With inflation at its highest in four decades, both paid media budgets and consumers’ wallets face economic stress this holiday season. Despite these unprecedented challenges, eCommerce marketers can ensure success during peak season and in the long-term. To help you execute an effective holiday performance marketing strategy that is resilient to today’s economic challenges, we’ve pulled together our top tips using data from leading retail clients. Read on to ensure a merry marketing season (and beyond).
1. Use CLV to determine if holiday discounts are worth the effort
Holiday shoppers are conditioned to look for steep discounts and doorbuster sales. Yet, if they are first-time buyers at your store, these purchases will obviously have lower customer lifetime value (CLV) than those who make their first purchase at full price. Over their customer lifetime, bargain hunters may buy only once or only purchase discounted products, lowering profit margins. Promoting holiday sales makes this situation even more complicated — you risk spending ad dollars on shoppers only interested in sales, holiday shopping, or both — not strong indicators brand loyalists.
We suggest changing your main KPI from ROAS to contribution margin, or even better, CLV. Because it reflects both the current and future value of your customers, CLV provides more visibility into the long-term impact of running holiday sale campaigns. In the case of a leading clothing and accessories retailer, the residual CLV over 23 months after shoppers made their first purchase during Black Friday sales was 11% less than those that made their first purchase outside the holiday season. At 14%, this difference was even more pronounced for another fashion retailer.
Takeaway? Analyze CLV before investing aggressively in holiday marketing campaigns, particularly in the current climate when ad budgets are tight. For more tips to manage paid media budgets in economic downturns, check out our guide.
2. De-average to target a wide range of customers
Beyond those low ROI bargain hunters and gift givers, new high-value prospects also encounter your store during the holidays. Our power hint: Be sure to separate campaigns between lower-value and higher-value prospects. Otherwise, you risk overspending on one cohort and underspending on the other.
To help, try de-averaging. Just follow these two steps:
1) Split segments: Separate segments that perform better than average into their own high-performance campaigns. These segments may win more loyal customers and generate carts with higher order margins or lower returns. It’s key that they have their own adaptable budgets so that the high-performers get their own targets during the season and can continue running post-holidays.
On paid social, try running dedicated holiday campaigns targeting lookalikes of your high CLV customers. For shopping, try using dedicated campaigns that only promote full-price products.
Unsure how to create this segmentation? Get in touch to learn about first-party data activation.
2) Refine conversion tracking: Bring more precision into your conversion tracking by accounting for margins, predicted returns, and new customers. With this approach, the ad platforms’ bidding algorithms get more precise signals. Also, you can upgrade Google’s tROAS to CLV so bidding is higher whenever a high-value prospect is searching.
3. Campaign to increase average order values (AOV)
Consider tactics to drive up your campaigns’ average order value (AOV) from new customers. Play up consumers’ economic concerns and incentivize them to spend more by offering deeper discounts for larger orders. At the very least, offer free shipping and a free gift once they meet a threshold of spend.
Highlight these discounts in ad copy, particularly using site extensions and headings emphasizing discount numbers.
Embracing discounts may be particularly effective if your holiday season AOV is already higher vs. the rest of the year. This could be an indication that consumers are already stocking up this season, and may continue to do so once you highlight discounted prices.
** Disclaimer: be careful about ad targeting these customers the rest of the year given CLV patterns in point one.
4. Make sure you’re truly ready to promote Black Friday deals
With holiday sales trending earlier and earlier (October 2022 saw Target “Deal Days,” Walmart “Rollbacks and More,” and an Amazon Prime-Day event, and more) it may be tempting to jump on the pre-pre-pre Black Friday deals bandwagon. When your automated marketing tools get involved, the pressure intensifies.
We saw one retailer fall into this trap when a leading search engine suggested bidding on Black Friday keywords even before the eCommerce brands’ relevant landing pages were live. After activating keywords like “Black Friday” and “Black Friday + Category” the retailer’s ads received low-quality scores, which had a high cost per click.
Unfortunately, capping bids did little to remedy the situation. The retailer suffered low click-through rates (CTR), bringing little traffic meaning audiences were too small to serve.
Bottom line? Don’t try to keep up with the Joneses and get swept away by automated bidding suggestions before you’ve got your ducks in a row.
Want some bonus tips on managing Google ads during a recession? Download our guide.
5. Second guess the power of urgency
Consumers appear less motivated by urgency than they did pre-pandemic, which marketers should consider when crafting campaigns. We noticed this mindset after one retailer, in hopes of creating urgency, changed its standard RSA ads to use a holiday countdown clock. Not only did the ads poorly perform, with less impressions and lower CTR, they also cost more.
Also, consider practical reasons consumers feel less urgency:
- The rise of remote work gives more flexibility to shop at any time. For those in the office, more than one-third (36%) use a secret browser according to a 2022 survey by Sitecore.
- Discounts creeping into October and September also mean consumers are accessing holiday deals for longer periods of time.
While we’re excited that you run with our holiday performance marketing tips to conquer the 2022 holiday season, they also should help improve your year-round paid media strategy, particularly those related to CLV. For more, check out Crealytics paid media services, or, talk to us about your needs.