Maximizing Black Friday Sales: Data-Driven Discounting Strategies

[00:00:00] Richard Gaffin: Hey folks, welcome to the Ecommerce Playbook Podcast. I'm your host, Richard Gaffin, irector of Digital Product Strategy here at Common Thread Collective. And I'm joined as I always am by Mr. Taylor Holliday. Same background as last time. So that hasn't changed this time around. Joined by Taylor, who's the CEO here at Common Thread Co.

Taylor, what's going on, dude?

[00:00:19] Taylor Holiday: You know, what's really hard about this background and it like makes me feel crazy sometimes is so I have these vertical lines and then I have all these like very hard right angles. And so like anytime anything slightly off, like, so if you look up here, there's like a slight gap and how horizontally straight it is.

Or if my camera gets slightly tilted, I feel like I'm in a crazy house. It makes me like literally almost throw up because I'm like, Oh wait, am I warped? Am I tilted sideways? Like, you know, that house at Knott's Berry farm, for those of you that live in Southern California where you walk in and just all the angles play with each other, man, it's really messing with my head.

So vertical lines really are a hard thing to put into your background. It's almost like you're showing everybody how off center you are all the time. 

[00:01:04] Richard Gaffin: That's exactly the same reason they tell you not to wear vertical stripes or whatever, because it makes you look fatter. 

[00:01:08] Taylor Holiday: That's right. It's like, it's like I turn I turned the grid lines on, on a, on like illustrator and I haven't turned them off and that's what it feels like. And so

[00:01:16] Richard Gaffin: Yeah.

[00:01:17] Taylor Holiday: can see exactly. It's like, oh, There's three lines there and no lines there. This is off center. Like, it's just like, I'm baking it very obvious.

Like there's one, two, three lines there. And only one, two, it's like, oh, geez, I'm like very obviously giving away my lack of symmetry. 

[00:01:33] Richard Gaffin: There you go. Well, well, the alternative is what I have behind me, 

[00:01:37] Taylor Holiday: Yeah. Yeah. 

[00:01:38] Richard Gaffin: absolute and utter chaos. So I don't know. 

[00:01:39] Taylor Holiday: it is starting to feel like that. You are in like your garage where you're just kind of stockpiling extra stuff. And that's where you've been sent is down into the basement. 

[00:01:51] Richard Gaffin: That's essentially what my my office in our new apartment has become. It's just a landing place for all of our knickknacks. So, there's probably, yeah, there's probably a fun game of I spy to be played by our viewers here. But all right. Well, so speaking of chaos, Black Friday is on its way. So what we want to talk about today is a couple of things.

So one our Black Friday, Cyber Monday holiday database. So what we want to talk about today is a couple of things. So one uh, our Black Friday, Cyber Monday holiday database. About for 2024 just came out. And what this is for those of you who don't know is every single year we sit down on black Friday, cyber Monday and take screenshots of the 700 biggest e commerce brands.

Black Friday offers, right? We go to their homepage. We take a picture of like their hero banner to give you a sense of exactly what everybody in the e commerce industry is doing vis a vis offers. So last year, last black, black Friday, we did this again, and we've just put out our new Database here.

And it's available to purchase right now for 99 bucks. That price goes up on October the 1st, which should be a few days after this comes out. So anyway, that's, that's all the, the pitching I'll do. But what I want to dig into a little bit more is a couple of the data points around what happened last year that made it different from the year previous.

And then I think we want to dig in a little bit too. How we think offer strategy is going to relate to 2024, given that this year is going to be different than past years for various macroeconomic reasons. So let's first talk about, I mean, there's a couple of interesting things here that I want to pull out and I don't know if you have any commentary on it, Taylor, but one is that the thing that we always track and that is always a surprise to us is that the sheer volume of brands that don't offer any discount whatsoever.

Now, again, a lot of these brands are larger. So there's a certain amount of brand equity that they need to maintain. And that may be or sort of brand what's the word I'm looking for. There's the idea of the, of the sort of brand value they need to maintain. So they don't do a discount. And then of course the other big category is site wide discounts and this year or rather in 2023, as opposed to 2022, it's sort of a shift where site wide discounts kind of increased and no discount decreased.

