No, it's not sales.
I mean, not exactly. Yes, you do want to sell more products but does it really help your business if you sell them at a loss?
And this could very well happen if you pour money into ads to acquire new customers while running a sale.
In this post, we'll look at the issues eCommerce businesses face during holiday sales and why blanket discounts are not necessarily the best strategy.
The Problem - Rising Ad Costs
In a survey to some of the highest earning online stores, Shopify found that the number one concern was rising ad costs.
Funny enough, when asked what their top marketing channels were, ads came in first!
You depend on ads to bring sales, but ads are getting costly. On top of that, they spike 140% during the Black Friday and Cyber Monday weekend.
So it costs more to bring in a customer during Black Friday, but the customer doesn't necessarily spend more on your store. In fact, if your promotions are like most others and you do a flat discount sale, customers are actually spending less on your store.
Rising costs and lower revenues mean slimmer margins. If you're not careful, you may even lose money!
There are two solutions to this problem. One, stop depending so heavily on ads, and market on cheaper channels.
Or, make each customer spend more on your site.
And that brings us to the one thing you must focus on improving this Black Friday - Average Order Value (AOV).
The Solution - Focus on AOV
The AOV is how much revenue you make per customer on average. To increase it, you need to get the people who purchase on your store to spend more money.
Now you might be thinking, this is the opposite of what customers are looking for during a Black Friday sale. They want discounts!
True, but there are ways to get them to spend more even though you're offering a discount. Here are five strategies you can use.
A gift card is essentially giving someone a discount, but there's one key difference. To take advantage of the gift card you have to first purchase something.
Let's say you have a $100 product on sale at $50 during Black Friday. If a customer purchases just once, your AOV is $50.
Instead, if you gave them a gift card that they could only use on their next $100 purchase, that means they've spent a total of $150. You've tripled the customer value!
Melin, a retailer of quality headwear, did something like this with one caveat. Customers could only use the gift card after a certain period of time. If customers bought something from them at full price on Black Friday, they received a gift card that they could only use in December.
They saw an 820% return on their ad spend during Black Friday when they did this!
An alternative to doing flat discounts is to increase the discount amount based on how much someone spends. This incentivizes them to spend more to get a higher discount amount.
For example, if you offer 20% off for purchases less than $100 and 30% off for higher amounts, then that works out to a savings of $20 on a $100 purchase and $60 on a $200 purchase. Your customers save more and you have a higher AOV. Win-win!
DIFF Eyewear created a tiered percent discount based on number of products. The tiered structure motivates an increase in number of purchases, even if it's the same product. So one pair gets only 30% off, but 3 pairs get 50% off.
They state this clearly in their ads and saw a 7.54X return on ad spend. In total, they had a 17% increase in AOV.
Bundles allow you to sell products at a discount without taking a hit on profit margin. Instead of having customers order individual products on sale, the bundle incentivizes them to sell more.
Let's say you sell shirts for $100 and trousers for $150. If customers could purchase them individually, they may just buy one shirt. However, if you bundle up two shirts with a pair of trousers, and offer that bundle on discount, you're AOV will be much higher while customers still get a good deal.
The added benefit of this is you can ship out the products in the bundle together and save on shipping costs.
Axe Bat tried this during Black Friday last year. They had a specific landing page for their bundle and promoted that via Facebook ads. Despite the higher ad costs, they still managed to get a whopping 11.49X Return on Ad Spend!
In total, their AOV increased by 18% despite the sale and their conversion rates increased by 193%. Incredible numbers.
Free Gift + Tiered Discounts
We spoke about gifting and tiered discounts already, but what about combining the two. Brooklinen, a luxury bedding store, does this for their Black Friday sales.
"We did some excessive testing on our Black Friday deal structure in order to optimize AOV. This meant testing dollar-based deals vs %-based deals at different levels in order to find the winning combination to maximize ROI." - Rich Fulop, CEO of Brooklinen
When you shop on their store, if your cart value goes over $35, you'll see a popup offering a free candle as a gift. Additionally, as you added more to the cart, you get a higher dollar value off, allowing you to save more even while spending more.
Don't Discount, Do Donate
Black Friday may be synonymous with big discounts, but that doesn't mean you have to follow the crowd. The fact is, consumers will be looking for products to purchase online, and discounts won't be the only thing incentivizing them. So why not take advantage of the added interest in shopping, while doing something a bit different.
I'm talking about donations. There are numerous brands these days differentiating themselves by aligning with certain causes. This is a response to a shift in consumer habits, where they prefer to shop with brands that have some social impact.
So instead of incentivizing shoppers with a discount, try incentivizing them with additional donations.
iHeartDogs did something like this in their last campaign. Discounting goes against their brand. However, they typically donate one meal per purchase to dogs in shelters. This is similar to the TOMS one for one model of donating for every sale.
During Black Friday, iHeartDogs doubled the number of donations to two meals for every sale. The additional meal pushes shoppers to buy more, knowing that it goes to a good cause. This actually lead to their best weeks of sales immediately after Black Friday.
AOV AOV AOV
If there's one thing you take away from this, it's that you must focus on AOV. As they say, what gets measured gets managed.
Figure out what your current AOV is and set a goal to increase that this Black Friday. Instead of doing a flat sale, try out some of the suggestions mentioned above to increase AOV.