Peter Cunningham
Peter Cunningham 16 September 2015

Black Friday Sales: Getting The Most Out Of The Inevitable Bargain Hunters

sales attract price sensitive bargain hunters with little notion of brand loyalty, but as long as there are enough good customers to compensate for the bad, sales make economic sense.

Sales exist for a good reason!


While clearing out last season’s left over stock frees up warehouse and display space and provides cash to reinvest in your business, the main reason you, as a retailer, sacrifice short term margins is in the hope that deep discounts will tempt good customers into your stores to begin a long term and profitable relationship. Of course everyone knows that sales also attract price sensitive bargain hunters with little notion of brand loyalty, but as long as there are enough good customers to compensate for the bad, sales make economic sense.

But that was how it used to be. Today we seem to have non-stop sales as imports such as Black Friday, Cyber Monday, and Amazon Prime Day have joined the traditional January and end of season sales.  And who knows if the Chinese invention of Singleton’s Day will be the next excuse to discount to arrive on our shores! As well as more sales, we have also seen a frenzy of discounting as retailers compete to give away more and more margin with headline grabbing price reductions to cut through the noise from all the competing store sales.

What makes this even worse, is that retailers have now educated a generation of customers who now just expect discounts. Armed with mobile phones and price comparison tools, show-rooming their way around the high street and armed with price trackers online, the price sensitive bargain hunter can surgically strip your real or virtual store shelves of every deep discounted loss leader and then disappear forever without even stopping to buy a Mars bar at the (virtual) checkout.

And It’s Going To Get Worse……Unless

Last year Black Friday and Cyber Monday completely rewrote all the record books for online sales and this year is already predicted to be even bigger.

But while the press delighted in tales of which retailer’s site succumbed to the deluge of traffic and who was struggling to get all those parcels out, the basic facts underline how important this was for retailers with Adobe calculating that US$2.4bn was spent online in the US and the Guardian reporting £810m in the UK on Black Friday alone. Now that is a big deal!

At Buyapowa, we have long preached against dumb discounting and argued that scatter-gun discounting risks attracting the wrong type of customer: the price sensitive switcher rather than loyal customers. Maybe we sound like we are preaching a sermon? Of course we do realise it is hard to stand firm on prices when all your competitors are throwing the kitchen sink at their Black Friday campaign with aggressive marketing campaigns shouting 50% off, 70% off etc.

However irrational it may be, you probably fear that your loyal customers might be tempted by that super bargain to stray once to your competitor and never come back. You know that customers are now expecting bargains on these days. So you will fight fire with fire with more aggressive discounts and risk burning down the whole building, maybe for both you and your competitor.

With so much turnover at stake, we know that our warnings will likely fall on deaf ears. It is like that last slice of sticky toffee pudding that’s hard to resist even though you know you really shouldn’t!

So let’s start on the premise that you are going to discount aggressively whatever we say. Now the challenge is to ensure that you do actually get loyal customers from your discounting.The surprise might be to learn that it is not too difficult to do that thanks to advances in refer a friend technology.

Bargain Hunters Have Friends Too!

The first thing to realise is that bargain hunters are not bad people.

They are not the kind of people you want to attract to your business because they will up sticks and head to the cheapest deal on the table at any time. But they are not pariahs in society. They don’t walk around with signs on their heads saying ‘bargain hunter beware’. They are our brothers, sisters, fathers, mothers, friends and work colleagues. We mix with discount hunters every day. And that doesn’t mean we are price sensitive simply because they are. That means that they can refer or recommend us to buy from you, and because we know and trust them, we are likely to act on that recommendation.

If you have to give razor thin margins to stand out on Black Friday or Cyber Monday then while you should accept that the price switchers will bring you little ongoing value, you should get them to bring you their friends and family who are potential loyal customers with high lifetime customer value. This might seem like common sense, but if it is so simple why aren’t you doing this already?

An Example Of A Retailer That Gets It

A good example is one of our large telecoms clients which is challenging and incentivising existing customers to bring it new customers by a combination of personal rewards, gamification and communal targets.

Not only does each person who refers a new customer get a reward for that individual referral, but all customers benefit when the group reaches a customer acquisition milestone during the lifetime of the promotion. The promotion also challenges potential super referrers to go the extra mile and compete to bring the most customers to get a special prize. In this way, each customer is motivated to do the most they can to bring in new customers for the business.

In short, by making your discount hunters work for their bargains and bring you good customers you can ensure that you are not just throwing away margin for no long term benefit. If you would like to talk to us about how we can help you get this up and running for your business, then contact us and we will talk you through some case studies.

Original Article

Find out more on the future of Business at our DLUK - Trends Briefing on the 24th September 2015




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