Heavy discounting on Black Friday is not an effective way of making new customers.
That’s the advice from marketing analysts Optimove in the run-up to the holiday season.
They point out that Next’s CEO Lord Wolfson referred to the day as “pointless”, and that Next’s announcement on Wednesday of a 1.3% sales increase has eased the pressure on the clothing retailer to join the big sell off.
Customers who first purchase during the holiday season are 19% less likely to return to buy from the brand than at any other time of year, say Optimove. This means it’s not a good period for customer acquisition, they say.
But they also say that existing clients make 30% more transactions than new customers over this period, and are worth engaging with more.
Pini Yakuel, CEO of Optimove, comments: “Black Friday is increasingly seen as a burden for retailers, a way to keep up with the competition rather than an actual retail opportunity.
“But, if approached correctly, Black Friday can be a great opportunity for retailers to work on increasing revenue from their existing customers. In fact, about 71% of customers on Black Friday will be existing customers, and these clients make 30% higher transactions over the Christmas period than new shoppers.
“From this perspective, the holiday season needs a different strategy. Retailers need to think about how discounting impacts acquisition.
“Whilst minor discounts of 5-30 per cent do encourage shoppers to return for a second purchase, anything over 30% is more likely to encourage “cherry pickers” – customers who… don’t hold a lifetime value to the brand.
“The large amounts of data that retailers hold on their existing customers is key to marketing in a way that increases value from existing customers.
“By using this data to target existing shoppers, personalising and targeting discounts, offers and promotions, retailers can make the holiday work for them by upselling to their existing customers rather than selling at a loss to others who won’t return.”