How to not lose money because of Black Friday and Cyber Monday – understanding consumer behavior, measuring profits, and more.
At the Nerd Marketing household here in NYC, our lease is up every November 30th.
This has given birth to an annual Thanksgiving tradition in five steps:
- Early November. In anticipation of an upcoming rent negotiation, we begin looking at apartments in Brooklyn. Always want to have that BATNA ready.
- 1 week before Thanksgiving. I order boxes and moving supplies from Makespace. The supplies arrive and take up most of the living and dining rooms.
- 3 days before Thanksgiving. The landlord delivers next year’s lease. He increases the rent a few hundred dollars per month. The wife and I get all tough (“this is BS! / we can do so much better! / we hate the UWS anyway!”) and start packing.
- 2 days before Thanksgiving. We get tired of packing (“this place isn’t so bad / the doorman is great / the UWS has great diners”). I delete the draft email telling the landlord to shove the lease up his ass. I send him a new one proposing no rent increase and reminding him how much we love it here. We agree on a smaller increase.
- Thanksgiving. We unpack what we packed, give thanks, and eat. The in-laws all sit on moving boxes around the table. The kids are confused.
Crazy, right?
It would be comical if it hadn’t happened three years in a row.
You know what else is crazy? What a lot of retailers do over Black Friday and Cyber Monday.
Let’s review in five more steps:
- We compete to offer more discounts and better deals over those four days.
- Revenue over those four days skyrockets!
- All evidence suggests we aren’t creating new demand, just cannibalizing it from October. We are simply training our customers to wait to buy on discount.
- The net result is that we are swapping full-margin purchases for discounted ones.
- Profits in Q4 bottom out!
Crazy, right? Almost like doing a fake move and then not moving.
Some brands can pull out of this cycle. They have unique, well-positioned merchandise that lacks any equal.
You don’t see Apple discounting. Or WP Standard. Or Saturdays NYC.
If your spouse wants one of their products for Christmas, you don’t really have any option but to step up and buy one. Full-margin.
Depressing? Well here’s what you can do this week: measure. Crack open my ROI spreadsheet and figure out just how much profit you generated this past weekend.
Do it now. Then set a reminder to do it again in February—then you can account for any returns and permanent changes in customer behavior.
Because when you discount (as most of you probably just did), you bring in a very different kind of customer…
[bctt tweet=”Customers you acquire via discount are very different from those who happily buy on full margin.”]
They return, they take up service time, and they don’t buy again unless you discount.
Here’s what you can do going forward: resolve to develop some killer well-positioned merch in 2018.
That way next Black Friday will be less crazy.