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10/10/2016

How to Avoid These Common Pitfalls of Holiday Promotions

As retailers across the country watch the back-to-school season start to slow down, we all know that they are far from breathing easy. September marks the beginning of fall, which means that the holiday season is just around the corner.

According to the National Retail Federation, 2015 was a big year for holiday retail sales. Holiday retail sales increased by 3 percent over 2014, raking in a whopping $626.1 billion. Furthermore, online and other non-store holiday sales, such as Black Friday and Cyber Monday, grew 9 percent to $105 billion.

While eMarketer estimates that retail holiday season sales will only increase 1.8 percent from last year, that still represents millions of dollars in potential sales growth for American retailers. However, it also means that retailers will have to be competitive both with their promotions and their marketing to beat out others in the industry, including online stores. As such, it's important to avoid some common mistakes that are often costly when it comes to holiday sales.

Here are just a few of the holiday promotion pitfalls to avoid this holiday season:

1. Offering discounts customers will ignore. As consumers continue to have more resources at their fingertips that influence their buying decisions, it's becoming very clear that these consumers are trained to wait for their favorite items to go on sale. During the holiday shopping season, they know that they can find items at reduced prices; however, the percent off can make a big impact on whether they end up making a purchase.

When looking at spending habits of specific consumer groups, we found that 78 percent of teachers need a discount of 25 percent or more, or else they would ignore it, while college students say 20 percent will get their attention. Considering that students are a part of the Millennial generation, now the largest generation alive with an estimated spending power of $417 billion, these are numbers retailers can't ignore.

To ensure that you are driving conversions and revenue, make sure that you are discounting your items enough that it will catch a consumer's eye and increase transactions without completely eroding your margins. Work with your finance team to decide the minimum price you can offer, then A/B test your offers with targeted customer segments. See what the smallest discount is that you can offer without impacting consumer interest. Making your best offers available to exclusive audiences may also drive sales and attract new customers. We recommend staying above 20 percent as a cut-off to maximize consumer interest.

2. Overcomplicating the buying process across channels. As retailers attempt to implement omnichannel strategies into their businesses, data overwhelmingly points to the cross-channel customer experience as a leading factor in purchasing decisions and overall conversions. Customer strategy firm ThinkJar found that 67 percent of consumers cite bad experiences as reason for churn, whether it be online, in-store or on mobile.

Data from Aberdeen Group Inc. shows that companies with the strongest omnichannel customer engagement strategies retain an average of 89 percent of their customers, compared to just 33 percent for companies with weak omnichannel strategies. However, a Zendesk study shows that 87 percent of customers think brands need to put more effort into providing a consistent, simple experience.

Therefore, when creating your holiday promotions, whether it's just a run-of-the-mill discount or a larger contest, create a simple-to-understand process that translates across all of your channels. Customers should be able to easily redeem the offer without impacting their overall buying experience. Don't forget to test the experience on mobile, as 52 percent of customers are less likely to engage with the company because of bad mobile experiences, according to WOW Local Marketing.

3. Partnering with off-brand companies. The holidays are a great opportunity to partner with a cause, especially given that many of today's consumers look favorably on brands that do so, especially Millennials. LIM College found that 63 percent of Millennials were more loyal to brands that engage in causes, philanthropy, or endeavors that reflect their values.

While partnering with a good cause can definitely mean greater loyalty from shoppers during the holiday season, retailers should be careful about the partners they choose. For example, an apparel company that produces its products in factories outside of the US should not partner with a cause that backs products “Made in America.” Not only will this come off as disingenuous, but it also has the potential to create a PR and social media firestorm.

We recommend partnering with causes that are especially holiday driven, such as the Salvation Army for clothing donations or giving a portion of holiday proceeds to food banks or homeless shelters. Each of these causes are front and center during the holidays, which can not only provide added visibility, but also give customers another reason to want to complete their purchases.

When it comes to holiday promotions, brands can set themselves up for success by simply following some best practices and staying away from easy-to-make mistakes. Not only will customers appreciate the effort, but so will the end of the year balance sheet.


Jake Weatherly is CEO of SheerID, which provides instant eligibility verification solutions that ensure margin and profit protection for enterprise and SMB clients while also making personalized marketing programs scaleable.