The Pros And Cons of Black Friday Sales for Businesses

As Black Friday approaches and the holiday shopping season gets into full swing, you may be weighing the pros and cons of running a Black Friday promotion for your business. 

In this episode, I'll take you through my personal considerations as a business owner. I'll discuss whether Black Friday sales are customary in my industry, the potential profitability of such offers, and how my existing wholesale pricing structure might influence my decision. 

Drawing from examples and practical insights, I'll guide you through the decision-making process, particularly tailored to businesses like mine that offer distinct products or services.

By the end of this episode, you'll have a more informed perspective on whether a Black Friday promotion aligns with your business model and values.

So, let's dive into the exciting and challenging world of Black Friday for businesses. Tune in to learn about the potential advantages and drawbacks of participating in this holiday shopping frenzy.

Specifically, this episode highlights the following themes:

• Unique sales tactics that protect pricing integrity
• The psychology of customer perception in discounted versus regular pricing
• Maximizing sales without compromising the brand

Want to give your podcast the boost it needs to stay ahead of the competition? Check out honestpodcasts.com and take the first step toward achieving your podcasting goals!

And if you have a guest in mind who you think would be a great fit for this show, drop me a line at hello@honestpodcasts.com. 

Transcript

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With Black Friday right around the corner and then Cyber Monday and Small Business Saturday and all the days that are coming up for holiday shopping. You may or may not be asking yourself, should we run a Black Friday promotion? Should we get in on the action when a lot of people are thinking about buying things for the holidays, especially if you have a consumer brand or product or if you have a service or an offer that makes sense to potentially offer Black Friday sale or bundle on. Well, in this episode, I want to break down the pros and the cons of putting your offers and your products on sale and why you may want to do it and why may best for you to stay put. Welcome back to the Honest Marketing podcast, where you learn proven strategies to grow your business without selling your soul. I'm your host, Travis Albritton, back for another solo episode, and we're going to be digging into discounting, the psychology of discounting and when it makes sense to do so and when it doesn't make sense to do so. Because putting something on sale, there are some second and third order consequences whenever you do that. Some of them are positive consequences. Don't get me wrong, there's a reason people do it, there's a reason Black Friday exists and why a lot of companies get in on the action, but there's also some negative ramifications as well. So you just want to go in with both eyes wide open, knowing what to expect and knowing what could potentially happen to your company, your brand, your business, if you decide to offer a Black Friday sale. And I'm going to offer lots of examples and things to think about. So you have some reference points to consider when you're thinking about this for yourself, for your own business. And I'm going to go into this conversation imagining a business that offers products and services but is not in the necessarily consumables CPG side of the market. So you don't sell toothpaste. You sell a specialty product that appeals to a certain kind of person in a particular way. So you're not a commodity product. You can't just find you on the shelf on Walmart, but there is a specific reason people seek you out for what you do. So the first question that you should ask when you're trying to think through, should we do a Black Friday sale or some kind of promotion? Is is that standard in your industry? Do people expect businesses like yours to have Black Friday promotions? So for some industries it's very common. So if you are in the electronics industry or in the software industry, or even if you do memberships and courses, it's pretty common to have some kind of Black Friday sale or promotion leading into the holidays. And then depending on what kind of product you have or what kind of offer that you have, you'll discount it accordingly. And so if it's pretty standard for companies to offer 30 40% off or to do some kind of special one dollars, try us out for a month trial, then you might want to look at that as an indicator. That because other companies are doing this and have had success with it over the years. It may benefit you to consider that as well. So that's the first question to ask, is it standard? If it's not standard, there may be a reason for that. And by doing some further self reflection, you may uncover what some of those reasons are. Because the second question that you should ask yourself is will this offer this sale be profitable? Because we can often think that the way to grow our business is to increase sales, but it doesn't necessarily mean that we're increasing profits when we do so. Sometimes when you increase volume, that also increases the overhead to fulfill that extra volume. And so if you're getting a bunch of new sales from a bunch of new customers, but you also have to pay for warehousing and staff associated with that and shipping costs. And if you're marketing this sale and promotion, there's going to be a cost associated with that. So you also want to make sure that you're mindful of how much it's going to cost you to fulfill all these products and services that you're offering at a discount and if it will still be profitable for you. Now, there's two ways you can look at this. You can look at this as short term profit, as in when we offer this product or service at the point of sale, we are making money. That's one way to look at it. The other way to look at it is at a more long term view, especially if you have a business that does a lot of recurring revenue or you have a lot of returning customers. Where you have a customer. Acquisition cost kind of baked in that you know about how much it costs to get a new customer and you know how long it takes for that customer to become profitable. And so by offering a discount, you may be able to get more customers and then you just tack on a couple of extra months to that break even point where you're pretty confident that they will become profitable. So depending on how you calculate profit in your business and what makes sense for you in your cash flow situation, you may or may not want to run a Black Friday promotion to get more sales, get more customers in the door interacting with your products and your services. The third question that you should ask is if you're in an industry or if you as a business already have wholesale pricing. So wholesale pricing, if you're not familiar with it, is pretty common in retail where a manufacturer of a product, let's say it's running shoes, will sell a $100 pair of running shoes to a Dick Sporting Goods or Academy Sports or your local Sporting Goods Store for$30 to $40. So they'll sell it to Academy for $30. Academy can turn around and sell it for $100 and make the profit. And that's how they make money. And so if you already have wholesale pricing baked in to the way that you do business, then you can offer a Black Friday sale that mimics some of that. Because with wholesale pricing, you have profit built in. That's why you have it at wholesale at that particular price, so that the reseller can make money and you can make money. And so if you already know what that number is, then you can offer a Black Friday Sale all the way down to that number, knowing that you're going to make money, because you've already calculated that