Invest in your Customers, not Discounts

The amazing thing to me about Black Friday, is why it's called Black Friday.  This annual Thanksgiving shopping frenzy typically marks the first day of the year in which traditional retailers are in the black.

Think about that.  That means they run in the red, or a deficit position, for 11 of the 12 months of the year.  What an amazingly stressful position to be in.

Deep discounting with fantastically reduced prices on key items drive the crowds on Black Friday.  Retailers are willing to take the hit on some televisions and computers to drive sales on other regularly priced products leading up to Christmas.

Love the concept, but the race to the bottom and the hysteria of the crowd is a proposition of diminishing returns.

What if instead of writing off those loss leading products, retailers invested in their customers?  Mark downs will always play a role in competing with store traffic, but think of the potential power even a small portion of that money being directed into customer loyalty / incentive programs would have.

Here is what I would do with that money.

1. Mobilize the shopping experience.  Integrating your inventory into your online / mobile experience is a must have as the smart phone has become an integral part of people's lives.  Make it a part of the in-store shopping experience.  Near field communications (NFC) and Global Positioning Systems (GPS) let us know where customers are.  Provide incentives to customers to use an app that will allow for push notifications alerting them to new information (sales, complimentary products, other customers) to enhance their shopping experience based on their physical location.  Capture their behaviour to learn what works best (and worst) in improving the experience and driving future sales. 
2. Close the transactional loop.  What makes online retailers so good at providing product recommendations and customizing offers is that they have access to all of the customer behavioral and transactional data.  This could be easily replicated for the in-store experience.  Smart shopping carts and mobile could consider in-store location, time spent in an aisle, near a category, what products are placed in the cart, and what products are purchased.  Tie individual customers to those activities through membership cards (some grocers like Sobey's are incredible at this) to create a full behavioral profile.
3. Tailor offers.  This behavioral data is critical, and if you don't have it you are not going to be engaging your customers.  Use the data to understand the needs of your customers.  Segment them, design programs for them - and market to them as individuals - like Amazon does online.  Deliver offers through mobile, email and through direct mail for certain segments.

These programs require investments from different budgets and organizationally could provide problems.  The opportunity here though is two-fold.  You can create loyal customers who don't need discounts to drive them to your store and you may be able be in the black in month one, not eleven.