3 Reasons This Q4 is Different: How to Prepare for the 2024 Holiday Season

[00:00:00] Taylor Holiday: Welcome to the initial kickoff to the 2024 holiday season. That's right. This is the official moment at which we begin the inevitable deluge of holiday content that an e commerce can't start soon enough. My kids are back in school today. That means it's time to start talking Black Friday, Cyber Monday.

That's my signal. And when we get tactical, we bring the man on the streets, Mr. Luke Austin, our VP of Strategy here at CTC to talk through exactly how we are approaching our overview for Q4. So Luke. Good to have you here. Are you ready to talk Q4?

[00:00:41] Luke Austin: It's going to be here. It's going to be a weird one. We know that a lot of, a lot of things at play this year that have not play in previous years. So, yeah, I think, I think starting there could be a helpful place just to orient us all on why is this year so weird and then follow it, what are we going to do about the weirdness?

[00:01:01] Taylor Holiday: that's right. So we're going to borrow a little bit from the political arena here and tag onto the democratic campaign associated with calling people weird to acknowledge what is it a very abnormal season. So we're going to talk through three reasons why this is going to be a weird Q4. And what you as a business should do to plan for that.

So Luke, take us through it. What is the first reason why this is a weird Q4?

[00:01:31] Luke Austin: Let's get the simplest one out of the way first. One of three reasons is because Cyber Monday is in December. This has happened before. So the main impact on this is just in year over year comps, spend planning, revenue forecasting, media planning. It's more just a nightmare as it relates to the planning against the, the timing around November and December and, and how that shows up on, on a brand's P and L, but cyber Monday being in December this year is one of note that we should put a pin in all be aware of that amidst the other two reasons is a factor at play.

[00:02:10] Taylor Holiday: So if you look back at 2023 and you go look at your calendar, you will recognize that black Friday last year was November the 24th cyber Monday was November the 27th. Whereas this year we get those days pushed back in the calendar where Black Friday is actually November 29th, and that makes Cyber Monday fall on December 2nd.

So as Luke is saying, and I was just doing this for a brand because we do all of the financial forecasting and planning for all of our customers and trying to predict Returning customer revenue and repeat rates and all the things that we look at to do our modeling is challenging this year because of that.

So if you think about a model that is extrapolated on historical performance, when you get this oddity in the calendar, where such a big driver of sales splits the calendar into. Partially falling in December versus November. It is going to make your month over month or your month by month, year over year comps useless.

It is not worthwhile comparing your November of 24 to November of 23 because of how big of a difference cyber Monday is. So right off the bat, we've got a. Budget allocation problem. We've got a forecasting problem and we've got some unique challenges around the expectations of each of these periods of time.

Weird point. Number one.

[00:03:26] Luke Austin: And so with that, the, the way we are approaching and solving. Weird point. Number one is first in the modeling specifically. So the, our spend Amy, our models and our retention models is where our forecasting process starts. And so our teams have been working through Steve recode and the, and the data team have been working through modeling approaches to take into account.

Cyber Monday being into December, looking at the past four years and how much revenue from new and returning customer cohorts we've realized on the specific dates and days of week that those dates are in. In November and December time periods and then moving around those points to reflect an impact in December versus November, November for those cyber Monday days specifically.

So our approach to that as step one is in our models. Taking into account the adjustment for the revenue allocation between those core customer cohorts, and then we're backing into the media allocation against that opportunity. The daily media plan, daily revenue targets, etcetera. All downstream from that.

[00:04:36] Taylor Holiday: So this has happened before.

If you go back and you have data that goes back to 2019, you'll be able to see the comp for the allocation of your spend between Friday and Monday being split between November and December. So it does happen every so often. And you can use some of the historical modeling to understand that allocation accordingly, but just make sure That especially if you use trend forecasting and you're looking at month over month, year over year comps to just be aware of this, this isn't going to be too novel, but it is something that goes into it.

Now, the second thing that's weird also has to do with the calendar Luke, and that is what?

[00:05:10] Luke Austin: So the second thing relates to when they the length of the holiday period this year. We have. Almost a week less of holiday days than we did last year for a couple of reasons, one of them being leap year and where it landed this year. But specifically to illustrate the point, Thanksgiving Day last year was the 23rd, I believe.

