Lets get into it!!
Why is Discounting Products a really bad idea?
Everyone loves a discount. Buyers get to grab things they want for far less than they would normally pay and sellers get a huge surge of cash flow. But for a business, we have to understand if this is actually good for us. Often, the answer is actually an overwhelming no.
So how does a discount impact our business? Well, it gets us a lower LTV with the customer.
"But our ROAS will be better today..." - who cares, ROAS isn't cashflow... lets unpack this
Lower day 1 revenue = Lower LTV
Discount buyers have a lower 2nd purchase rate, so discount buyers have a dramatically lower LTV
Existing customers who take a discount also have a reduced LTV
The math is basically this... can we focus our business effort on acquiring lower-quality customers that are worth less to us, that are less likely to spend again, which results in a worse future cash flow environment, all so that today can be a nice looking number in our cash register.
Is it really good to invest heavily in harming the future of your business?
Far more often than not, the answer is an overwhelming no.
Business growth is built on cash flow and profitable customer journey acquisition
*harming this, is bad for business
The result of a Black Friday sale, where we discount all of our products heavily, is simple to project with very high confidence.
Step 1: Tons of revenue today
Step 2: Inventory gets depleted quickly
Step 3: Average LTV drops
Step 4: Daily average cash flow drops in Q1 because we have a higher volume of customers who are far less likely to buy again or pay more money
Instead of running a sale on your products. Let's use this time and effort to grow the LTV and improve the 2nd purchase rate.
Sell Bundles & special offers.
Design the offers to either bring back existing customers for something new and exciting or get new customers to have an AOV on purchase 1 that is much closer to the LTV of your customers.
How to use Facebook Ads to grow your CRM audience for Revenue
What if you didn't even need to run ads during Black Friday?
What if you didn't have to play the game of competing with brands who can lose more than you could ever spend just to keep you out of the game?
What if instead of tanking your evergreen campaigns, to compete in a high cost battle for low-quality customers?
What if instead... we spent the time leading up to big sales periods to grow our CRM resources.
From email, to chatbot, SMS and more... building exclusivity through non-paid channels gives us an asset that matures in value. We can use these lists to drop offers before sales happen. We can rely on them to get us our "sales period" revenue potentially even before the official sale starts. Ideally, we can use this revenue to fund the ancillary efforts like awareness campaigns and production costs for creative, or even to acquire new inventory and improve CX.
Why should you run a Black Friday sale?
There are 3 good reasons to run a Black Friday sale
1: We NEED cash flow.
- Sacrificing future revenue potential and tanking LTV is a less of a liability than not having cash flow and inventory turnover right now
2: We want to RAISE LTV
- Using this buying holiday as an opportunity to sell more to existing customers, with special offers and vertically integrated offers designed for brand loyal customers
3: We want to build a better customer base
- Selling special bundles that are above the AOV of normal offers, to attract higher quality customers, leveraging consumer intent to offset price/value based objections
If you are running a Black Friday sale because "you're supposed to"... I HIGHLY recommend that you don't.
All of this btw, applies fully, to every sale you ever run.
Black Friday isn't special
Its just a legacy retailer marketing to become profitable in the year
That's NOT you, or your problems, or your business model
So its NOT YOUR NEED!
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