Should Your Business Participate in Black Friday?
A few of have asked me whether you should take part in Black Friday or not. So I’m taking the opportunity to lay out a few points to consider when thinking about Black Friday.
Firstly, this global shopping phenomenon can’t be ignored, it’s everywhere each year. It has the potential to boost your sales, visibility and customer recruitment, but it also presents challenges that need careful consideration before you dive straight in.
Black Friday does 3 important things for your business:
Converts followers or people on your email list who have never bought before.
Rewards your existing customer base with a discount, encouraging them to buy again, which increases your lifetime customer value.
Combines customer recruitment and retention strategies to drive long term growth.
Let me break down why these things are so vital and how Black Friday can be a strategic opportunity for your business.
1. Understand Your Margins
Before diving into Black Friday, it’s crucial to understand your profit margins. Consumers expect significant discounts, and the pressure to offer them can be intense. For small businesses, this can be a double edged sword: attract more customers but potentially at the cost of profitability.
This is by far the loudest thing I hear each year from business owners. But…it’s usually said by those with limited understanding of their figures.
Ask yourself: Can your business afford the discounts expected on Black Friday?
If deep discounts threaten your margins, consider alternative strategies like offering value added promotions or bundling products instead of slashing prices. This way, you can still participate without sacrificing profit.
2. Evaluate Your Capacity
Black Friday can result in a surge of traffic. While this sounds promising, it can strain your resources if you’re not prepared. Increased demand can impact your stock, fulfilment processes, and customer service.
Depending on how your business operates - for example are you a maker versus buying in stock (at unlimited quantities)? If the production of stock depends solely on you then you need to consider capacity much more.
Ask yourself: Do you have the resources to handle a potential spike in orders?
If it’s just you or a small team then focusing on providing excellent service to your existing customers might be more sustainable than overstretching.
3. Consider Your Brand Positioning
Black Friday is synonymous with deep discounts, but does this align with your brand’s image? If your brand is built around high quality, premium products, offering large discounts might dilute your brand value.
Ask yourself: Will participating in Black Friday undermine your brand’s positioning?
If you’re concerned that discounting could harm your brand, consider other ways to leverage the event, such as offering exclusive products or limited time bundles.
4. Assess Your Competition
The marketplace is crowded on Black Friday and competing on price alone is challenging for small businesses.
Ask yourself: How can you stand out from the competition?
Focus on what makes your business unique, such as exceptional customer service, locally sourced products, or a loyal customer base. Highlight these strengths instead of engaging in a price war. This particularly applies if you are a re-seller as competing on price is the main thing you have so by also pulling out your key USP’s this can put you in a more powerful position.
5. Customer Recruitment and Retention: The Heart of Black Friday
Black Friday plays a crucial role in both customer recruitment and retention, the two pillars of long term business success. To understand this fully you need to understand your lifetime customer value.
Customer Recruitment: Black Friday is an excellent opportunity to convert followers or email subscribers who have never purchased before. Even if you offer a lower margin initially, these new customers can become loyal buyers, providing significant long term value. A growing customer base is essential for your business. Without new customers, you’re left to resell to your existing ones, which can be limiting in the long run when they dry up.
Customer Retention: Once you’ve acquired new customers, the next challenge is to keep them coming back. Your customer retention strategy - ranging from frequent new product launches to smart pricing - ensures that first time buyers turn into repeat customers. Retention isn’t just about offering more products though; it’s about giving customers a compelling reason to return, such as quality, service, or complementary product offerings.
6. Reason to Buy: The Black Friday Advantage
Both customer recruitment and retention require trust and nurturing, but they also require a compelling reason for customers to buy. Black Friday offers that reason through:
Fear of missing out (FOMO)
The influence of others (social proof)
Positive reviews addressing customer anxieties
Urgency (time sensitive offers and potential sellouts)
Compelling offers and discounts
Black Friday capitalises on these elements by creating a buying frenzy with minimal hype building needed - society does that for you. The sheer scale of the event sets the stage, and even those who claim to dislike Black Friday often make a purchase.
Ask yourself: Can Black Friday help you recruit new customers and convert existing ones?
If executed correctly, Black Friday can inject new customers into your funnel while encouraging existing customers to spend more, a win-win situation.
7. Measure Potential Risks vs. Rewards
Finally, it’s essential to balance the potential benefits of participating in Black Friday with the risks. While increased sales are enticing, you need to consider possible downsides like margin erosion, overextending your resources, or damaging your brand’s reputation.
Ask yourself: Do the potential rewards outweigh the risks for my business?
If yes, a well planned Black Friday strategy could boost your sales and attract new customers. If not, exploring alternative strategies might be wiser.
Lifetime Customer Value: The Bigger Picture
To make Black Friday truly effective, it’s vital to understand your Lifetime Customer Value (LCV). LCV is a critical metric that helps you determine how much each customer is worth to your business over time. Knowing your LCV allows you to make informed decisions, particularly when recruiting new customers through ads. If your LCV is significantly higher than your average order value, Black Friday can be an opportunity to drive profits while growing your customer base.
LCV Calculation: LCV = Total Revenue (last 12 months) / Number of Customers Who Purchased in that Period
This figure represents how much each customer is generally worth to your business over a year. Understanding this metric ensures that your Black Friday efforts are not just about short-term gains but also about long-term growth.
Make an Informed Decision
Black Friday can be a powerful tool for small businesses, but it’s not a one size fits all solution. By understanding your margins, evaluating your capacity, considering your brand positioning, and recognising the importance of customer recruitment and retention, you can make an informed decision that aligns with your business goals.
Remember, it’s about what works best for your business. If Black Friday doesn’t align with your vision, that’s okay. Focus on strategies that do. But if you choose to participate, do so with a clear plan and an understanding of the bigger picture, both in terms of immediate sales and long term customer value.
Whether you dive into Black Friday or take an alternative route, the most important thing is that your actions are aligned with your overall strategy and business goals.