This year is the 28th. So Thanksgiving and Black Friday is the latest it could ever be in November, just in terms of how the calendar falls this year. And it's a lot shorter than last year. So you don't, you have almost a week less of your core holiday dates going on in November, leading up to Black Friday, Cyber Monday, and then into the holiday period.

So not only do you have Cyber Monday falling in November. December, but you have less holiday days to be able to drive revenue and performance from due to the timing of leap year pushing back Thanksgiving and Black Friday, Cyber Monday, basically the latest that it could ever occur within a November.

[00:06:19] Taylor Holiday: So if you think about generally speaking, you usually have five full weeks. Or is it four full weeks? You usually have four full weeks between the last day to ship, which is like December 19th and Black Friday, Cyber Monday. So you would usually have almost like 25, 26 days in between those moments, which if we think about cultural, culturally and behaviorally, Black Friday really kicks off that shopping period.

And so the difference between. What we see to happen to conversion rate and impact post Black Friday, Cyber Monday, where we enter the holiday period and really functionally losing seven of those days where this year we only have about 18 or 19 days that represent that post Black Friday period, it actually makes a meaningful difference to the messaging and communication and how many moments you have, how much messaging occurs, how many ad dollars get allocated into those spaces.

Before that last day to ship and really focusing on that gifting period, the gifting period just becomes a little bit shorter as a lot of the messaging that we see brands do leading up to black Friday, cyber Monday is still self purchase. You're still in this period where black Friday, cyber Monday is usually the pivot point to transition to gifting messaging.

And now that period gets shrunk by a week. And so that is consequential and does lead you to have to drive more value out of November. Maybe than you normally would. What other implications do you see? Practically for brands in that change.

[00:07:47] Luke Austin: Yeah, I think that the, I don't think it can be overstated that. Even five days in November, early December, how much revenue can be driven and is driven for brands during that short of a time period. So I would just sort of. Double click on that point where these are, these are four or five core holiday days that are unaccounted for.

And it's, it's not a small impact in terms of the amount of revenue that you've likely driven for days like that historically for your brand. So in order to overcome the loss of a few core holidays like that, it's important to really think about what your offer strategy and the timing of the offer strategy looks like, I think is the first step, which is let's, let's take the, the example of heavy gifting brands, where if you have a less of a gifting time period and you actually experience more revenue during that gifting time period leading up to a Christmas.

Then there might be a case for you to think about your early bird, early Black Friday offer that you launched prior to Black Friday. Cyber Monday being more in the self gifting sort of what you've done historically. And then you actually make Black Friday and or Cyber Monday your big gifting offer in moment so that you can recapture some of those days that were lost otherwise.

So for brands that have heavy gifting angle and audience, Shifting the offer strategy and offer timing around that to account for some of those days I think is, is, is the starting point to really think about where, where offers landing and how much revenue are we expecting to drive from those during, during those periods.

And, and then the, the other piece I would add in is. What's going to happen is we're going to have days in November leading up to Black Friday, Cyber Monday. You get the days on the front end as well. So you have to think about what to do with those, right? You have less of the gifting days, but now you have more of these like early November pre Black Friday, Cyber Monday days.

They have to think about what to do to try to drive a similar amount of revenue as you would have seen during those holiday periods. And so I w I would just get very clear on each of those days. What were the offers we were running in the past years? What, how much revenue do we drive during those specific days?

And then what would need to be true in terms of an offer strategy this year to account for the flip flop of those days and them showing up early black Friday versus in the holiday time period.

[00:10:07] Taylor Holiday: Yeah, I think to think about the opportunity that there's likely practically less time for people to get gifts. There may also be opportunities to lever that leverage that from a messaging standpoint to push forward additional offers related to fulfillment pace and things like that. I also think there's an interesting idea that maybe it puts more emphasis on Q5, which is sort of this other moment post Christmas, that 25th through the 1st, where you generally see a CPM decrease for brands to say, Hey, there's a chance we may need to pick up some of this deficit into that period and make sure that you really are equipped For some sort of strong offer or message that meets people in that sort of surprisingly short experience that they had previously with some additional opportunity, depending on how those periods go.