Now, what that may or may not connect to is something that we've been tracking in the DDC index for a long time and that you were just talking about before you hit record Taylor may play into 2024, what we're probably going to see in 2022 24 is that the no discount brands are going to continue to decrease and the sitewide discounts are going to continue to go up. So when you talk us through what you're showing us here as far as discounting goes.

So we've been tracking the discount rate, so discounts is a percentage of order revenue over the last four years. So going back to 2021 of the graph that I have on the screen is like all year long. What percentage of discounts are brands offering an aggregate across our data set? And this is, I think, a really important.

Telling sign and the general TLDR. For those of you that can't see is that every year from 21 to 22 to 23, the average discount rate has gone up and 2024. The discount rate is as high as it's ever been. So far year to date. What that means is that if we look last year into black Friday. What we see is that the discount rate peaks in the year, and it peaked at about 22 percent as the average discount rate across the store.

But right now we're trending about like, I'm just eyeballing this, so don't hold me to this number, but somewhere between 10 to 15 percent higher. All year long on discount rates than we did last year. So if you sort of apply that general go forward thesis, now I think there's an upper bound to this, that's just governed by margin, but I would imagine that we're going to see somewhere in the neighborhood of 24 percent discounts on average.

So there's just a continued upward trend. And this connects to an idea that I think is. Really important that we have been looking into as it relates to how we think about the effects of inflation on our industry. So obviously in the macro economy, there's a lot of conversation related to inflation, but I've had this sort of thought that.

The map, the e commerce industry actually has deflationary dynamics. So if we think about, you've ever seen the chart of inflation, where it's like any space that has government regulation or intervention tends to be highly inflationary. So the examples there are like university costs or medical care, or these things where there's like just massive inflation in price.

And then alternatively consumer products or highly competitive markets tend to be highly deflationary. And so if you look at that chart, what you'll see is like health care costs up and the cost of a television way, way, way down. And that's just because in our space, it's purely capitalistic, and that engine tends to drive people towards less and less price to gain.

To capture less and less margin to undercut competition. That's what competition tends to breed is it's consumer beneficial. And so I had this theory and I went to the team at particle. So particle, this is not a plug. This is just, I think those are, it's a smart team over there. And I wanted to do this sort of mini research project with them.

And what I had them do was. Pull a set of products, a consistent set of products across their entire database and say, cause this is what they do. They track price trends for products over time and to pull the average price of those products over time going back two years. So going back to 2022 Q1 and to see what has happened to those average prices.

And what has occurred is that The price is going down for those products. That's they actually exactly what I expected to happen is happening. So the deflationary pressure pushes the price of a common set of products down now, inflation in the United States peaked in Q3 of 2022. And you actually see that in the average price here too, for those that you're looking at, it peaked at 62.

And now it's all the way down to 53 for the same set of products. And then what brands try to do is because their supply chain actually Costs do increase. Those are actually commodity goods are subject to on the supply side and raw materials, a little bit more of the inflationary pressures that would brands do is when they introduce a new product, they try to move the price up.

So on the right hand side of this chart is. What you see is the price of the average price of new products introduced by this same set of brands. And you'll see that those prices are higher, but they also suffer from deflationary pressure as well. So a lot of this is, that is a way of saying part of the reason that discounting is up is a few different things is one increased competition.

Our, our. Category commerce has massive competition all the time for every marginal dollar. And that causes price to continually be pushed down to, is that we're seeing with these discount trends, that there is a price conscious consumer that is making it so that people want value, right? That's a narrative that I think people really care about.

So when you combine these two things, and I'll stop sharing now. What that leads to is a value conscious environment where I think that what you're going to see is that your ability and the discount rate and offer that you choose is going to have to take into consideration the surrounding context of what other offers might exist and to consider that they could be higher than they've ever been before. 

Gotcha. Okay. So, so is the takeaway then like strategically for this year, just as just to keep slashing or what's like, how do you approach this? Intelligently, I 

[00:09:15] Taylor Holiday: it's a great question. Cause I think that's like the, the lo fi answer, which is just like, okay, well then I'll have the best offer. But I think it's really a question of how do you differentiate your offer so that it feels like more value than what anybody else has? Because I think it's sort of a race to the bottom to just go, okay, last year was 25.

