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BFCM Strategy In The 2024 Macro Environment

by Sam Tomlinson
August 19, 2024

As crazy as it sounds, Q4 is right around the corner. And – thanks to a “perfect storm” of factors, this year’s Q4 is going to be radically different from what any of us have seen in the past decade-plus. The bad news is that this storm will break many brands that were not seaworthy in the first place; the good news is that those ships that survive will find themselves in calmer, less cluttered seas for the foreseeable future. But the best news is that there is still time to make your proverbial ship seaworthy.

I’m not going to lie to you: the storm on the horizon is brutal. It’s massive. And it’s only likely to get stronger. Like any superstorm, this one is comprised of multiple, smaller storms:

The most expensive + most online election in history

Whether or not we like it, the simple reality is that this election season will be the most expensive in history, with an estimated $12.5B+ (source) spent on the Presidential, plus another ~$10B on Congressional (Senate + Congress) races. For context: 2020’s total spending (Presidential + Congressional) was about$16.4B in today’s dollars. Obviously, not all of that will be online (there’s direct mail, TV, radio, etc.), and total US Ad Spending was ~$350B in 2023 (eMarketer) – so this ~$22.5B is only ~6.5% of that total. BUT – and this is the BIG BUT – the overwhelming majority of that spend will happen in September, October + early November. The net-net: we’re projecting that digital CPMs will rise by 30% to 50% above 2023 levels.

Attention + Financial Costs: 

Elections aren’t just about the increased costs on the media side – that money comes from somewhere. And, in the case of this cycle, a substantial chunk will come from millions (likely 10-15 million+) of individuals giving less than $200. From a purely financial perspective, donations to candidates are zero-sum to eCommerce brands: a dollar donated to Harris or Trump or [whomever] is a dollar that’s no longer available to that individual to spend on rent, heat, food or BFCM purchases. The fact is that well over a billion dollars in consumer discretionary spending will flow to candidates, who will turn around and use it to jack up CPMs across the board.

Interest Rates + Costs of Capital: 

A 30% – 50% increase in CPMs alone would be a massive headwind (and should be a bigger story), but that’s far from the only thing going on here. Interest rates remain at persistently high levels. Even if the projected Sept. rate cut becomes reality, the impacts of it won’t trickle down to brands placing BFCM inventory orders in August-September. eCommerce + retail are capital-intensive businesses. From a pure business perspective, the cost of debt has increased 190%+ since 2021, while requirements to access outside capital (debt facilities, venture funding, inventory-based financing, etc.) have become increasingly more stringent.

The US Consumer Is Stretched: 

The fourth major factor is the state of the US Consumer. To be blunt: the core buying demographic for most retail businesses – individuals aged 25-55 – is in trouble. Credit Card balances alone are at $1.14T – the highest level ever recorded. Student Loan balances – repayment of which has (thankfully) been paused for millions of borrowers – exceeds $1.58T.

This is just brutal:

The above two charts are just the tip of the proverbial iceberg: housing costs are up over 32% in the past 4 years. Costs of child care are through the roof – and this is before we get to skyrocketing healthcare costs, groceries and essentials, etc. You get the picture.

And before anyone goes on the “well the market is up 17.2% this year” – yeah, it is (and I’m delighted about it!). Unfortunately, that rosy stat hides a brutal truth: 93% of all stocks owned by individuals are owned by the top-10% of earners. And while 62% of Americans report owning at least one stock, the vast majority is held in retirement accounts (read: not available for spending this BFCM).

This is a classic case of an average hiding an insight: while the average wealth of Americans has never been higher, the distribution of that wealth has never been more concentrated among two groups: the top-10% and the elderly. And, spoiler alert, the elderly aren’t buying off Meta Ads at nearly the same rate as those under 55.

This isn’t doom-and-gloom. This is reality. And I believe that if we are to navigate this storm, we need to be clear-eyed about what we’re facing. The US consumer is being slammed on every side – from inflation + rising costs of living, to declining real wages, to weakness in the US job market, to a non-stop bombardment of political solicitations.

All Hope Isn’t Lost

It’s true that we, collectively, are facing an absolutely brutal macroeconomic storm. But it’s also true that this too will pass. It will not pass without many businesses failing, but that’s a good thing. Just as a fire renews the forest, so too does a storm renew the ecosystem (and I realize that’s cold comfort in the moment to the people who lose their businesses + livelihoods).

