Anyone who’s spent a few years at an ecommerce shop knows the difference between the pace of the offseason and the g-force feeling of the holiday season kicking in during Black Friday and Cyber Monday (BFCM). If you’ve ever described this period as your Super Bowl, you’re definitely among friends here. While this has always been a pivotal period, the upcoming holiday season expects to see over a trillion dollars spent for the first time ever. If that doesn’t turn your face into a money-mouth emoji, it might be time to turn in your Shopify credentials.
The end of summer is a great time to finalize your game plan and start prepping for the data analysis and customer nurturing that needs to happen in advance of this crucial long weekend. Here’s how we’re thinking about holiday planning for Shopify brands.
3 metrics to analyze and optimize for BFCM
Assuming this isn’t your first holiday season, you’re sitting on a massive amount of data from years past that can help you gain an edge in November and December. We’re talking about things like customer acquisition cost (CAC), lifetime value (LTV), and average order value (AOV). We’re also thinking about the ways in which you can take any of those metrics and dive deeper with segmentation. Let’s start with three metrics that we’re keeping a close eye on.
Customer Retention Rate (CRR)
Customer retention rate tells you the number of customers that came back to place another order in the months after their first purchase. Better than that, it gives you an idea of the customers who are naturally loyal versus the ones that need a little more nurturing to re-engage with your brand.
The takeaway for the holidays? Understanding the breakdown of new versus returning customers will help you personalize your marketing strategies for multiple cohorts. For example, returning customers might respond better to a promotion on a product related to a previous purchase while new customers should start closer to the top of the funnel and get exposed to your greatest hits.
Customer Acquisition Cost (CAC)
By dividing your marketing spend by your number of customers, customer acquisition cost gives you an idea of how much it costs to reel in one new customer. With ad spend likely to increase during the holidays (especially as you analyze and identify the ad channels with the best return), it’s important to know what you can expect from different budgets. Used in conjunction with lifetime value, you can optimize your funnel to acquire customers at a cost lower than their projected value, a surefire way to make every new purchaser a profitable one and really capitalize on holiday traffic.
Lifetime Value and Average Order Value (LTV and AOV)
As your product offerings expand, a great way to increase profit and decrease CAC is by increasing the average order value. More purchases means a higher lifetime value and a lower acquisition cost, which is why thinking about customer loyalty and ways you can be remarketing to customers you already have access to now can pay off at the end of the year.
What should we do with this data?
As you gain a better understanding of your customers’ behavior through metrics like the ones above, you can start to plan strategies to cater to them. That’s why customer retention should be a huge component of your pre-BFCM playbook. It’s a great way to increase sales at a low cost, and it helps to hedge your bets against relying solely on brand new customers during the holidays.
What should you be doing to encourage previous customers to shop during the holidays? The simple answer is turning up the frequency of communication in channels where you’re already reaching customers for free – email, SMS, live chat, and social media. Not sure where to start? According to Shopify, email was the highest converting channel for their shops last year. If you’ve been sending one email per week over the summer, now is the time to build out a calendar for two or three times as many campaigns during the height of the holidays.
Another strategy is putting your loyal customers to work for you by incentivizing referrals. Haven’t dusted off your SMS contacts in a while? Remind customers of their unique referral code with a quick, no-pressure text that doesn’t require them to spend any money at the moment, but does provide another touchpoint that will help keep your brand in mind when it’s time to start buying gifts.
Did you think we wouldn’t cover discounts?
Perhaps the biggest association shoppers have with BFCM is discounts, something we’ve talked about using and measuring in the past. While you should land on a discount amount that makes customers feel appreciated and leaves you with a comfortable margin, it’s a science to hit that sweet spot.
One way to feel more confident about your discount amount is to test different rates ahead of the big weekend (another place where email comes into play!). Not only could you measure the success of a given sale in revenue, but you could also dig into historical data around an advanced metric like repurchase rate by discount code to compare different promotions on the basis of what worked in the moment and brought those same customers back in the future.
While many customers expect holiday discounts, some brands have actually found success going in the opposite direction. Patagonia, for example, is notorious for their activism on behalf of the health of the planet. On Black Friday's past, they’ve donated 100% of retail and online sales to “grassroots nonprofits working on the frontlines to protect our air, water and soil for future generations.” Incentives in other industries could include offering a free resource with every purchase such as an ebook or special access to limited edition products and events. As always, knowing what your customers will respond to should dictate your discount strategy.
You’re ready for a big holiday season
The most important thing you can do right now to prepare your holiday strategy is to understand the ecommerce metrics that power your business. Any actions taken to increase customer loyalty should be informed by and work with your data insights. With in-depth segmentation of 100+ metrics at your fingertips, an automated analytics platform like Peel can help you use your data to sell to more new customers and improve the lifetime value of the ones who’ve already shopped with you.
We’d love to hear your ideas for holiday strategizing on Twitter or LinkedIn, and if you need help jumpstarting the process, sign up for a 7 day free trial!