at that wholesale price, you can do so. So those are the questions that I would first and foremost ask of you and of your business when you're thinking about a Black Friday sale and if it makes sense for you. Now, let's talk about the pros of running a Black Friday sale. The first pro, you're going to boost sales. If you offer a product or a service at a discount, there's going to be people that take advantage of that that wouldn't have otherwise if it was full price, especially if you have a business which is a highly considered purchase, because some of the most potent sales tactics that you can use are scarcity and urgency. And so if you have a limited time, offer a Black Friday discount that expires at a certain point, that's going to move people to take action and buy whatever your product or service is before that deal goes away. They don't want to miss out on saving money, especially if it's something they've been considering for a long time, but for whatever reason, have chosen not to purchase it to this point. Another pro you're going to gain new customers. They're going to be people that see that promotion, that see that ad, and are going to discover your product or service for the first time. And if the price point works for them and makes sense for what you offer, they may consider taking a flyer on doing business with you, when otherwise they would have seen that promotion. They would have seen your company and said, eh, maybe someday down the road. The other pro is that you can reengage previous customers. So if you have a product or a service and you have other offers built on top of it, or if you have recurring revenue models built on the back end of some of your products and services, you can use a Black Friday sale to get some of your previous customers back engaged with your company and with your brand. And so if you are trying to pull people into a subscription model, this can be a great way to do that because you can offer a trial at a discounted rate. You can offer just a grandfathered rate that if you get in on Black Friday, you'll get to keep this price forever and ever. And so you're going to get people in the door that otherwise might not be there. Now let's talk about some of the cons of doing a Black Friday discount. The big one, the big con that you should consider and fully count the costs on is that you are going to train people to accept the sale price as the new threshold for what the value is of your product. They're not going to see the full price as a good deal anymore because they know the sale price exists. This was the reason that JCPenney has had such a hard time in the United States market forever. They were known as the place where you go to find deals, where every single week you'd go in there and they'd have some new discount or some new deal. But what ended up happening is that shoppers became educated and learned that unless they saw something on sale at JCPenney, they wouldn't buy it because they expected that same product to go on sale sometime in the future. And so if you run a Black Friday promotion, if you run a Black Friday sale, you're at risk of informing your customers that there is actually a different price that's available sometimes, and that if they just wait long enough, they'll get it at that discounted price. So just be mindful of that in how you promote it and who you promote it to. And you want to make sure that you set up people for the right expectations. And this goes back again to if you run this promotion is going to be profitable. You don't want to regret people buying your product or service. You want them to be excited about it. You want to be excited about it, and you want this to be the beginning of a long term business relationship. And so if at the very beginning of the relationship, you're signaling to people our products and services aren't worth what we say they were worth because we're able to offer it at the sale price and still make money, then you're communicating this is actually the price of the product. That when it really comes down to it, the full price isn't actually the price. It's now the sale price. The other thing that it's going to do is it's going to diminish the perceived value of your product or service. And so this is just true across the board. The difference between a $50 purse and a $5,000 purse is not that big. It's all about the branding and the perceived value of that item. And so if somebody sees your product offered at a lower rate, they're going to assume it's worth that much because that's what you're selling it for. And so if your brand skews high end. If your brand skews towards the top end of your market and you offer something at a discount, then your customers are going to assume that your brand is actually not worth what you say it's worth. So these are some psychological things that happen when customers see a discount or see a sale price. And what can happen if you fall into this trap without knowing it is you become a car dealer or furniture company. Let me explain. So every President's Day, Memorial Day 4 July, Labor Day holiday you're going to see rooms to go, lazy boy. Every furniture store in America and every car dealership, every Chevy and Ford and Dodge and every every single car dealership and every furniture store running sales and promotions because people expect them to. And because when they go into a store to go furniture shopping, they're going to wait for that sale. They're going to wait to buy the car if they can. If they're able to wait, they're going to wait until they see a sale, see a discount, see a deal to take advantage of that vehicle. And so just be mindful that if you do a Black Friday sale, that you're not signing up to having to do them in perpetuity forever and ever because you've now reset the expectation of what it means to buy something from your business. All right? So again, that's not to say don't do it. You will certainly boost sales. You will certainly get new customers. You will make more money. You just want to make sure that money is profitable coming into your business, that it's adding to your profit margin, not taking away from it, and that you are setting the expectations accordingly. Now, some creative ways that you can do a Black Friday sale without resetting the price of your products or services is doing a limited Black Friday sale where it's either for a certain number of people or it's a certain product taken out from your main stack. So if you offer a wide range of products and services, you may choose one of them to do a promotion on as a way of getting people in the door and then upselling them on everything else that you offer at full price. This is also common in the course world, in the membership world, where if a creator has, let's say, five online courses, they'll offer one of them for sale. And then as they get people into the door on their email list with that one sale, they inform them about the other four courses that they have, and then some of them will opt to buy those at full price. So you don't have to run a Black Friday sale across the board on everything that you do. You can pick and choose which products or services maybe aren't moving quickly or the ones that are really good initial purchases for your best customers and clients and try and boost your roster of ideal clients that way. So there's some creative ways you can do it. Just make sure that you don't assume running a Black Friday sale is going to fix all our problems. We're going get a bunch of new customers. We're going to make punch money. And there's no downsides. There's always a downside to discounting your products and services. And now you know what those are. Hopefully this was really helpful for you. If you're thinking about a Black Friday sale, take these things into account and you can't go wrong. And until next time, be honest.