Pricing

How to protect your profits during Black Friday?

November 22, 2021

Why protecting your profits is important during Black Friday 

Black Friday and Cyber Monday are almost around the corner and soon you will see the words “50 Off!” “SALE!” & “Biggest Discount of the Year” everywhere. Although the origins of black Friday and Cyber Monday lie in the United States, more and more companies in the Netherlands are joining into the hype as well. Especially for the ecommerce sector it is an important period in the year as covid-19 in combination with discounts makes people shop more online. Last year, IDEAL even recorded the highest number of transactions during Black Friday

During the Black Friday period companies try to tap into the fear of loss effect. According to studies, the human minds tend to value losses more than gains. This makes people want to buy products with discounts during Black Friday as the fear of losing out on this once in a year discount is huge. For many B2C companies, Black Friday is also an opportunity to generate income that they normally wouldn’t get. This is the opportunity for them to either clear stock, or sell more fan favourite products for an increased revenue.  

All these discounts are good for customers, but for many companies this means a decreased margin. The goal for B2B & B2C during Black Friday should be to sell products to customers that wouldn’t buy the product for the normal price. While simultaneously they shouldn’t focus on selling products to people that already wanted to buy the product but are just waiting for the right moment. This line is very thin and very hard to walk on.   

What is your goal for Black Friday?

As a business you should first decide why you would want to participate in the Black Friday madness. Maybe you have too much stock and you been not selling as much as you expected. Then it would be a good idea, to clear out some inventory to generate some cash flow again. This can especially be effective for products that need to move fast, such as seasonal fashion or FMCG.  

Another reason for participating in Black Friday could be to attract new business. Discounts can be a very good way to give a last little push to customers that are doubting to buy your product. With this little extra persuasion, you may be able attract customers that wouldn’t otherwise buy your product.  

However, you should watch out for new customers on Black Friday. Most of the time, these people are looking for the best deal and their brand loyalty will be lower than customers that would buy during other periods of the year. 

How to protect your profits during Black Friday? 

After knowing your goal for the Black Friday frenzy, you should take into account the following factors for protecting your margin: 

  • Cost price | Know the exact price you paid for the product your selling – including production, marketing and other costs. This will give you the price that will make you break even.  
  • Market research | Know your market as good as you can to be able to know what discounts will do to the attractiveness of your products. Is your product price sensitive? Is there a lot of competition in your product market? This is relevant information that you should take into account before deciding on the discount you are going to give. With the use of the right demand forecasting and pricing software, you make sure to be on top of the game! SYMSON or other pricing software can help you with this. Read here all about the availanle pricing software tools.
  • Choose the right products | Focus on giving discounts to products which have a high margin or low opportunity costs. This could be private label products or products that are from previous year or season.  
  • Decide on margin | After knowing your cost price you should focus on deciding how much margin you want to have on a product-to-product basis. Maybe you can give a sharp discount to be lower priced than your competitors. Or maybe you can give a small discount for a product that is low in price sensitivity.  
  • Save stock | Maybe giving a discount is not the best option. Instead of trying to sell as much as possible, it may be better to sell your product after Black Friday for a higher margin. Some people deliberately wait a period of time for companies to give them discounts, just because they can. Instead of selling your products for a discount to these customers, you can also decide to wait and sell in the period leading up to Christmas! 

B2B Black Friday Tips 

Black Friday and Cyber Monday are traditionally used by B2C companies to sell inventory. Sometimes we hear B2B companies say that they cannot participate into this, because “they are not like fashion retailers”.  While this may be true, B2B companies can also do some tricks to reap the benefits of Black Friday! 

Smart Discounts | Many B2B companies sell products at a price that represents the value people are willing to pay for it. Heavily discounting a product would then always make sense. Many B2B solutions are also not sold to customers within a day. Sometimes, 4,5 or even 6 people need to approve a transaction. Therefore, B2B should try to give smart discounts. For example, instead of offering a 1-year subscription for 100 euros a business could offer a 1-year subscription for 100 euros and a 2-year subscription for 90 euros. While the second option brings in 10% less revenue per year, this option does ensure that the customer will stay for 2 years instead of 1! 

Offer extra service | Instead of offering a discount, B2B could also consider offering extra services. Think of a webinar, whitepaper or a demo product. This is something that will make you stand out from the rest and this could lead to beneficial results. 

Try to stand out | Many companies try to target and reach out to consumers on and during the Black Friday period. Paid advertisements will be more expensive and more emails will be sent. Customers see a lot so make sure that your marketing stands out from the crowd! 

Conclusion 

Protect profits by optimizing margin and revenue. Higher discounts for products that need to sell, lower for products that are more durable. B2B companies should consider participating carefully. Opportunities to stand out, but shouldn’t undersell their product or service. 

SYMSON can help businesses optimize their margin and revenue. Do you want to know more about Black Friday pricing? Or do you want to know more about SYMSON? Please contact use! 

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