This is 30 next year's 35 next year's 40. But instead, what I think there's an opportunity to do is I'll give you an example. We have a client who They do an early access sale where everybody who purchases over X dollars gets a free pair of leggings for a 48 hour period. And so the perceived value of a pair of leggings for this business is like 150.

But the actual cost of goods is obviously much less than that. so. the customer's perceived value is really high, but the actual discount rate becomes lower than if they had increased the percentage off sale. So, that's a way to think about what is the perceived value to the customer and how do you play with those dynamics relative to the actual cost to your business.

[00:10:15] Richard Gaffin: so. Yeah. So I guess it's, it's interesting because like looking at the data from our BFCM offer database here, it's clear that like the most, well, the 3 most common discounting types. And this is, this is held, I think, for the last 3 or 4 years. I've been again, no discount whatsoever, a sitewide discount of some sort.

And then third would be a discount on select SKUs. But I think the common thread between all three of those things is that they're very general 

[00:10:44] Taylor Holiday: Mm hmm. 

[00:10:45] Richard Gaffin: because for the obvious reason that that's the, those three are the easiest to execute the other kind of like categories that we have here, like. Tier discounting or BOGO of very, or buy three, get five, whatever some sort of free gift, some sort of subscription.

So things that are a little bit more complicated to execute. But as part of what we're saying here is that like there needs to be some additional creativity, creativity in that, like the sitewide discount can't just get deeper and deeper and deeper. You have to come up with a different way to connect with people in this period or something 

[00:11:18] Taylor Holiday: Well, Yeah.

I mean, I think you have to make some choices, which is can you, Mm hmm. Can you win at the discount at the higher discount? Can you still make money? And part of that's margin question for your business. Some businesses can sustain a deeper discount than others. And some of you have to be more creative, right?

You have to actually find alternative solutions. In either case, I think what you're getting at is that clarity still matters is that we don't want it to feel complex to understand or to participate in. You know, there's this growing trend. I was at a conference this week up at the commerce roundtable and there was two talks that I think kind of struck me as like, Ooh, I think we might be losing our way a bit as an industry.

One was somebody speaking on the subscription side of things. And he was showing this chart about how every time you send a reminder to customers about that, their subscription is about to ship it massively decreases, or it massively increases your unsubscribe rate by basically making the customer aware that they're paying for something they go, Oh dang, I didn't want to do that.

And they unsubscribe. And so the marketer's solution to that was like, Well, let's just make it a really pretty email where the button to do that is sort of offset and hidden by a bunch of other options that we show them. And you just start to realize like, Ooh, like we're not in that case, what we're trying to do is sort of obfuscate the reality that the customer doesn't want your thing.

And we're not actually addressing the core problem, which is like, do they want and need your thing? Instead, you're almost trying to trick them into continuing buying it, even though they may not need or want it. And the other, the other one was like I've heard a lot of talk about how some of these bigger businesses now have these really complex schemes that are like they've switched from their offer pop up to being instead of 20 percent off.

It's like. Cash back, but the customer doesn't really know how to engage with the cash back and they just use it less. So it actually delivers them less value. And so you end up making more money because the customer doesn't redeem the cash back as frequently or doesn't know how to, or you have these paid membership programs where you get people to pay for a membership, but then they don't utilize the benefits as much.

And so you're just, and anytime I hear about these things, what I hear is like extraction. Okay. Is that you've got, you've got these customers and you're basically trying to figure out how to take more from them for the sake of your growth versus this like value exchange that both sides feel really good about.

At the end of the day, if I look back on my payment with your business and I go, man, I, I feel kind of like I paid for something and I didn't get anything that is going to eventually be a net negative signal and you're removing from yourself, the responsibility of like doing awesome stuff that make customers happy.

And so I think there's, there's this other part of this offer. Which is there'd probably be a temptation to come up with like a clever way to make them feel like they're getting something, but they're not and make more money. But I think you really got to ask, like, what would be a freaking awesome experience for the customer and help you make money?

And I know that's like a little philosophical, but it's just something I noticed as a trend. It was like, Ooh, as people get desperate for money and margin, there starts to be this temptation to try and extract value from the customer in ways that are about sort of obfuscating the what they're really getting. 

