For consumer brands, the holiday season is go time. The high-energy, two-month period that starts on Black Friday and Cyber Monday (BFCM) can account for as much as 19% of a brand’s total annual retail sales, according to the National Retail Federation.
Even as brands have visions of profits dancing in their heads, there’s another side to the holiday season they must consider. Holiday shoppers tend to be the worst when it comes to customer lifetime value (LTV). Too many shoppers will buy once from your brand and then disappear. They might come back next year in some cases. Other times, they’re gone forever.
How do you take one-and-done shoppers and turn them into loyal brand advocates? The answer lies within the treasure trove of commerce data that you collect.
Let’s examine four ways that your commerce data can help you craft the right pre-holiday strategy and drive repeat post-holiday business.
Pre-holiday: Optimize your marketing spend
Proper segmentation drives better personalization during the holiday season.
In light of growing uncertainty over the effectiveness of digital advertising, brands must carefully monitor their marketing spend data in November to see whether they’re on track for success or failure over the holiday season. Your ROI should increase the closer you get to BFCM. If it’s not, you need to adjust fast to optimize your holiday profit margin.
At a high level, you want to monitor the effectiveness of each marketing channel over the holidays. One of the most helpful metrics to track is return on ad spend (ROAS), a barometer of efficiency that shows how much revenue you generate for every marketing dollar spent. Break your ROAS down by channel and watch for any sudden fluctuations or red flags so you can make adjustments in real time.
To see whether your marketing efforts are driving profitability and bringing the right customers to your website, you can go a step further by running a cohort analysis that measures LTV:CAC ratio. This calculation will give you valuable insight into your customer lifecycle so you can identify the ROI for each dollar you spend on customer acquisition.
To do so, you’ll need to create time-based cohorts of “customers from first time of purchase” and compare them year over year. Because the exact dates of BFCM are fluid, we recommend starting by making Black Friday day 0, then counting backward (-1, -2) pre-BF and forward (+1, +2) each day after BF. This also works for performing an LTV:CAC cohort analysis for Christmas sales using Christmas as day 0.
Once you have the results of this analysis, you’ll know whether the customers you spent money to acquire last holiday season were profitable, if you’re just breaking even or if you’re losing money on them. You can dive deeper to understand whether your holiday marketing campaigns were successful in engaging and converting customers who will purchase again and drive higher LTV, and then use those insights to make changes to enhance customer loyalty this holiday season.
Pre-holiday: Set up segmentation to drive campaigns and sales
Proper segmentation drives better personalization during the holiday season. Start by reviewing your customers’ purchase data from the last holiday season, segment it by product purchased, then, starting just after BFCM, send customers personalized “buy again” offers featuring the same products or complementary products.
You can extend personalization by also segmenting shoppers who purchase using discount codes versus those who don’t. Then you can target different campaigns at each group to get the maximum value from non-discount-code shoppers, retain repeat customers who favor a discount, and keep your margins healthy.
Once the holiday season begins, segment consumers who shop for themselves from those who buy for others. A simple way to identify this is to see if the shipping address matches the buying address. You can also ask consumers this question in a survey embedded within order confirmation emails, which have an open rate of about 60%, according to Omnisend.
Once you segment these two groups, dive into the data. Identify whether a gift buyer is a more loyal or less loyal customer than those who buy for themselves. Depending on the results, you may choose to send a free sample to gift buyers to incentivize them to buy again. Another tactic is to send gift buyers a personalized message recognizing their generosity.
Post-holiday: Build a winning retention strategy
Brands focus so much on winning the holiday season that they often forget the importance of what comes afterward. This is especially true for founders or heads of growth who see the holiday season as prime time to expand and promote their company.
While maximizing holiday profits is paramount, it’s even more beneficial to take your holiday shoppers and turn them into repeat customers for the other 10 months of the year. Doing so will keep your business healthy and profitable all year long.
Start by examining the cohort of customers you acquired during the last holiday season. Then look for clues that differentiate loyal customers from the one-and-dones. Consider the channel they came from, whether they used a discount code, how many visits they made and how long it took them to make a purchase.
Next, look at their actions in December and January regarding returns and exchanges. Did they interact with your email campaigns? Did they answer a survey you sent them in an order confirmation email? Use all of these clues to determine which actions drive LTV.
Contact any new customers you acquire this year shortly after the holiday season ends to gain quick wins. Review what they purchased, identify the items they bought together and use the data to create real or virtual product bundles. This will help you further engage holiday shoppers and clear excess post-holiday inventory.
Bonus tip: Look at your historic customer data and identify the time between customers’ first and second purchases. If, for example, data shows that a percentage of customers who buy facial cleansers return within 30 days to buy moisturizers, then you can create promotions that offer them moisturizers at day 25. These types of reengagement campaigns encourage repeat purchases, cross-sells,and upsells that will drive LTV and increase average order value.
Post-holiday: Win the returns game
Returns are a harsh reality for brands, and they’re magnified post-holiday. Studies show that 30% of all products ordered online get returned. Yet each return is an opportunity — 92% of customers said they’d buy again if a brand makes its product return policy easy.
The path to creating a solid post-holiday returns process begins during the holiday season. Start by reviewing the volume of returns you received in past post-holiday timeframes based on the number of orders. Then, take that number, add the number of support requests (i.e., email, chat) you received on those same dates and map that number as a percentage of sales. Your goal is to get to a place where you can estimate the number of post-holiday returns you expect based on how your holiday sales are going this year.
Once you understand your data, staff up smartly so you can handle the post-holiday return deluge. Consider whether you need more (or fewer) customer service representatives in 2023 to handle customer emails and returns than you did in 2022. Set your staffing levels with an eye on efficiency. The more seamless your returns process is, the more you’ll build customer loyalty.
In addition, determine the actions you want customers to take when they choose to return a product. If you want your customers to send your products back to you, it may make sense to offer free returns or to incentivize return items with bonus credits toward a future purchase. If you want to encourage customers to exchange products instead, you may choose to charge for a return but not for exchanges, a tactic multibrand retailers like DSW and JCPenney are embracing. You can then offer a credit that prompts consumers to exchange and buy a more expensive item.
Prep for holiday, then go further
You already know that it takes plenty of tenacity to achieve success. You work so hard to attract new customers during the holiday season that you don’t want to lose a single bit of traction when the calendar turns to 2023. Consumer brands who know how to use their data to maximize LTV will win the holidays and set their brand up for growth well into the new year.