Black Friday and Cyber Monday deals may only happen once a year for consumers, but for ecommerce professionals and site owners, a successful and profitable shopping season takes months of careful planning, research and execution. But starting the process early and taking the time to determine your price points and selling prices can pay off: according to sales figures from 2017, American consumers spent $5 billion on Black Friday alone, an increase of over 16% from 2016. In addition to the basics like honing your marketing and customer service game plans and ensuring that your ecommerce sites are equipped to handle sudden bursts of increased traffic over the holiday shopping season, establishing your price points and discount levels ahead of time is key to turning a healthy profit.
It's Never Too Early to Start: Black Friday and Cyber Monday Sales Planning
It may only be the beginning of November, but the time to prepare for Black Friday is right this minute. In fact, data shows that some consumers actually begin their holiday shopping season as early as October or even sooner, so the race is already on!
Start with Your Break Even Price Point
The break even price on merchandise or services is the minimum amount you would have to charge to cover not only the flat cost of the item, but any additional costs associated with it. Simply put, the break even price covers what it would cost for you to not lose money between acquisition and sale.
But it's important to remember that this would include more than just the price you paid for the merchandise. For an online store, you would have to factor in web hosting fees, marketing and advertising costs, taxes and any additional fees and costs.
According to Investopedia:
The break-even price is mathematically the amount of monetary receipts that equal the amount of monetary contributions. With sales matching costs, the related transaction is said to be break-even, sustaining no losses and earning no profits in the process. To formulate the break-even price, a person simply uses the amount of the total cost of a business or financial activity as the target price to sell a product, service or asset, or trade a financial instrument with the goal to break even. For example, the break-even price for selling a product would be the sum of the unit's fixed cost and variable cost incurred to make the product.
A good rule of thumb is to start a database and work on your price points throughout the year so that you don't have to start from scratch or work backwards to meet the Black Friday and Cyber Monday demand.
How to Offer Discounts — Without Sacrificing Profits
Shoppers of all stripes love a good discount. (They're basically the whole point of Black Friday and Cyber Monday to begin with!) When it comes to offering discounts, sales and buying incentives, the trick is to find the right balance between incentivizing customers to shop without also cannibalizing your profits.
Remember that sales and discounts can be about more than just slashing prices. Think in terms of adding value and upping the convenience factor for your shoppers. Here are a few options that can help you offer your customers attractive deals without hurting your bottom line:
Start with Tiered Discounts
Tiered discounts allow you to structure your sales in a way that draws in customers without necessarily cutting into your potential profits or worse — operating at a loss. Tiered structures work by increasing the amount of the applicable discount according to how much the customer spends. The more they spend, the higher the discount/rate of savings.
Bundle Products Together for Savings
If offering a flat discount rate doesn't make sense for your online store or you'd like to diversify your methods to experiment and see what works best, bundling a group of products together for a single price (like the gift basket principle for ecommerce) is a good option. It creates value and savings for the consumer, even if the actual "discount" rate is relatively low.
Loyalty Rewards and Incentives
If across the board discounts and sales are not a good fit for your business, creating a rewards program for repeat customers is a great place to start.
Don't Neglect the Human Element
Protip: Offering your customers attractive pricing is important, but you don't have to go broke or try to compete with Amazon or Walmart in order to run a successful independent ecommerce business, especially during the holidays. Keep in mind that consumers value excellent customer service and want to feel a personal connection to their favorite brands and businesses — and are often willing to pay more for it.
Even smaller ecommerce sites can become bogged down with the planning and details that go into setting up a successful holiday sale. Don't miss out on potential profits by waiting until the last minute to implement your pricing and discount strategy.