experience.

On-site technologies that link up to your data, and determine who your customer is, can make it easier to show and hide different offers when certain conditions are met.

Build Off Q4 With A Sustainable Incentivization Strategy

Case-by-case incentivization is one way of describing the replacement for mass, untargeted strategies that can run riot over your bottom line. The best thing is, you can reap the rewards of a more goal-oriented promotional strategy all year round.

By targeting customers on a one-to-one basis and using your business objectives to qualify customers for a deal, you can avoid falling into the same trap when Cyber Week 2022 enters the frame.

I’ll leave you with a few golden rules to bear in mind:

  • Discount one-to-one, not one-to-all
  • Use margin to qualify your customers for your best deals
  • Don’t just think smart over Cyber Week – do it throughout the year

Simon Bird is Co-Founder and CEO of RevLifter