Holiday horror: five potential profit killers to avoid for Holiday 2013

By Bizclik Editor

By: Aneesh Reddy, Co-Founder & CEO, Capillary Technologies

The holiday season is a time of good cheer for both retailers and consumers. Consumers get to celebrate their favorite season by giving presents to loved ones and eating holiday meals with family. Retailers get to enjoy some of the most successful, high traffic sales runs of the year. The holidays bring families together and keep companies in business.

But retailers should also beware some of the potential pitfalls of the holiday season— pitfalls that can lead to a much less successful holiday haul than usual. Adjust in advance and retailers should have a very Merry Christmas. Miss the mark, and profits will disappear faster than Santa makes present deliveries.

Fortunately, most potential mistakes that may hurt retailers can be predicted and avoided. Here are five of the most common ones to consider and how to avoid them.

#1: High shipping costs.
UPS is looking at a highly profitable fourth quarter, as both online and brick-and-mortar retailers look to gain customers by cutting out the need to stand in line and delivering packages straight to the consumer. But high shipping costs are burning some companies, creating extra, unexpected expenditures that weigh down the company balance sheet.

How to avoid high shipping costs: While you may not be able to escape initial shipping costs, you should be very careful about offering customers overly good deals on shipping. Everyone wants to do right by their customers, but Amazon has had to raise its required shopping cart total for free shipping from $25 orders to $35 orders to protect company margins.

Think like Amazon. Beware offering your own incredible shipping deals.

#2: Customer burnout.
You can’t miss an opportunity to sell during the holidays if you are a retailer. But you also have to avoid bombarding your customers with offers to the point that it turns them off. Consumers buy largely based on desire, so turning them off is one of the worst things you can do to yourself as a company.

And remember: you’re not the only one trying to sell them. Holiday ad spending is expected to rise by 3-4%.  Fisher-Price recently upped its digital ad spending by more than 50%, and plenty of other companies, such as Toys R Us, Best Buy, Amazon and K-Mart are already running holiday ad campaigns in full swing.

How to avoid burning out your customers: Be honest, be different, and structure good offers. Customers hate being misled, so treat them well by telling it like it is so they see you as a positive force. Also utilize strong customer intelligence tools to make the right offer at the right time. If analytics suggest your audience will not appreciate you sending them an offer at current frequency, adjust accordingly.

'Tis the season to be smarter.

#3: Practically giving merchandise away.
Everybody loves discounts: it’s a fact so pervasive that Progressive Auto Insurance built one of its famous Flo commercials around it. Furthermore, the right discount used at the right time is a smart move that can help bring in extra customers, especially during the intense competition of the holiday season.

But dishing out too many discounts or playing to the most discount-driven shopper hurts your chances of achieving record holiday profits. There is a point when lowering the price becomes counter-productive.

How to avoid over-discounting: Stick to your profitable pricing in general. Then, to compete with those offering discounts that dwarf yours by comparison, structure your offer differently. Be intriguing and interesting; discuss with marketing masters the best way to present your deal so it stands out in a sea of holiday promotions. In the end, it won’t be the best discount that wins, but the most enticing one.

Present the right offer at the right time and the bottom line of the discount will become far less relevant.

#4: Uninformed Employees
Even in a world where digital marketing is more prevalent and important than ever, employees are still an effective, often essential sales touch point. When customers have a good experience in store, it means great things for your business; when they don’t it means you wind up with a nasty Yelp or Google product review and a dent in your sales.

Therefore, it’s a real disappointment when employees are rude or unhelpful to customers, creating an unpleasant overall customer experience.

One recent example of employee affecting sales is the treatment of a secret shopper trying out Nintendo’s new Wii U, who reported that multiple retail employees told her, “'Well, there's no difference between the Wii and Wii U.’" (there is, by the way) and implied she should buy the original, 7-year-old Wii instead of the new product!

How to avoid uninformed employees: One fairly obvious way to avoid uninformed employees is to increase in-store education. If you don’t have training programs in place or your programs have not been recently updated, you may want to look into updating.

Or, perhaps more relevant, train your employees specifically for holiday retail situations. Then incentivize them for selling hot ticket, high-margin items this holiday season.

To double-check the effectiveness of your measures, use secret shoppers and monitor social media. Keep your finger on the pulse of customer sentiment with smart monitoring of the word of mouth environment.

And naturally, hire well to sell well.

#5: Show-rooming
Some companies may have to contend with consumers playing with items in store but purchasing online instead of buying on the spot. Consumers may be looking at getting the best deal, or prefer the ease of pre-ordering rather than feeling the pressure of the sale during a trip to the retailer. Whatever the case, some customers are guaranteed to buy with a combination of channels that sends money from brick and mortar to online environment.

How to prevent show-rooming: For starters, be omni-channel in your approach: provide positive options foe customers online, via email, and through mobile devices. Also, make sure to adjust your pricing appropriately based on well-rounded statistical analysis. Capture enough data along the way to know how your customers think and how they will purchase.

You may also be able to take a page out of Apple’s playbook and reverse show-room by offering easy purchase in store of items viewed online. Use calculated discounts, early release, and flexible holiday hours to draw in customers.

About the author

Aneesh Reddy is the Co-Founder and CEO of Capillary Technologies. A visionary who believes that advances in technology can lead to significant advances in business value and ROI, Aneesh leads the Capillary team and works with enterprise customers to help them put the right communications for the right products into the hands of the right customers at the right time. He is the winner of the Under30CEO award, Forbes’ 12 Hidden Gems and a number of other high tech industry recognitions.

About Capillary Technologies

Capillary offers an Intelligent Customer Engagement platform to retailers and consumer businesses - managing the entire life cycle of customer data from acquisition, analysis, insights and activations. We are the world's leading SaaS provider of end-to-end Multi-Channel Customer Engagement, Big Data Customer Intelligence, Clienteling, Real-time Loyalty and Social CRM solutions to 150+ enterprise customers - with over 10,000 locations and 75 Million shoppers who interact with our cloud platform. Marquee customers like Marks & Spencer, Pizza Hut, Puma, Benetton, KFC and Courts, have realized as much as a 4-6X ROI from customer engagement across every major channel, including in-store, mobile, online, e-mail, and social by leveraging Capillary’s solution.

Present across North America, EMEA, Asia-Pacific, we are the youngest company to win at Marketing Magazine's CRM & Loyalty Agency of the Year Awards 2013. The company has also been named: a Gartner 2013 Cool Vendor, among Harvard Business Review's Pioneers of Reverse Innovation and to Mint WSJ Bloomberg Businessweek’s Hottest Technology Businesses 2013. Capillary is financed by Sequoia Capital, Norwest Venture Partners and Qualcomm Ventures. Visit www.capillarytech.comfor more details.


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