By Nikolas Vogt
Founder, Growth Academy | Ex-Growth Marketing Lead, Google | Guest speaker, Santa Clara University
According to Search Engine Land shoppers are spending up to 30% more money online since the beginning of the Covid-19 pandemic. This shift in online shopping behavior will most likely boost Black Friday and Cyber Monday sales even further. This means transactional B2C businesses like e-commerce have to expect a substantially bigger Black Friday sales boost and have to be prepared for it. Chances are that most e-commerce businesses know about this and prepare by expanding and optimizing upper funnel acquisition efforts like paid marketing, pricing, and SEO.
The more strategic question “How do you turn Black Friday shoppers into loyal customers?” is harder to answer. Focusing on the upper funnel is not enough to turn impulse buyers on the hunt for discounts into loyal followers who make multiple purchases over time and recommend your product to others. To turn impulse buyers into loyal customers you have to extensively look at your mid and lower funnel activities. Knowing and preparing your whole customer funnel for Black Friday is what turns such a short-term “spike” into a substantial opportunity for sustainable growth.
This also means that there is no so-called 'Growth Hack' or silver bullet that prepares your business for Black Friday. Quite the opposite, our experience shows that solving such growth challenges require holistic growth strategies which you can learn in our you can learn in our remote growth courses.
To give you an idea how these growth strategies work let's discuss two growth tools of our Growth Academy toolbox that help you turn Black Friday traffic into loyal customers: I. ‘Acceleration loops’ and II. ‘Growth models and retention’
As pointed out in prior articles (see Spotify’s Growth Hack of the Decade or Growth Hacking lessons learned in Silicon Valley), doubling-down on loops allows you to harvest incremental growth which is usually ‘free’. Acceleration loops are usually baked into a product and designed to leverage product interactions of new customers to generate even more new customers. Contrarily, more conservative companies will often rely on traditional marketing efforts that are not repeatable and outputs cannot be reinvested.
Let’s take a look at the growth scenario below to understand what this actually means. In our example, traditional paid marketing generates 400 customers per day, with a cost per acquisition of 50 €. This traditional acquisition activity is characterized by a linear relation between acquisitions and budget, meaning you have to double your cost to double your acquired customers. Relying exclusively on traditional activities for scaling a business seems inefficient and costly.
Now, imagine you could double your impact for free. That’s where acceleration loops come into play. Combining these traditional paid marketing activities with referral loops can be very powerful: Assuming that every 2nd new customer acquires another customer we would end up with 1.615 additional customers on top of our paid acquisitions in only 6 days.
Designing and optimizing acceleration loops is a key module taught at Growth Academy. Explore our courses and discover how growth experts from Google, Amazon, TikTok, Spotify, Skyscanner, and more implement acceleration loops.
Now that you know about the power of loops let’s discuss some concrete ideas for acquisition loops for e-commerce businesses. Remember - Always ask yourself: how can a new customer attract another new customer.
1. Incentivised sharing of your products with group buys
The Silicon Valley e-commerce platform Wish offers discounted group buy prices. If you choose to buy with another shopper you will automatically receive a discounted price.
Once the group buy button is clicked you can neatly send the listing to one or multiple friends. A share of the prospect’s friends will do the same and a share of their friends will do the same, etc. Basically all new Wish customers using the discounted group buy will acquire more new customers on your behalf by sharing the listings with their friends. What makes this loop especially powerful is the monetary incentive to share. Another company that uses a similar loop design is the delivery company DoorDash where users also get special discounts for group orders.
2. Bring prospects back with price drop emails or notifications
Offering notifications for price drops can be an effective way to convince prospects who are on the fence of buying your product. A good example for this approach is Ebay’s price drop emails or notifications that will be sent to prospects interested in an item with the goal of bringing them back to the offer. They send similar messages to sellers about the number of users watching an item so that they can reduce the price for quick conversion.
3. Loyalty programs to bounce back incentives to establish repeat purchases
Loyalty programs can be a great rebuy incentive to establish your business in the customer’s long term consideration set. Usually, customers get limited-time loyalty points or vouchers in order to drive the next purchase. This brings past customers back to your business and improves loyalty. The only downside is that building such programs usually takes a bit longer and you have to establish proper revenue attribution in order to make sure that revenue is incremental and does not cannibalize organic purchases.
Join Growth Academy if you want to become an expert in growth modeling and acceleration loops. The industry’s leading growth experts show you how they do it in companies like Google, Amazon, TikTok, Spotify, Skyscanner, and other tech giants.
Retention problems can be compared to a ‘leaky bucket’ where upper funnel efforts begin to fill your bucket with customers but you are also slowly losing customers through hidden drop offs in your customer lifecycle. This doesn’t seem like a problem at first but in the medium-to-long run, you’re going to need more and more water for the same growth rate. For sustainable growth you have to fix these holes before opening the faucet on Black Friday.
Most e-commerce businesses already face strong retention headwinds compared to other industries, for example the average long-term retention of transactional B2C businesses (~25% - 45%) is usually significantly lower compared to SaaS businesses (~50% - 85%). These headwinds get even stronger during major demand spikes like Black Friday or Cyber Monday since you usually acquire less retentive customers through heavily discounted offers which are hard to maintain over time.
Growth models and our so-called 'moments that matter’ are powerful growth strategy approaches to fixing these holes and improving customer retention. To identify the ‘moments that matter’ for your retention you have to know the different customer or user states across the lifecycle that define your so-called 'growth model':
The user lifecycle usually starts with people hearing about your product and then potentially joining it, which we classified as the awareness and sign-up state. After this, they try to understand the value your product offers, which we call the activation and onboarding state.
If successful, users will start to include your product into their routines during the engagement state.
And finally, if users can't make sense of your product, or it doesn't fit into their lives, they become unengaged and churn, which is called the churn or re-engagement state.
To prepare for sustainable growth on Black Friday, it is essential to run a growth model analysis to identify the biggest drop offs in your mid and lower funnel. Once you know where your biggest drop off occurs take a brief look at our 'moments that matter' framework and think about how you can meet the respective goal of the problem area in a better way.
If you want to learn how to diagnose retention more in-depth, join Growth Academy and learn growth strategies to acquire and retain customers from leaders at Google, Amazon, TikTok, Spotify, Skyscanner, and more
“To prepare for sustainable growth on Black Friday, it is essential to run a growth model analysis to identify the biggest drop offs in your mid and lower funnel.”
Retention is all about connecting customers to value. This simple but powerful growth insight explains why retention problems often lie in the activation phase and its ‘magic moment’. The goal of the magic moment is to get the customer to understand your value proposition as fast as possible.
“Retention is all about connecting customers to value.”
Only if your customers receive great value in a relatively short period of time they will experience something ‘magic’ that makes them come back. Improvements at this stage are usually very effective since they compound over time and improve retention of all future customer cohorts. As you can imagine it is really hard to substitute such a crucial moment with emails and notifications later in the customer journey.
We hope the discussed ideas and frameworks give you a starting point on how to apply growth strategies for your Black Friday business. If you want to learn more on this and other outcome-oriented growth frameworks, check out Growth Academy and join our growth strategy courses designed by leaders from Silicon Valley and the European Tech Scene (Google, Amazon, TikTok, Spotify, Skyscanner, and more).