Should you invest resources and budget to attract new customers on Black Friday?
Acquiring a new customer is up to seven times more expensive than keeping an existing one.
You’ve likely heard the stat quoted before and it should hopefully have resonated. But have you done anything tangible to address it?
Perhaps you have, but traditionally acquisition is prioritized over retention. We put more budget, resource and scrutiny on how we attract new customers.
72% of small businesses say that they put the majority of their marketing budget on acquisition. So only 28% are spending more on retention despite it being more cost-effective.
Who can really blame the 72%? Acquisition is often viewed as the major lever for growth but the numbers may suggest otherwise.
According to Bain and co, a 5% increase in customer retention could increase profitability by up to 75%.
Impressive right? It doesn’t stop there.
Gartner’s research suggests that 80% of your company’s future revenue will come from 20% of your existing customers.
So how does this relate to Black Friday?
When Black Friday comes around there is the temptation to think of it as a free-for-all. The majority of marketing budget has been stored up for when there’s the biggest chance of driving sales.
Yes, we’ll be marketing to our existing customers. But there’s also huge opportunity to attract new customers when buying intent is at its highest.
Last year sales passed £8bn during Black Friday and Cyber Monday in the UK. For many retailers, this is make or break time for the entire year. Can you realistically afford to neglect acquisition?
Not really. But you should come at it knowing that many metrics are stacked against acquisition in this period.
1. Prepare to pay more to advertise
Unfortunately, all your competitors are playing the same game at Black Friday. If you’re trying to drive new sales from advertising, then be prepared to pay more for each click.
Auction-based ad platform (Adwords, Google Shopping, Amazon PPC) thrive off the increased competition of Black Friday.
The same is true for impression-based advertising. Research by the Social Code revealed that it’s 2.6 times more expensive to show an ad to 1,000 people on Black Friday.
2. Watch out for Amazon
On top of squeezing money out of you to advertise on its site, Amazon are also going be competing with you. Amazon claimed a 55% share of transactions on Black Friday in 2017.
Don’t be surprised to see Amazon competing against your ad spend too. During Black Friday 2018, Amazon was claiming a 40% impression share in certain Google Shopping product categories.
The good news is that since April 2018, Amazon appears to have abandoned bidding on Google Shopping altogether. But we’re still talking about a company that spent over $10 billion in advertising last year.
3. Balance your metrics
Yes, we’re paying more for advertising traffic and our margins are lower, but surely we’ll make it up with improved conversion rates?
There’s a good chance you can take the hit. According to Adobe, the desktop conversion rate was 5.5% on Black Friday in 2016. That’s a noticeable jump on the average desktop conversion rate which falls between 3.8% and 4.5%.
The jump isn’t as noticeable on mobile. The average mobile conversion rate is between 1.7 and 2.0%, but only jumps to 2.4% according to Adobe’s data.
Mobile conversion rates should be a big priority. 40% of Black Friday sales were on mobile in 2017.
Making customer acquisition work on Black Friday becomes an act of balancing multiple metrics. Don’t just think that higher conversion rates will make up the difference against the metrics that eat your margin.
4. Combat cart abandonment
Another metric that’s working against you is cart abandonment rates. The average abandonment rate is 69%. That climbs to 75% on Black Friday.
Cart abandonment emails are very effective way to recover sales that might normally be lost. On average, our customers recover 12% of revenue lost to cart abandonment.
To state the obvious, cart abandonment emails rely on you having an email, which your not going to have for new visitors.
Unless a new visitor begins account creation, you’re going to have no way to retarget cart abandoners in their inbox.
There are three options available:
- Cross your fingers and hope they come back to complete the purchase
- Spend more money on retargeting ads to try to bring them back to your site
- Capture an email earlier in the buying journey
If you can’t get the sale, get the email.
Using overlays that offer an additional discount just for first-time visitors will give you the email you need to deliver cart abandonment emails.
An additional discount might dent your margin on sales, but an email address opens many doors.
You can retarget visitors earlier in the buying journey with browse abandonment emails. For example, alerting individuals when items they’re browsed are running low on stock. Or simply sending an email reminder when your sales are coming to an end.
Email continually delivers the highest ROI of any marketing channel. Once you have an email you can continue to market to these people throughout peak and beyond.
5. Account for high return rates
It’s the end of Cyber Weekend. Your marketing campaigns delivered conversions. You’ve seen record sales. But the works not done yet.
That sales revenue is not guaranteed. A sale is only a sale if the customers decide to keep the item.
As much as 40% of online purchases are returned but it’s not just the loss of a sale that impacts profits. Costs are incurred with the handling, cleaning and storage of returns.
Items tied up in the return system can cause headaches for the remainder of peak. With many retailers extending return deadlines on Black Friday, there’s a risk that returned items might not be available to be sold again during peak.
Investing in virtual fitting solution is an effective way for fashion retailers to reduce size-related returns.
While post-purchase marketing can help reduce the chances of an item being returned. A simple thank you after a purchase can go along way. Asking for a review or offering a discount off their next purchase helps build rapport and reduces buyer’s remorse.
So should you bother with acquisition on Black Friday?
While this data is based on averages, it does pose the question of whether spending a lot of customer acquisition is actually good for profitability.
The best way to answer that question is to look at your own historical sales data.
- What were your conversion rates during Black Friday?
- What were your customer acquisition costs from Black Friday advertising?
- What percentage of items were returned?
Abandoning acquisition altogether is unlikely to be the right answer. Within this article, we’ve outlined tactics you can use to improve your customer acquisition funnel.
You can make it a success, but there are other opportunities available.
With Black Friday fast approaching, now is the right time to prioritize what you’re doing to drive sales from your existing customers.
There are big advantages in focusing on existing customers:
- You’ve already built trust which will benefit your conversion rates.
- You can target them with email which will be your most cost-effective marketing channel.
- You already hold a lot of data on them about previous purchases and buying behavior during peak.
Investing resources into segmentation and personalization for your email marketing is a cost-effective way to make more of what you’re already got planned.
Additionally, optimizing your website for returning visitors with personalization will ensure existing customers are being recommended the right products over this period.
If you’re keen to learn more, watch our webinar: 10 Mistakes Brands Make on Black Friday