Four rules that will help you cut prices for the holidays to drive business, but maintain the ongoing value that your brand has captured.
I love Thanksgiving. Of course the food and football is always fun, but - without getting too sappy here - I really love the underlying idea and its spirit.
Thanksgiving is, of course, the American holiday that takes place on the third Thursday of November every year and is meant to commemorate a moment in the birth of our country where people came together to help one another out. You can read more details here. My favorite thing about this holiday, though, is its critical place on the calendar. Thanksgiving is a day set aside to enjoy what you have, and it is situated precisely before the moment when you begin to think about what you want.
That is, Thanksgiving is also the eve of the Winter Holiday Shopping Season (as it is politically-correctly called these days). We used to wake up on the day after Thanksgiving, loaded with food and wine and fun, and slowly creep to the malls to start poking around. The popular idea began to spread that this was, in fact, the biggest shopping day of the year and that it was not until this day that retailers became profitable (i.e., moved from "being in the red" to "being in the black"), giving this supposedly fun day the relatively dreary name "Black Friday." Of course, this is a myth. If you are unprofitable for 10 and a half months it is unlikely that one single day, no matter how wonderfully revenue-generating it is, will save your bacon.
The practice, though, began where stores would open earlier and earlier, offering steeper and steeper discounts until we finally got to the point we find ourselves in today: Best Buy will open at midnight on Thanksgiving, meaning that people will show up at the stores, ready to buy, probably having just finished eating dessert.
Online, we see the same trend. Several years ago, the term "Cyber Monday" popped up (so long ago that we were still unironically using the term "cyber"). The belief was that consumers would continue the shopping spree online, when they got back into work on Monday. I can't believe that is still the case. In fact, I imagine that there will be people in the line at Best Buy on Thursday night buying things via their tablets and smartphones.
Personally, I have always had a problem with the practice of deep discounts. Clearly we've trained consumers to expect that they don't need to pay as much for products on this particular day. As we shift to online, consumers have an even greater expectation of finding discounts, because they can always do a quick search for "best black friday deals."
There is no way to eliminate the massive price cut practice. But at least we can get much better at it. If you are in a position to slash prices for the holidays (or any other time), you should follow a few good rules that will help you use the tactic to drive business, but maintain the ongoing value that your brand has captured.
Rule 1: Have something that never gets discounted. One of the big mistakes that brands make is to have sales on everything, all the time. Often this is done via a coupon code that takes money off everything. But the best practice with discounting is that you reserve some particular item or collection that never, ever goes on sale or is discounted. Putting things on discount communicates a lot to the consumer about the balance between how much they want to pay and what they can get. If there is something that is never discounted, then the consumer can have an anchor point in their expectations.
Rule 2: Have something that always gets discounted. The corollary rule to having something that never goes on sale is to have some set of things that always go on sale, for precisely the same reason. By having these two sets of products, the consumer can then frame their shopping and buying decisions.
Rule 3: Use discounts strategically. Discounts are great in that they automatically get consumers engaged and excited. But they don't need to be applied across the board, to all consumers. Give early discounts or deeper discounts to those who are following you on social media. Also, feel free to use discounts as a way to establish relationships with people (such as "Follow us on Twitter to get discounts").
Rule 4: Retarget with discounts. If you have the ability to give people an across-the-board discount, like a coupon, think about using it in a retargeting campaign. For example, some brands have seen great success using retargeting ad networks that find people who left items unpurchased in their shopping carts. Showing this segment a coupon that invites them to return and get 10 percent off is very effective.
Discounts are a core part of the retail strategy and we are in the season where they are going to be used more and more. However, like anything else in this world, this is a tactic that needs to be used thoughtfully and appropriately, not just to create a spike but to increase your value to the consumer over the long term.
Have a great holiday.
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Gary Stein is SVP, strategy and planning in iCrossing's San Francisco office. He has been working in marketing for more than a decade. Gary lives in San Francisco with his family. Follow him on Twitter: @garyst3in. The opinions expressed in Gary's columns are his alone.
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