[00:14:28] Richard Gaffin: Or making it feel, making it feel like a good deal when it really isn't or 

[00:14:32] Taylor Holiday: That's right. 

[00:14:33] Richard Gaffin: think. Yeah, well, so, so two points on that. Like one, so we talked to, or I talked rather to Tommy lamb, who's our director of email and SMS here, CTC for our most recent episode. And one thing that he brought up that I thought was really interesting is this idea of being able to almost circumvent the site wide, you know, Black Friday, Cyber Monday discount offer by like very, very tight segmentation on your email, where what you're doing is providing specific people based on specific behaviors, a very specific offer that will feel specific to them.

In other words, like what you're doing is breaking through the noise by only speaking to a small group of people or a smaller group of people who will understand what you're saying to them a little bit more clearly. But then, of course, you're You have a ton of different segments that you're able to speak differently.

Now, of course, that's much more complex and requires a lot more setup, but maybe that's the type of thing that needs to

[00:15:25] Taylor Holiday: Well, and I think that's you're going the right direction, which is that I want to actually understand you and bring you something of unique value to you in a way that you'll feel cared for and excited about. And so I think you're right. There's complexity in that. But. I do think that the opportunity is to be again, just this idea that you're a very value forward that says like, Hey, in this moment where we know we're competing for your attention amongst everybody else.

We've understood you and now we're bringing you the best offer possible and it's better than what everybody else gets. Like, I think there's this idea that maybe 20 percent off sidewide is a great base starting point for everybody. And then there's this segmentation in your customer list where it's like 35 percent off on a subset of SKUs for people you know, care about those things, you know, like, or Hey, we notice you've liked this.

We. We believe that this is the most common next tried product. You should try that. Here's an amazing 50 percent off discount because you can get them into multi category purchasing. And so, you know, there's value in that. So I do think that While clarity for the consumer is important, that doesn't necessarily mean simplicity on your side as the operator.

Those are different things. You can have a complex segmented offer system that still ends in the consumer's inbox with clarity. Right. And so I think just don't conflate those things. Don't conflate the idea that we're saying clear for the customer and easy for them to engage as meaning it can't be complex on your side.

That's really about your ability to execute against it. Well, at every different stage of the customer journey and the different various customer personas that, you know, you have access to. 

[00:17:02] Richard Gaffin: which is why, of course plan offer planning needs to begin now or needs to have already begun. In order to, to, I think, like achieve that executional level that you need to achieve, because, I mean, it's easy enough to fall back on 20 percent sitewide, but if that's not going to cut it this year, then.

You know, a lot more thought has to go into it earlier, I think. 

[00:17:20] Taylor Holiday: Yeah. And I, I want to shout out to like, just. Things that cut through the noise and some of the times that is offer, but there's also like ways that. So, one of our clients to actually, you know, two of our overlapping clients, like liquid death and plunge just launched a a cold plunge together. And it's like, free.

It's like freeze to death. Cold plunge, you know, very, very liquid death on brand. And I just thought to myself, like, that's really cool. And it was a cool visual. And I think again, there's this idea that Scarcity is another thing where part of the thing that people could be getting on Black Friday is an offer that is time bound or a set of things that are scarce that offer into it some sense that There's a unique interaction for me to be had versus the generalized opportunity that exists for everyone. So I think all of those are ways to spike the engagement and interaction with your business in a period. That's going to be full of discounts and probably deeper discounts than we've ever seen before. If the data is right, 

[00:18:20] Richard Gaffin: Yeah. So, and so one other thing I want to point out then jump jumping off that, or that point specifically, is that another real value of this offer database is that we provide, like I mentioned up top, more than 2000 screenshots of everybody's homepage. On black Friday and on cyber Monday, what you get out of that is specifically not just, so there's the general data that like, okay, 30 percent of brands didn't have an offer at all, but the way in which a lot of those brands didn't have an offer was executed differently across all of them.

So for example, certain brands saying we're not doing an offer because we're making some sort of statement about, about black Friday, that tends to happen. Or of course I can't remember what they did last year, but cars against humanity, the way that they execute their offer every year is, is pretty Completely off the wall, which of course is completely on brand for them as well.