So, what can you do? How do you prepare? I have five ideas:

Idea #1: Start Sooner

Let me start with a single principle: there are two ways to win – (1) be first or (2) be better. And while many people reading this newsletter are remarkably talented marketers, it’s a hell of a lot easier to just be first.

This is very much a zero-sum game in the minds of consumers: a dollar spent in October is a dollar that’s not available to spend in November or December. Whether it’s cash or debt is not relevant – that bill comes due either way, and credit limits aren’t changing.

I’ve found this to be true over the course of thousands of consumer interviews: there’s one bucket of money for holiday shopping. That jives with data from many other financial surveys, showing that 30% to 50% of consumers have a set holiday budget, and another 30%+ have a “general” budget (i.e. I think I’m going to spend about $1,000 total on gifts this holiday season).

While it’s popular in our industry to glamorize BFCM as the “SuperBowl” of eCommerce, I think that’s wrong. BFCM is the halftime show: Is it fun to watch? Sure. Is it where the real action lies? Not even close.

Internalize this simple truth: the real action happens all around BFCM, not necessarily on it.

The moment that you do, you can change your objective from “How do we win at BFCM?” to “How do we capture the share of our consumer’s holiday spending that we need, at a cost we can afford?”

I know that every eCommerce owner gets more than a little excited seeing those BFCM peaks in the Shopify dashboard. I know retailers LOVE printing out Quickbooks statements with big, fat green “up” arrows showing how much more they’ve sold on these festivals of commerce. I also don’t care. 

Here’s the alternative: start sooner. 

For some brands I advise, we’ll drop customer-only BFCM offers in October – with emails going out in the beginning of the month with, “if you want an invite to our exclusive BFCM pre-launch, you need to be a customer by October X, 2024.” This has three benefits: (1) it takes money off the table before my competition is even in-market, (2) it enables me to better forecast + manage inventory through the entire Q4, and (3) I can do this well before ad prices go parabolic, thereby freeing up more contribution margin (read: profit) on those customers.

Idea #2: Invest a Metric Shitton in Preparation

90% of eCommerce brands are under-prepared for BFCM. I’ve worked with brands who are still figuring out what “deals” they’re going to run for BFCM during the first week of November. They haven’t finalized their budgets. They are flying the plane while trying to build it (and somehow, these are always the brands that crash, look around, and have the audacity to wonder, “why’d that happen?!”).

There’s a reason Steph Curry shoots 500 shots per day. There’s a reason Connor McDavid skates 50+ hours a week. There’s a reason Warren Buffet reads 150,000 pages a year. Preparation not only helps you execute better, it raises the ceiling on what’s possible.

From a BFCM standpoint, this means a bunch of things: 