Now there's a, there's definitely a chance that this all gets just concentrated into a smaller period and revenue remains roughly the same. We will see, we can analyze that as we go. But I think that having that prepped Q five could be another way to approach it as well.

[00:11:03] Luke Austin: Yeah. Yeah, I completely agree. And we're, we're having more of those conversations this year with our clients as we're looking at what this holiday is going to entail around What does our post Christmas offer look like for specifically for brands in the apparel footwear space, end of season inventory, and moving that sooner than later, there's a lot of opportunity there with apparel brands and leading in end of December and then all the things that go on with, with health and wellness at the beginning of the year, but yeah, the Q5 moment, you could probably scrap together some offers to make up some of the revenue deficit from, from the previous days that in tandem with.

What are you doing? You know, the days leading up to Black Friday, Cyber Monday, there's opportunity on both sides, but it's more condensed than it has ever been. So it requires the timing and execution to be dialed.

[00:11:52] Taylor Holiday: Okay, great. So that's the second sort of weird anomaly. And then the third one, of course, has to do with it being an election year. And there is a big impact on those of us in the e commerce space as it relates to both digital advertising interaction with the Election spending and also how users behave around the week of a moment as large as, and that sort of captures the cultural zeitgeist, like a presidential election.

So, what, Luke, are we learning and seeing as it relates to how that affects this year

[00:12:25] Luke Austin: Yeah, so maybe to start and take a step step back. So, And first look at what we saw in in previous years from this, because I think just for anyone thinking, well, maybe there's not too much impact because there's so many millions and billions of advertising dollars out there that how much this is really impact things.

There's there's two. There's two impacts, but the two metrics that really this the political advertising will will show up on is the cost of advertising as it relates to CPMs and CPCs. So that bucket. And then the conversion rate specifically tied to the attention and conversion around the customers that you're driving through those ad platforms during that.

Period of time. So, during the past election season, what we saw within our data set is about a 30 percent increase in meta CPMs from October 1st to October 22nd. Now CPMs usually increase during that time period in October. But in the previous years, we only saw about 11 percent increase.

Lift compared to the prior month in that October 1st, 22nd. So 30 percent increase versus 11 percent increase. So, pretty substantial impact on the cost that we can expect for meta and Google. Now we actually like higher CPMs here at CTC. If you haven't noticed, if it comes with better quality traffic and higher conversion rate unfortunately that's not what we expect to see particularly the week leading up to election and for those days directly following the election, likely, it's just due to the amount of attention that's going elsewhere during that time.

And and so the conversion rate drop off is pretty substantial as well. Meaning that starting really November 7th or 8th is when leaning heavily into your like holiday offers, holiday product launches, collections. That's, that's the timing that likely makes the most sense because anything prior to November 7th and 8th is going to be either higher advertising costs comp and or lower conversion rate because of all the attention directed elsewhere over the course of that 7 to 10 days.

Yeah.

[00:14:34] Taylor Holiday: But that that revenue often gets recouped in black Friday and cyber Monday. So again, a lot of this has to do with the distribution and expectation of revenue and consumer behavior, and then therefore how you as a business should behave.

If you try and hammer your moment into the noise of the election, I think you're going to run into a slightly depressed consumer behavior set. Alternatively, More than ever before black Friday and cyber Monday tends to outperform. And what I'm referencing is that in 2016 black Friday sales outperformed both 15 and 17.

So you get this increased expectation where the election day and week, there's roughly a 6 percent drop in sales as attention focuses into that chaos. But that tends to get recouped in the later periods of the month. So a lot of what we're describing right now has to do with the flow of the money and the flow of customer behavior and how you can overlay your daily plan against it.

That's a lot of what we're helping brands to think about is that CDC we're in the business of every dollar every day being forecasted and planned against and how your messaging and marketing calendar should meet the consumer in their behavioral expectations. And this is a great indication that, Hey, Don't compete in the noise of the election, but do anticipate that you might have a bigger opportunity on Black Friday than you realize.

