[Editor’s note: Michael Loban is a co-author of the best-selling book Crawl, Walk, Run: Advancing Analytics Maturity with Google Marketing Platform, available now on Amazon.]
It’s the time of the year where everyone is talking about Black Friday and holiday sales, and many companies are entering the season with very specific goals. We want to sell $1 million of products. We want our coupon to be used X number of times across X number of new customers. Those kinds of concrete, short-term ambitions are great, but it’s equally (if not more) important to think about the long-term impact of your holiday marketing efforts.
You can probably meet your sales quotas for any given day, especially if you have a well-established brand and offer steep discounts, but what does that mean for your sales two, three, or six months down the road? Did you just acquire a lot of new people who are interested in a good deal, or will those sale-acquired customers actually continue being customers over a longer period of time?
These are complex and crucial questions that every company should be asking. Below, I’ll explain what metrics you should look at in the next four to twelve weeks in order to accurately assess holiday sales’ long-term value for your company. I’ll also offer some suggestions for maximizing the long-term value of your holiday marketing efforts.
Measuring the Value of New Customers
When you’re trying to assess the long-term value of holiday sales, the first major segment you should consider is new customers. Let’s figure out whether your discounts actually appealed to people who were not already familiar with the brand. Here are some key metrics for evaluating your campaign’s long-term success.
- One important indicator following your promotional campaign is (hopefully increased) brand awareness. This can be measured by looking at overall organic traffic on your website after the holidays. If you ran a massive campaign with 30 percent discounts, your website might have seen stellar traffic on Black Friday or Cyber Monday. But if you look at your traffic four to twelve weeks later, have you seen a sustained increase in organic traffic? Did people start talking about your brand, and is it more recognized because of the campaign?
- Another way to measure your long-term appeal to new customers is through sentimental analysis. When people bought your products for the first time, did they mention anything positive across social media? Did they do anything that generated more social media exposure for your brand?
- Not all customers are created equal. Some customers are simply looking for a bargain, and after they shop your clearance items, they won’t return to your business. It’s much better to attract customers who will provide more lifetime value through their loyalty. The best way to gauge whether your promotion attracted the first or second type of customer is to check back in over the coming weeks to see whether you’ve been able to sell them products at the regular price and measure the average number of purchases by newly acquired customers. The relevant time interval will vary based on the product that you actually sell. For example, if you sell things that a customer typically buys every month rather than every week, you will need to consider a longer period of time.
The most important aspect of measuring the impact your holiday campaign had on new customers is to watch these metrics closely during the twelve-week period after your sale. If you don’t pay attention over the long-term, it’s difficult to accurately assess the true value of your one-day deal.
Measuring the Value of Existing Customers
Most companies know that it’s cheaper to retain your current customers than to acquire new ones, so it’s important to measure the impact on your existing customers as well. Here’s how.
- In order to assess your campaign’s success, you must first determine what your sales benchmark looks like one to three months before Black Friday. For example, let’s say that in early November, I started looking for a sweater. I noticed that the average price across several companies was $120. I would face two options: I could buy the sweater for full price or wait because Black Friday and Cyber Monday were around the corner. As a consumer, waiting obviously makes the most sense. From the perspective of the business, though, these considerations make it necessary to take your pre-holiday sales into account. Did your sales in the fall pre-holidays decrease because people were anticipating a discount? Many times, companies tout their holiday sales figures, saying, “The sale generated this much revenue,” when in fact, they simply borrowed from their own sales because people delayed their purchases.
- Companies must also monitor their existing customers’ behavior after the holidays. For example, the company Alter Eco makes delicious dark chocolate, so let’s say I buy from them every month. If they offered a Black Friday sale of 30 percent off, I might be tempted to stock up. The question then becomes, are they generating sales, or are they borrowing their future sales and paying a premium for it? The true impact of your holiday promotions hinges on your year-long sales figures.
- To assess your campaign’s impact, it’s also important to pay attention to the metrics of each individual channel you use to communicate with your existing customers. Let’s take the email as an example. You must analyze email marketing interaction numbers before, during, and after the sale to see how they change over time. What’s the open email rate, click-through rate, and click-to-buy rate? Were people looking at your emails before your promotion? Or do they only open your emails when they’re getting a discount? These numbers reveal important information about your communication via each channel. If you aren’t maintaining stable “open email” numbers, it’s possible your emails are getting stale. You shouldn’t need to use sales promotions to buy a response.
Alternative Ways to Create Long-Term Value
I frequently hear the argument that if a company doesn’t offer discounts, customers will take their business elsewhere. That’s why the confidence that an advertiser has in a brand is such an important measure in terms of the type and amount of promotions they need to run. If your brand has loyal customers, you don’t have to worry as much about the “everyone else is doing it” problem.
As an advertiser, consider your other options. Is your best choice offering 40 percent off, or is that money better spent creating a special experience for your loyal customers? You could announce a limited product available only to subscribers, or you could offer them exclusive opportunities that reward them for their repeat business. The more you continue to differentiate yourself, the more advantage you will have over your competitors.
Before the holidays, test different types of promotions across small customer segments to determine which ones will resonate with your audience. Do they respond more positively to a 20 percent discount, a $20 discount, a free product, or an exclusive offer? If you have a subscription service, I recommend offering a discount for those instead of individual products. That way, you’re able to retain your customer for a long period of time. Plus, subscription discounts allow you to acquire customers who are truly interested, not just those hunting for bargains.
Whatever you do, you do not want to come into this weekend and say, “Let’s go for 40 percent off because everyone else is doing it.” If that’s your approach, it means you probably aren’t giving your customers what they really want. You’re simply running sales because everyone else is doing so, and you’re trying to stay relevant.
The Best Strategy is to Stand out
From an analytical standpoint, sales are not a one-time event. You must consider what happens before, during, and after the sale in order to get an accurate gauge of the sale’s impact. Create benchmarks for what’s happening to your sales before the promotion and determine whether you’re training your customers not to buy until they get the discount. Then use metrics to understand what happened during the sale and how you can make your promotions more effective moving forward.
These metrics will help you get a better grasp on whether your sales made more revenue and profits for your company or whether you participated in the craziness just because you assumed you had to. At the end of the day, this is valuable information for any organization because it helps you channel your marketing dollars into efforts that will create brand awareness and build customer loyalty. The best strategy is always to stand out, not to one-up someone with a bigger discount.