Cyber Monday Tip #2

Continuing our series on Cyber Monday, the giddy online holiday designed to give away gross margin so that the media have something to talk about ... let's move on to Tip #2.

Tip #2 involves existing customers and new customers. In most of my projects, Cyber Monday does not yield a significant increase in new customers, compared to the rest of November/December.

• % January - October Buyers New = 45%.
• % November Buyers New = 57%.
• % Cyber Monday Buyers New = 55%.
• % December Buyers New = 53%.

The scenario painted above is typical. We see that customer rates are similar through November/December.

Let's assume that you promote more heavily on Cyber Monday than the rest of November/December.

• November Buyers = 38% Use A Promotion.
• Cyber Monday Buyers = 90% Use A Promotion.
• December Buyers = 42% Use A Promotion.

In this situation, you begin to expose yourself to a challenge. You essentially acquired customers via promotions instead of a more reasonable mix of full-price purchases and promotions.

I like to run 12 month repurchase models - measuring how much customers spend on full-price and discounted products. Here's a typical outcome for full-price demand.

• November Newbies - Future Full Price Demand = $40.00.
• Cyber Monday Newbies - Future Full Price Demand = $27.00.
• December Newbies - Future Full Price Demand = $38.00.

And here's a typical outcome for future demand tied to a discount/promo code.

• November Newbies - Future Demand Tied To A Discount Code = $25.00.
• Cyber Monday Newbies - Future Demand Tied To A Discount Code = $36.00.
• December Newbies - Future Demand Tied To A Discount Code = $25.00.

Remember, in our example, we brought on newbies via a promotion during Cyber Monday. And while future demand is largely similar (counting demand at full price, and demand tied to a discount/promo code), demand shifts to discount/promo codes. This causes the demand to be less profitable, causing us to conclude that shifting demand into Cyber Monday is not optimal for this hypothetical business.

Of course, your mileage will vary.

But how do you know unless you run the analysis yourself?

Contact me (kevinh@minethatdata.com) for your own Cyber Monday analysis.