[00:15:57] Luke Austin: how condensed the holiday season is and how competitive it is due to the increased political advertising. What it really comes down to is timing is everything around these pockets. You got to identify the pockets and align your offer strategy accordingly.

And then your media plan and your forecast, et cetera. But to add on to the broader conversation. The DTC index that came out for for July has, or the August issue has a lot more data for anyone interested in really doing a deep dive. But we, what our estimate is, is that the total available advertising dollars, the war chest of the political ad campaigns is about 3.

2x higher this cycle than last. And I think the data point I, I can't, I can't find it offhand here, but I think it's somewhere around last cycle, digital ad spend as a portion of total was close to like 24, 25%. Whereas this year it's, it's close to 50%, just under like 48, 49%. So not only are the, are the war chests much larger in general, 3.

2 X, but also the, the allocation of those dollars away from TV to digital advertising is two X as high as well. And so I think it'll be really interesting to see how this year's data in terms of the cost impact, the conversion impact, all the things we've been talking about, how this actualizes against really substantial changes in terms of the media mix of the political advertising, as well as the total capital available.

[00:17:21] Taylor Holiday: Yeah. And, and so we can add a little concept as to why that is part of it is because there were basically no primaries in either case where generally there are huge outlays of capital from the DNC and RNC against those moments, but because they weren't, and also because who the candidate was, was sort of ambiguous on the case of the DNC.

A lot of the political ads are meant as persuasion against a specific person. And so there's been this withholding of funds. As well as the DNC very recently raising a bunch more money when Kamala Harris became the candidate that suddenly there's, it's not that people don't have plans to spend, it's that they've been waiting.

And so most of these dollars do get concentrated into September and October with October actually being the largest period of spend where we see CPM impact. The other things I'll point out is to consider your customer base spending on meta and Google. Is disproportionately larger from the Democrats than it is from Republicans currently.

Now we'll see if that trend holds, whereas the Republicans tend to spend more on television. You can sort of make your assumptions about the demographics of both parties. Also, the spending gets massively concentrated in the swing states for the presidential election. So if your customers are disproportionately in Michigan and Pennsylvania and Florida and Georgia and Nevada and Arizona, then you should expect More impact to your feeds and your customer's feeds in particular, whereas if your customer base is highly concentrated in New York and California, where the election results are much less in question, you're going to get a lot less political spending in those feeds.

Now, of course, there are state and congressional spending that exists in those regions and you can see maps of those data in the DC index. But the point is just, it's not evenly distributed by party and demographic in any way. So understanding your customer base and how they might be impacted is important to consider as well as the broader implications for our.

[00:19:11] Luke Austin: Yeah. So what this all all leads to is more competitive and more condensed timing around have to and what we're what we've been talking through with our clients and our team over these recent weeks is What the strategy is to be able to take that into account and combat some of the, the impacts that we see upcoming.

So, this will be kind of rolled out over these coming weeks, but what we're really focused on is the seven core moments that That exists in half to four brands driving wanting to drive predictable, profitable e commerce growth. So we're calling this the seven peaks and one valley of half to for those following along last year, we had the four peaks of the fourth, fourth peak.

So we had, here's our fourth peak around holiday BFCM. It's really comprised of four individual mini peaks, early bird, black Friday, cyber Monday, and then holiday. Well, this year, timing is everything, and it's more condensed, which means making the most of each of these pockets of opportunity, which is really seven peaks that are available and in the back half of this year and in the one valley around the election.

And so that's really what we're focused on is the offer strategy. Media allocation and the execution against those seven peaks to be able to to be able to take into account the increased competition and a condensed nature of this year.

[00:20:37] Taylor Holiday: great. And in the coming weeks, you're going to be hearing from all of our channel level experts from creative to paid media, to email and SMS, to discuss specifically how we are handling this in every channel. In true CDC fashion, we will have a very detailed set of plans. We will be publishing our annual snapshot of.

Hundreds. I think it's thousands now of brands, creative offer examples, and breaking down what offers people are running and having success with. And we will make sure that you feel as prepared as possible to take advantage of this weird, slightly abnormal, but sure to be exciting Q4 in e commerce, Luke, thanks for setting the table for us.

And we will see you all in the coming weeks.