But what you get from that is like a bunch of very specific creative inspiration around seeing other people's minds at work, thinking about how to be creative about expressing their brand in this particular way. Which I think is another huge value too, because yeah, not everybody can, let's say, I don't know.

Dig a one inch hole in the ground for every purchase that they get like cards against humanity does but there's ways that you can think through how like maybe your brand can speak specifically in this moment.

[00:19:36] Taylor Holiday: I actually, there's something there too. And, cause one, I think that when we talk about creative ideation, think of that set of 7, 000 screenshots as the beginning of the source material for your own ideation. Not for the sake of copying, but to think about the different directions people go.

And so even what you just did, the sequence of it, Richard, is, oh, Karts Against Humanity, dig one inch. I think about, like, This idea that what are the sort of dynamics that are interesting right now? It's like, Oh, okay. Live on Instagram and Tik TOK. Is that what if there was some way in which something was happening every time somebody bought something and it became this viral compounding idea.

That's like live on Tik TOK. Every time someone bought. Miracle mini bomb. We started building this giant thing. And then at the end of it, it was all done in this cool, you had an artist doing something and it was like, yeah, like there was actually an incentive for people to buy, to create the interaction that was cool on social.

Like those kinds of ideas are what are rooted in seeing what other people are doing in a way that you just think about. But I really Do think that depending on how big of a swing you need to take, if 20 percent off site wide sale, then by all means. Go out and get it. But if you need to, to fight through it in a way, I think that that's where this is great source material to go find out some different ways in which people are doing cool things.

I 

[00:20:55] Richard Gaffin: just a quick question on that? Like, do you have any sense of like, what what types of brands are the ones that are going to need to really get creative here that I have to like, put a little bit more thought into their offer than they usually would.

[00:21:06] Taylor Holiday: mean, I, I think that there's a reality for a lot of brands that they're looking at this moment to define their year, that the profitability is not guaranteed. And it's a battle yet to be won. And we're depending a lot on this moment to accomplish it. So I think being really thoughtful about the economics of this moment, which how you anticipate that to affect.

You know, the efficiency of your acquisition and making sure that you get where you need to go is the state for a lot of businesses this year, probably and if that's the case, then, then maybe you need to reduce the variance and you, you aren't one of the ones that wants to go wildly crazy. Maybe, maybe you're actually in the opposite spot, which is that you have actually some banked excess capital.

You've had a really good year. And so you want to find out what would happen if we did something different. Different where if it busted a little and it was an 80 percent outcome, like you've still had an awesome year. I think that it's hard to prescribe who exactly should be wild and creative. But what I would say is those kinds of actions tend to have wider error bars on the expected outcome.

So if you need, whereas like 20 percent off site wide, you could probably model within a pretty narrow band of impact. And so I think it's just, I would say that someone who can is open to for whatever reason, whether it's because they need to unlock the upside or they're not afraid of the downside would be the person that would go out and try something more novel. 

[00:22:26] Richard Gaffin: cool. So I think one conclusion I think makes sense to draw from this is that, like, we can't, and in some ways, like, I wish we could give you some more specific tactics around, like, this is the type of offer that's going to work. But really, the only thing that you can draw from is, in a lot of ways, the historical record to see what people have done in the past, what's worked in the past and use that as inspiration to think through.

Exactly what you were going to do this time out. And that's what this database provides for you guys. So anything else, anything else you want to hit any sort of final bottom line point on offer strategy

[00:22:57] Taylor Holiday: No, I think, I think to understand the context of this data is really important, which is to say that discount rates are up, there's pricing pressure for the customer and you have 7, 000 available screenshots for you to help you solve that problem. And so I would go and get like 99 for 

[00:23:13] Richard Gaffin: real quick, 

[00:23:13] Taylor Holiday: 000 screenshots.

Isn't the same. Sorry. 

[00:23:15] Richard Gaffin: it's pretty good. It's 2000 screenshots, 2000, 700 brands, 2000 screenshots for 99. It's a steal. Okay, cool. All right, folks. Well, I think that's going to do it for us this week again, to buy the black Friday, cyber Monday. Offer database, just go to commentaryco. com click learn from us, find the BFCM product there and you can purchase it before October 1st for 99 bucks.

All right, folks we will talk to you next week. Goodbye.