How Mini-Flash Sales Can Help You Avoid Killing Your Profit Margins on Black Friday
Written by James Corr.
Flash sales can be a double-edged sword…
Even though they have the potential to help you move massive amounts of inventory and acquire new customers they can also act as profit margin busters that wind up costing you more than they’re worth in the form of reduced profitability and unhappy customers unlikely to become repeat loyal customers.
Black Friday and Cyber Monday have become synonymous with flash sales. In fact, consumers all over the world now expect you to slash prices and beg them for their business this time of year.
Black Friday has become a global phenomenon:
However, like turkey, gravy and pumpkin pie- too much of a good thing can cause you to feel sick to your stomach…
2. The Flash Sale Pitfalls
Some retailers have found that the Black Friday/Cyber Monday craze – or running any large scale flash sale – may not only erode profit but also cost them customer relationships due to the large volume of sales that can overtax resources and negatively impact the overall customer experience:
- The margin of these sales may be so small that it fails to cover operational costs, promotional efforts and the additional labor required for fulfillment
- If shipping and delivery experience delays – whether it’s due to a problem on the merchant’s end or with the carrier – the negative customer experience may impact future success. In this study, 22-percent of flash sale comments on Facebook are related to negative shipping experiences
- It’s often difficult to gauge which products are likely to be embraced by flash sale shoppers. Forty-five-percent of flash sale products sell out faster than anticipated, which means you run the risk of disappointing customers if you build excitement then run out of stock or fail to track inventory real time
- A large scale, site-wide flash sale can overload your server and cause a site crash. This challenge gets even more acute on Black Friday/Cyber Monday. Even though you may be able to predict site traffic based on your email marketing, PPC campaigns or social media metrics, surprises can happen and overpower even sites that have been load tested
- If you run flash sales too often, you risk attracting bargain hunters or training your customers never to buy anything from you at full price. This can further impact your profit long after a flash sale ends
These challenges are not only faced by small retailers. Amazon’s biggest flash sale event, Prime Day, has reported mixed results and frustrated customers:
Why bother is flash sales are so risky?
The benefits associated with running flash sales can significantly impact your financial and brand health…
Flash sales can help you:
- Move excess inventory
- Boost revenue
- Acquire new customers
- Raise brand awareness
- Plus, customers who buy from you during a flash sale and have a positive and memorable experience are also more likely to return and make future purchases.
The Challenge: How to run a flash sale so you not only leverage the advantages it can bring, but also avoid allowing it kill your profit margin and cost you loyal customers?
In other words, how can you generate buzz & profits without letting a Black Friday/ Cyber Monday flash sale bring you, and possibly your ecommerce site, down?
3. The Mini-Flash Sale
Mini-flash sales offer ecommerce merchants an opportunity to test the flash sale waters without assuming all of the risk associated with massive blowout flash sales…
Instead of an all-out site-wide sale, consider a series of highly targeted mini-flash sales of smaller scale leading up to the holiday shopping season.
Not only can they help you prime the pump for bigger end-of-year events by making more customers aware of your brand but they can also serve to train customers to expect a more focused or personalized flash sale experience that can help you increase profits without sacrificing margin or resources.
Strategic planning and meticulous execution will determine the success of your mini-flash sales…
Here then are five key factors that can help you plan and execute successful mini-flash sales aimed at helping you offer the right products to the right customers at the right price :
FACTOR #1: YOUR OBJECTIVE
You certainly won’t know whether your mini-flash sale is a success unless you define what success looks like beforehand.
What’s the main goal of this promotional effort?
Do you want to:
- Move excess inventory
- Acquire new customers
- Reward loyal customers?
Getting clear on your objective can help focus your effort, target the right audience, and select the appropriate products for the event. Leverage the behavioral data to which you have access to match your objective with the appropriate email list segment (if using email marketing) or Facebook lookalike audience (if running a PPC campaign).
Consider these examples:
- Your best sellers may be used to attract new customers
- Excess inventory might be heavily discounted and marketed to price sensitive customers
- Loyal customers may be offered cross-sell or upsell flash sales based on purchase history
FACTOR #2: INTELLIGENT CUSTOMER TARGETING
After you’ve decided on your goal…
Define your target group and choose the best channel to reach members of the group by understanding:
- Where these members are most likely to engage with you
- How much it costs to acquire them as customers
- The ROI of converting them
ATTRACTING NEW CUSTOMERS
Existing Facebook ad groups with campaign histories of relatively high CTR and low CPA rates may be leveraged with lookalike audiences (Facebook users with similar preferences or behaviors). Consider leveraging trending terms on Twitter and Instagram as well to reach new customers who have demonstrated an interest in offerings like those you’re featuring in your sale.