  1. Get Your Lists Ready: Every brand should have a core set of lists ready to go across their entire media stack – from your historical BFCM buyers (often one-off buyers), to your specific customer segments (perhaps by product type, or brand, or product line), VIP customers, lowly loyalists (buy a lot of low-margin stuff), to your money-losers + your lurkers (email subscribers/SMS subscribers w/ zero purchases). Each one of these groups is likely going to need a different message. Each one has a different use. Winning Q4 is as much about turning out your base as it is about exploring beyond it. If you don’t have your lists ready to go + updated regularly (read: daily/hourly) via automation, you’re not going to be able to use them to maximum impact. 
  2. Data Passback: Audiences are one kind of data, but far from the only kind. If you’re serious about winning Q4, the single-most-important platform tactic you can execute is setting up offline conversion import on Google + CAPI on Meta. This is your single-greatest point of data leverage. 83% of brands do NOT have it, according to Optmyzr’s 2024 data. If you can pass specific, continually updated transaction + margin data to ad platforms in near-real time, while bypassing things like ad blockers & privacy trackers, you should be doing it.
  3. Feed Updates: 50%+ of eCommerce brands I speak with before BFCM have done zero feed optimization. They’ve set it up once, maybe looked at it in GMC if there was an issue, and that’s been that. It’s a massive missed opportunity. Your feed can power 1,000s of insanely useful + profitable optimizations – from allowing you to create more robust campaign structures, to enabling you to stand out on the SERP, to providing G/Meta with the data they need to better serve your product to relevant consumers. Your feed is a targeting mechanism. Use it. 
  4. Create a Q4 Calendar: Your Q4 calendar should be robust. It should have – at minimum! – 3 natural, revenue driving points (the best brands have 5-6, but 3 is minimum). This could be a “VIP customer preview sale”, BFCM, and a “last-minute gifting cutoff.” Ideally, you’ll have more than that – perhaps tie in a relevant holiday, a product drop (or two), a special event, whatever. By creating more “moments”, you de-risk Q4 – all of your eggs aren’t in a 1-week-long basket. You have more opportunities to reach your target audience at the moments when everyone else isn’t also in their face with a “BUY ME” message. More moments = more opportunities = higher probability of success. 
  5. Have WAY More Creative: The most successful brands have an abundance of creative – 50, 100, 150+ new creatives added to their accounts every month. They do this for the same reason I advocate multiple moments: diversity of creative de-risks creative performance. I’ve seen ad accounts where the brand only had 2 ads for BFCM (1 video, 1 static). The ads were bad. So were the BFCM numbers. Make more creative. 90% of it will never get more than $100 in spend on Meta, but the incremental gain that comes from finding massive outliers will produce a better return than anything else you could do from a creative standpoint.
  6. Scout Like Hell: Review your competitor’s previous (2020-2023) BFCM ads + offers. Candidly, most brands aren’t that creative – so odds are most of what you’ll see is the same $h!% different year. While knowing what your competition is rolling with isn’t a guarantee of success for you, it does give you the opportunity to weaponize your offers + angles. If you’re very interested (and the brand is on shopify), add: /sitemap_pages_1.xml to their homepage to get a list of all their landing pages. Find the relevant ones (you can usually find their forthcoming BFCM pages, too!), and voila! More competitive intelligence. The moral here is simple: the more you know about the plays other brands are trying to run, the better prepared you can be to take advantage of them. Also, monitor traffic to your own BFCM pages, if you have them live on the site – if you start to see visitors to them, your competition might be scouting you (so, either (a) take them down or (b) put up false info). 
  7. Self-Scout, Too: Make sure your own house is in order – go through your site (or, better yet, have people who have never gone through it + suck at technology try to make purchases). There’s nothing worse than losing sales during one of the most competitive, cutthroat periods of the year because of a self-inflicted, unforced error.
Idea #3: Lose Your Losers

This is a controversial idea, but not all revenue is good revenue. To illustrate, here’s an example of customers by contribution margin percentile (Revenue – Discounts – COGS – COD – CPA):

What becomes immediately apparent is that about 35% of these customers are net losers: the costs to acquire + deliver to them exceed the revenue produced by their purchases. For some of these (i.e. customers who purchased “entry” products (i.e. a “starter kit” or a “trial”), that may be a-OK. But for other customers – maybe ones that were exceedingly expensive to acquire, or who came in on shockingly large discounts, or who made a large purchase, then returned a bunch, that’s a problem. As a brand, your goal should be to AVOID these kinds of toxic customers, because (in reality) they’re costing your business 15%, 20%, 25% of your contribution margin. These types of customers are toxic assets.

For many eCommerce brands I’ve worked with, BFCM is the time when they acquire more toxic assets. But, fortunately, there are ways to avoid doing this:

  1. Identify Your Losers: The first step in solving a problem is identifying the problem. Run an analysis similar to the above, using your cohorted, blended CAC + margin numbers. It is eye-opening to see how many of your customers are actually losers.
  2. Set tCPA/tROAS/Bid Caps/Cost Caps: One reason I tend to be pro-cost controls (defined broadly) is because they provide insurance against bad spend. Are they perfect? No. Do they have flaws? Yes. But I can effectively hedge against some of the biggest flaws (i.e. limited delivery) by expanding the time horizon I have to bring in revenue (see above – creating more moments).​
  3. Exclude LALs: If we weren’t already there, we’re about to enter “hard core controversial” territory: I think more brands should exclude not just their “loser” audience (from (1) above) BUT ALSO a lookalike of that list from their BFCM campaigns. If there’s one thing I’ve observed time and time again, it’s that bad customers tend to exhibit the same kinds of bad behaviors. LALs, fortunately, are quite good at detecting those behaviors – so if you have a relatively solid list of losers, generate a LAL and exclude it. Yes, there will be some collateral damage – but (IMO) there’s enough fish in the proverbial sea to overcome this limitation. ​
  4. Cut Without Mercy: Most marketers are too afraid of looking bad to cut and run – we recommended a channel, so we need to see it through. We recommended a tactic, so we have to give it more time + money. We just brought on this affiliate or influencer, we’ll keep him/her around + give him/her another shot. No, no, no. Q4 isn’t the season for second chances. This is the end game. If something isn’t working, cut it. Double down on what’s working, put your superstars in and don’t look back. If I’m going to lose, I want to lose with the money on Google + Meta, not because Pinterest didn’t turn in a Nick Foles-in-SB52-esque performance.​
  5. Refer Them Away: Finally, if there are toxic customers (or toxic leads), refer them away. I love a good break up email: “Sorry, we’re probably not right for you. If you’re looking for something at a more modest price point, go talk to [insert cheap competitor here].”

