Don’t Betray Your Best Customers With Holiday Hysteria

The holiday shopping season is fraught with retail myths. The myth that Black Friday actually increases profits. And the myth that the 3-day Thanksgiving weekend does anything to reinforce the loyalty of your Best Customers.

Here’s a quiz: Black Friday, that traditional shopping day after Thanksgiving, is:

1. The second largest shopping day of the year
2. A huge waste of time and money
3. A “cherry–picker’s” dream
4. A betrayal of the precepts of customer–centricity
5. All of the above

If you selected #5, then you are right. If you also added in #6, that Black Friday is a requirement during the holiday season, then your answer is even more right.

According to the National Retail Federation, 212 million shoppers visited stores and websites over Black Friday weekend and close to 140 million consumers came out to sample discounts and offers on that Friday. Some consumers lined up the night before and slept outdoors to be the first in line for a limited number of highly discounted items.

For many retailers, the concept of Black Friday—the practice of one-day “blowout” sales—is flawed in and of itself…

In addition to in-store offers, some 8-10 percent of that audience took advantage of online Black Friday deals by various estimates. Online retailers reported a 16 percent increase in their revenue on Black Friday, according to data from Coremetrics.com. According to both ShopperTrak and the National Retail Federation, retail sales were at their highest levels ever on Black Friday this year.

In addition, Americans spent more than $1 billion on Cyber Monday (the Monday after the Thanksgiving weekend), making it the biggest online shopping day in history as well, according to digital marketplace research firm comScore. Overall, consumers found their pocketbooks and used them for the holiday season.

So what’s wrong with this picture?

For many retailers, the concept of Black Friday—the practice of one-day “blowout” sales—is flawed in and of itself, and as retailers continue to “dance to the same tune” as many years ago, the faster their losses in both customers and profits will accumulate.

The Impact of Available Information

Let’s take a look at what Black Friday used to be, and what it has become. Traditionally, Black Friday was the day when retailers actually began to make a profit for the first time in the year. Using the “loss leader” approach, retailers would lure customers by promising outrageous deals, and consumers would purchase additional items at less of a discount or full retail, creating a profitable purchase event. Then along came the web. Now consumers are aware of the best prices on a given item in their marketplace and they can even check those prices and make online purchases while IN your store!

Guess what happens? Using the information that is now available on their phones, consumers can “cherry–pick” the hottest sales, going from store to store to get the best deals as highlighted by different web sites and by their friends on Facebook. Now, consumers purchase those loss-leading items, and then head off to the next sale at another store. Retailers are left holding the bag, having given away their margin on the promoted items and gained fewer profitable purchases in return.

Compare this behavior to best customers. Best Customers also use their phones, but less to check prices and more to access inside information from and on the company and to use phone-friendly services. They do not cherry-pick because the retailer has established relationships with those customers that, assuming prices are close to market parity, transcend the goal of saving the last penny.

Breaking Down Best Customer Relationships

The very concept of Black Friday-style events undercuts customer–centricity. If you are building your retail business around your Best Customers, offering hot deals to any consumer who happens to park outside of your store overnight is a contradiction. In addition, our research shows that Best Customers do not like the concept of Black Friday, and are usually not shopping your store on that day. In fact, most customers who shop on Black Friday are once-a-year shoppers. In other words, those customers who are eating up your profit on Black Friday are not only not your best customers, but are probably not even your regular customers.

So, not only have you failed to drive incremental profit to your business, but you’ve also alienated your best customers. And this is the day we called the best retail day in America?

But You Can’t Just Hide

It is also clear that Black Friday cannot be avoided. If you remember rule #6, to ignore Black Friday is to run the risk of falling off the customer map entirely. Even Apple, one of the retailers with the highest aversion to discounting, offered a 10 percent discount on MacBooks as a one-day special. If a force like Apple is participating in Black Friday, the day can clearly not be avoided.

The smartest retailers use a threefold strategy in order to weather this day with the least damage to their bottom line and to the relationships with their Best Customers:

1. Promote primarily private label or special items that you been able to pre-purchase at a steep discount. That way, you can still offer a substantial discount while making some level of profit on those heavily featured items.
2. Contact your Best Customers prior to Black Friday, and offer to reserve some of the heavily promoted items for them to purchase prior or following the event. That way, you can provide a service benefit to your best customers and reinforce the special nature of your relationship with them.
3. Also, make sure to have enough product in inventory. One of my friends is a Very Best Customer with a major retailer, and tried to purchase a limited inventory product online before the big sale. By the time he got online, the item had been sold out for two hours. The company only allocated 13 of the item for each store! Now, they have annoyed a Very Best Customer—needlessly. Would he have had better luck on so-called Cyber Monday? We’ll never know. He’ll never return to that retailer’s website again.
4. Create private shopping experiences for Best Customers, right after Black Friday. This approach is seldom used by retailers and offers the best opportunity to drive incremental profit out of a day that has become all sales and little profit. Let’s call it “Green Sunday,” a day when retailers, by offering premium experience (and good value) to Best and High Potential Customers, not only break into the Green (profit) but also help to cement their best customers for the future, truly a gift that keeps on giving.

So stop breaking down your value proposition by complying with the mass hysteria of Black Friday. Focus on the core—your Best Customers—and you will see your black turn into green.