SELLING TO EXISTING CUSTOMERS
Interested in running a mini-flash sale that generates $38 for every $1 spent on marketing?
Email marketing is a tried-and-true standby you can use to offset the discounting often associated with holiday flash sales. Remember, the key is to leverage the customer data you already have:
- Purchase history
- Site browsing data
- Abandoned cart items
Consider further segmenting your list to reach a very targeted group of consumers.
Fifty-six-percent of businesses have higher open rates on their Flash Sale emails compared to their yearly open rate. A flash sale can help increase engagement and build customer loyalty:
By understanding what works best for different segments, you can leverage the information to determine whether larger sales are appropriate and how exactly to craft messaging to larger segments.
FACTOR #3: THE PRODUCT
Not all of your SKUs may be flash sale worthy…
With your goal and target group in mind, you can select the most appropriate products to promote.
If you want to move inventory, you can use keyword tools to identify search volume, find out what your competitors are focusing on, or connect your product to trending content.
Google Keyword Planner can give you insights for product selection.
ATTRACTING NEW CUSTOMERS
If you want to attract new customers, seasonal or marquee items are good candidates. You can give these customers a taste of your product collection by limiting the choices so you have a greater degree of control over margin and profitability. You may even increase your revenue through upsells or cross-sells.
SELLING TO EXISTING CUSTOMERS
If you’re targeting existing customers, you can consider highly targeted campaigns; flash sell abandoned cart items only to those who abandoned a particular item or flash sell a specific product to those who have visited or spent a defined period of time on a specific product page.
FACTOR #4: LOGISTICS
After you’ve selected the SKUs you want to flash sell make sure your logistics are in place to fulfill the orders:
- Track inventory in real time
- Sync your inventory management with fulfillment operations
Driving customers to your site and then informing them the item of interest is out of stock can create ill will between your brand and its customer base. Work with your logistics provider to predict sale volume, and make sure you can track inventory in real time while simultaneously providing shipping update for effective communication with your customers.
This also makes for a good opportunity to “stress test” your fulfillment system- to make sure it can handle larger sale events.
Before you run that flash sale though…
Consider that approximately one third of the purchases made online are returned and many of those returns are fraudulent:
In fact, the average retailer, according to the trade publication Inbound Logistics, spends 8.1% of total sales on reverse logistics which includes taking back damaged, unwanted, spoiled, or counterfeit goods.
TAKEAWAY: Calculate the anticipated costs associated with flash sale returns and how that may influence the size of the flash sale discount you offer.
FACTOR #5: TIME AND DURATION
Successful flash sales have a short shelf life…
In other words, shorter flash sale durations are often more effective than their longer counterparts. In fact, research suggests three hour flash sales often convert at higher rates.
Example of a three-hour outperforming flash sale:
The research also suggests that conversion rates are 23% higher for evening flash sales compared to lunchtime sales, and revenue per flash sale email is 30% higher in the evening:
Given the importance of timing, you can increase the effectiveness of your campaign by targeting customers in a specific timezone or country by appropriately segmenting your email list or geotargeting your PPC ads.
Running multiple mini-flash sales over the course of the year, or even in the time leading up to Black Friday & Cyber Monday, can help you gather consumer insights specific to your business and customer base.
By studying the results of your campaigns and testing different variables you can learn:
- How to avoid flash sale pitfalls
- Whether larger flash sales might be profitable for you
- Optimization techniques to boost your results without sacrificing margin
Mini-flash sales can allow ecommerce merchants willing to experiment a way to fail quickly and identify proven ways to succeed on a larger scale. These miniature flash sales are a “lean and mean” way to to test the popular flash sale concept without the outsized risk that can negatively impact profits and customer sentiment when flash sales fail.
Interestingly, mini-flash sales may even become a year-round tactic you wind up using long after the madness of the upcoming holiday shopping season has passed.
Rare.io makes it easy to start using automated email campaigns for common challenges like: Welcome Series, Abandoned Carts, Order Follow-up emails and more! You can learn more about our powerful email marketing automation features here or go ahead and get started right away by using Rare.io for FREE.
And if you’re one of the thousands of merchants who are already using Rare’s Smart Email Marketing software and want to see how our Customer Success Team can work with your brand to grow your revenue – feel free to book a call at your convenience here.