05 Nov, 2023
Opinion: The best Black Friday discount strategy? Not having one.
Are Black Friday discounts really worth it?
The chaotic frenzy of Black Friday is upon us once again.
Originally conceived as a remedy for retailers, a period when increased sales transition their financial status from "the red" into "the black," Black Friday has evolved into a relentless race to the bottom. The constant lowering of prices poses a significant threat to the long-term sustainability of businesses.
It's a time when businesses often find themselves wrestling with the idea of joining the bargain bonanza. But here's a bold take: the best Black Friday discount strategy is not having one.
Why you might want to reconsider Black Friday
Let’s start with the elephant in the room. Continuously offering steeper discounts can be a slippery slope that erodes your profit margins. To compensate for this loss, brands often depend on boosting sales volume, which usually means hiring additional employees and ends up impacting the customer experience through shipping delays and stock management. But this expansion can impact your profitability further. Some retailers attempt to safeguard their profit margins by factoring the discounts into product pricing, but discerning consumers see right through that.
Conflicting brand values
For businesses that strongly emphasise ethical production, sustainability, an employee-first culture, or have established themselves as premium or luxury brands, participating in silly season discounting can send mixed signals. Joining the tradition solely due to competitive pressure may suggest a wavering commitment to your core values, potentially harming the goodwill you’ve built with both customers and employees.
Brand equity erosion
A tradeoff arises when businesses decide to implement extensive or frequent sales strategies. Offering Black Friday promotions might give you a short-term revenue boost, but it often chips away at your brand equity. By conditioning customers to expect discounts on this day, you unintentionally devalue your products throughout the rest of the year. It's like telling your customers, "Wait for Black Friday; that's when it's worth buying."
Attracting less than loyal customers
Hi and bye. Black Friday discounts draw in customers who prioritise deals over a brand's unique features. This influx of bargain hunters consists of one-time buyers who are unlikely to stick around or become brand advocates. Your customer acquisition and engagement results may look great over this period, but be prepared for a significant drop-off in the following months.
Alienating loyal customers
By offering special deals to entice first-time customers, you might alienate your most valuable segment – your loyal customers. In a 2018 study involving 1,000 respondents, two-thirds expressed annoyance when their favourite brands didn't extend the same discounts to loyal customers as they did to first-time buyers. Prioritising the wrong customer segment can hinder your long-term success.
What brands should do instead
If Black Friday discounts don’t align with your brand values, that doesn’t mean you need to stay quiet during the run-up to the holidays. Here’s how to be strategic about it.
Reward and delight your best customers
Instead of pouring energy into a promotion that attracts new customers who are just out for the best deals, focus on nurturing your existing loyal customers. Invest in them and you’ll reap the rewards of their loyalty all year long.
In other words, don't make a fuss of Black Friday. If you do decide to focus on that day, turn the tables and use it as an opportunity to reward your best customers.
Have a disruption strategy
You don’t need to offer discounts to drive action. While others shout from the rooftops about their discounts and special offers, be the brand that stands out by aligning your core values and finding an original angle. Take inspiration from companies like Allbirds or REI who have built affinity, sustained long-term customer relationships, and stood out by making a difference.
There are a number of reasons to engage in and avoid Black Friday. At the end of the day whether to participate or not will come down to what your business stands for, your relationship with your customers, and the margins you have on your products. Our recommendation is that you stay true to your values and remember that just because others are doing it, doesn’t mean you should.