Black Friday? Bah! Cyber Monday? Humbug!

We are now just days away from the “official” start of the 2010 holiday shopping season with those two notorious leading economic indicators, Black Friday and Cyber Monday, ready to jump-start the season even before we’ve cleared the table from our Thanksgiving dinner.

I am going to go out on a limb here and predict that we will soon be bombarded with round-the-clock jingles that call us to worship at the temple of unbridled consumerism. This is a column on paid search, so I’ll spare you a rant on the over-commercialization of Christmas even after I’ve heard the Overstock TV commercial (“O, O, O, the great big O”) for the four hundred billionth time.

Instead, I’d like to spend a little time talking about the economic impact of aggressive Black Friday and Cyber Monday promotions. It is all well and good to try to beat your all-time single day sales records and get a head start on the Christmas selling season, but I suspect that many of the crazier promotions are doing more harm than good for companies who launch them.

Once I’ve gotten that issue off my chest, I’ll also give you few PPC tips that may help boost your sales and profits this year. And then, finally, to prove I’m no scrooge about Christmas shopping, I’ve thrown in a special little holiday present for you at the end of this article.

Is This Any Way to Run a Business?

Businesses with strong seasonality always face special management challenges because they have to generate enough revenue and profit in the hotter selling seasons to sustain them through the slower parts of the year.

Retailers, in particular, have always looked for ways to address the intense seasonality of the Christmas holiday season and especially the middle two weeks of December. In an attempt to spread gift buying across the entire 6-8 weeks of the season, many retailers have been offering deep discounts much earlier in the season and then continuing them all the way through mid-January. And while that strategy does effectively reduce profits, it keeps incentives in place across the whole shopping season.

But now, after two years of a terrible economy, some retailers are looking at Black Friday and Cyber Monday as major opportunities for generating record revenues by leveraging consumers’ predispositions to shop on those days.

For example, take a look at this set of search results for the term, Cyber Monday. Even though we are still a full two weeks out from this years’s Cyber Monday, you can see there is already a cyber-stampede for ad space. Note the incredible focus on deals—ranging from 50-90% discounts! Are you kidding me?

Now, while advertisers didn’t create the phenomena of Black Friday and Cyber Monday, we certainly have embraced it as an way to turn consumers, quite literally, into rabid, deal-hungry animals. People have been trampled, injured and killed on Black Friday in their quest for the best discounts! Have we all gone stark raving mad? Save 50-90%! No, no. Wait Mr/Ms Consumer, we’ll give you 95%… plus free shipping!

Why are we doing this? The Christmas season already creates crazy logistical issues without us making it worse by encouraging the motivated shoppers to do their thing one day a year. Why are we training our customers to concentrate all of their shopping efforts on one day a year? Does anyone ever sell anything at full price anymore?

The Hidden Costs Of Cyber Monday Madness

Chasing highly motivated buyers with enormous discounts to get them to do their shopping all on the same day not only seems counter-productive, but also seems more likely to create issues with profitability, logistics and fulfillment by overwhelming your company’s short-term capacity. For example:

Deep discounting reduces revenues. Intense competition creates discounting wars and it is easy to cut your margins too thin. That’s great for consumers, but not for your bottom line.

Your costs are probably higher than you originally planned. When competition heats up you may incur additional hidden costs that probably did not get factored into your pricing calculations. These include higher CPAs caused by higher CPCs as you try to muscle your way to the top ad spots, increased payrolls caused by overtime and temporary workers, and expediting surcharges you may need to pay to ensure that you have your inventories, product collateral in-house and your website updates and shopping cart deadlines are met. These types of unplanned charges often don’t show up until a month later and can take a real chunk out of your profits.

Let’s face it. No matter how well you plan, stuff happens when you rush to market for Cyber Monday.

Customer service suffers. When your call volumes spike past your normal capacity, not only do your service levels suffer and hold times increase, your costs can rise unexpectedly, too. Temporary workers and experienced people make more mistakes under pressure during peak times. In turn, that can put more pressure on your shipping department. Reshipments, FedEx charges and higher return costs add up quickly.

What’s a PPC campaign manager to do?

Obviously, you can’t stop Black Friday and Cyber Monday from happening, but you can decide whether or not to participate in the crazy bidding and discounting wars. You may lose out on some sales to the big discounters, but unless you can compete effectively on price, then you aren’t sacrificing profits anyway, so don’t worry about it. There are many more weeks ahead for you to win profitable customers.

Here are four straightforward tactics you can use to improve your PPC campaign success this holiday season.

Pause all but your most productive keywords. This is not the time of year to experiment with new keyword sets or to keep marginal keywords online. Pause them all now so you can free up more budget and CPA wiggle room for your best keywords.

Suspend ad testing. This is the time of year to leverage your best performing ads. Except for testing of holiday ad messages, pause all but your most productive ad sets.

Sell differently to “early Janes” and “late Johnnies.” Early shoppers have different motivations than folks who shop late. Free shipping, the king of all offers, will appeal to early shoppers. Overnight or electronic delivery will appeal to late shoppers. Late shoppers have less time for comparative shopping. Consider increasing prices (or reducing offers or discounts) the week of December 20th, but emphasize value, availability and overnight or instant delivery.

Assume higher conversion rates in your bid calculations. As the season progresses, assume that both conversion rates and traffic will increase and adjust your bids accordingly.

Well, that’s it for this month. Good luck to all of you in holiday promotions. I’d love to hear your perspectives on dealing with the crazy logistics of the Christmas season, so please leave a comment if you feel so inclined.

And That Holiday Gift I Mentioned…

I promised you a little present to get you in the right mood for working on your campaigns and here it is, a wonderful video that a good friend and colleague, Barb Young, shared with me a few weeks ago. A highly talented flash mob from the Opera Company of Philadelphia took advantage of the famous Wannamaker’s organ in Philadelphia. Enjoy!