Not all revenue is good revenue. Not all customers are good customers. Lose your losers.

Idea #4: Don’t Default To A Discount

I am about as anti-discount as any marketer in the eCommerce space, for a host of reasons (if you’re curious, here ya go). 

There are (literally) dozens of ways to craft attractive, highly competitive offers that do NOT require you to give away 20%, 30%, 50%+ of your margin for nothing. Yes, competition will be giving it all away. No, you don’t have to follow suit.

Instead, try: 

  1. Free Gift with Purchase: I LOVE free gift with purchase offers; they tend to be disproportionately less expensive than discounting (since the customer “sees” the full-price value, but it only costs the brand a miniscule fraction of that), it makes the customer “feel” good (who doesn’t like free stuff), and – if used strategically – can beachhead another product/service line. For example, a skincare brand might offer a free lip gloss or lipstick with purchase of a face wash or skincare routine. Not only does that create MASSIVE value for the brand (the lip gloss COGS are likely 10% of the retail price), but if just 1-in-5 customers loves the look, the subsequent sales from that small minority of customers will more than offset the entire cost of the promotion.
  2. Supersize Your Deals: I love a good volume-based purchasing offer; instead of giving people a flat $ or % off, tier it out such that if you spend X, then you save Y, or if you buy X, we reduce the price on each one by Y. This creates more absolute margin in the sale (good for you!), while providing the customer an incentive to spend more.​
  3. Bundle, Bundle, Bundle: Bundle offers are great, because they not only drive AOV higher (objectively good, because it puts more absolute margin in the deal), but because they expose your audience to things they might not have bought without the bundle.​
  4. Add-On Services: this one is logistically tricky, but if you can do add-ons like gift wrapping, adding a card, or delayed shipping until a Holiday, that’s insanely valuable. I’ve seen a few brands that do this remarkably well – I can order in October, set my delivery date to December 18-22, add on gift wrapping + a card, and voila! I don’t even have to think about (let alone wrap, store + ship) this gift. Is that worth an extra $25 or $30 to me? Hell yes. Is that also (likely) another $20-$25 in margin for the brand? Also yes. ​
  5. Include Other Benefits (Membership, Community Access, etc.): Not every brand has the resources in place to do this, but if you do, it’s an amazing benefit. For instance, if you have a premium membership or community, offer a year’s membership to it for all customers who purchase more than $Y during a set time period. The incremental cost of serving this is small (likely close to $0), but the perceived benefit (“this is only available to our VIP customers”) is disproportionately valuable to a segment of your customer base.
  6. Subsidize An Adjacent Purchase: Similar to the FGWP, this serves as a discount-without-a-discount. Instead of giving the customer a flat $ or % off, you provide a targeted reduction on a subsequent purchase. For instance, if you spend $500 on X, we’ll provide you $250 toward Y on a subsequent purchase.” There are two reasons this is a wonderful structure: (1) it allows you to target that spend toward products or services you might otherwise struggle to move (or is exceedingly expensive to move) and (2) the very structure of the offer requires that customer to come back and make a subsequent purchase. Psychologically, this “reserves” money in that customer’s mind – they now have a $250 credit (in my hypothetical example) that they either use or lose. And, odds are when that customer comes back to use that credit (because no-one wants to lose it!), they’ll also buy some other things.​
  7. Offer Longer Payment Plans: From the outset, I mentioned that US consumers (in particular, but not exclusively) are strapped for cash. Offering a longer payment plan as a default option + prominently highlighting the low monthly payment amount unlocks other “pools” of money in the mind of your customer. Suddenly, this $250 purchase isn’t part of my Q4 budget because I’m going to pay it back in Q1 2024 and Q2 2025, and it’s just $40/mo. ​
  8. De-Risk The Purchase: money-back guarantees, love-it-for-100-nights-or-return-it, guaranteed for life, free extended warranty, etc. This works particularly well for high dollar purchases, and is exceedingly effective when used in conjunction with other tactics from this list.​
  9. Play Into Other Emotions: Plant trees in the rainforest. Preserve acres of farmland. Send shoes to kids in a place. Buy school supplies for at-risk youth. Provide holiday gifts for those less fortunate. During a time when every other brand is laser-focused on consumption, there’s an opportunity for brands to lean into other emotional desires. A word of warning: what you choose here should align with the story of your organization – if you’re all about loving the outdoors, then planting trees or preserving national parks or whatever makes sense; school supplies for at-risk youth makes less sense (unless there’s a good story there!).
  10. Gamify The Experience: Pair one (or more) of the above with a gamification mechanism – the first 500 orders get a limited edition X or Y. This, when done via SMS & Email (more on that below) is a wonderful way to catalyze sales
Idea #5: Lean In on SMS & Email

Email & SMS are every successful eCommerce brand’s secret weapon. 

These two channels are the most effective and efficient ways to reach those lists (from above) and turn them into buying customers. Ensure you’ve designed flows for each segment, ideally with targeted landers for each one. For instance, I LOVE what HexClad has done here:

Customers who have purchased a knife, but not a full set, are sent to this page to complete the set at an incredible price. Yes, it’s a discount – but it’s one that is highly relevant AND saves them from having to advertise more stuff (yay, savings!). Combine this with tight customer lists + exclusions for your paid media (remember that preparation point above), and you have a machine for cost-effectively driving revenue + activating all those subscribers you’ve diligently collected over the years.

The first rule of Q4 email + SMS is this: SEND MORE. 

Too many brands are too conservative with their lists – you should be sending 5, 7, 10 emails on critical days (each of those “moments”) from your calendar, PLUS 5-10 emails/SMSs in the week-ish leading up to each moment. There’s no reason to hold back. Remember: your audience is being bombarded with emails + SMSs during this period. Everyone wants a share of wallet. Don’t assume they’ll remember.

The core function of Email + SMS is be driving incremental AOV. The name of the game for Q4 prospecting is rapid revenue acceleration. No matter when in Q4 you acquire the customer, your contribution dollars are likely to be lower than the rest of the year. That’s just how advertising during the most competitive time of the year goes – even when you play smart, create multiple moments and have killer offers, you’re still going to pay through the nose to get those customers – either in the form of higher CACs, higher discounts or higher COGS (if you run a free gift with purchase or buy-one, get-one deal).

The key to making Q4 work for your brand (or your client’s brand) financially is using your owned channels to accelerate revenue through the rest of Q4. This means designing custom flows and triggers (which is a GREAT use case for ChatGPT) to upsell + cross-sell those new customers on more of your products. For instance, if a new customer buys a polka-dotted rain jacket on October 30th, you should have an email flow to sell them accessories to complete the look – rain boots, a backpack, a water bottle, an umbrella, whatever. Add on a landing page for that, and make it as easy as possible to buy it all (one click add to cart is magical!).

In fact, I’m going to end this by going one step further: email is table stakes. You must do it, and you must do it well. SMS is where brands will find incremental value. If you don’t have an SMS strategy that complements + supports your overall email & advertising strategy (and no, copying your emails into SMS is not a strategy, it’s a cop-out), you will fall short of your Q4 goals.

Ultimately, the brands that win this Q4 will be the ones that earn the attention of their audience, and there’s no better way to do that than by being relevant on the screen they check first thing in the morning and while they fall asleep.

While that’s a lot, it’s also only August. Yes, the storm is on the horizon. Yes, this is going to be the single-most-difficult BFCM period of most of our lifetimes. But if you execute against these five ideas, you’ll be in a position to not only survive the storm, but to thrive after it. It isn’t easy, but nothing worth doing ever is. 

Good luck & happy planning!

Cheers,

Sam

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