| 5 min read
Prep for Q4
Q4 is a big time of year for most DTC businesses. We’ve collated our thoughts on the three key things you can do to maximise your efficiency, keep key stakeholders onside and ensure you’re getting the most out of your marketing this peak season.
Forecasting and Unit Economics
A great peak season starts with a good forecast and the right expectations.
Stakeholders in finance and marketing often have very different ideas of what good looks like when it comes to performance, so the key thing is to work collaboratively on setting targets based on business profitability and revenue targets.
One big lever for achieving these targets is your promotion strategy.
When planning a promotion, we always look at things through the lens of trading gross margin for a lower CAC. A well-judged discount pays for itself by reducing your cost of acquisition by more than you give away in margin.
This enables you to spend more at a better ROI and acquire customers more cheaply than during a normal trading period because you temporarily expand your target addressable market.
Many large DTC businesses, such as Huel, HelloFresh and Heights have used new customer promotions to great effect, enabling them to acquire customers more cheaply, get the product in people’s hands, then make profit on the second purchase due to their high retention rates.
Our recommendation is to look at past discount performance, ideally at a similar time of year, to understand what promotions have worked the best for you in the past, not just in CAC but in overall profitability, and use that as a starting point for planning your next sale period.
Creative and Promotions
Many businesses tend to overcomplicate their creative strategy in their peak season, with marketing teams looking to test lots of different angles, visuals or messages that they may not have tried before.
If you’re running a promotion, the key thing is to ensure you’re clearly articulating the promotion in your creative whilst still marketing your product. This is what will help you compete in the auction at the most competitive time of year, expand your target addressable market, but also drive quality traffic to your site that is interested in your product, not just the discount.
Even if you’re a brand that doesn’t want to look like a “discounter”, you can still experiment with bundling in additional products to increase the perceived value of the purchase. This can be just as effective as a discount and it often has the effect of increasing AOV and ROAS, although CAC will rise relative to basket size.
The Two Key Levers: CTR and CVR
Digital ad platforms all operate on an auction-based system and the two things that you control are your click-through rate and your conversion rate. Nailing these two things will give you an edge over other advertisers at the most competitive time of year.
Conversion rate optimisation is an ongoing process with big wins few and far between, but in peak season you can have a big impact on conversion rate by being very clear and deliberate with your promotion on site. Use a sticky banner, strike-through pricing and countdown timers (if appropriate) to make sure that people are aware that they have an opportunity to purchase at a lower price.
A high conversion rate means a higher estimated action rate in the auction, enabling you to gain positions in higher-value inventory and ultimately get better results.
The same is true for your creative strategy. By increasing your CTR from relevant users, you are also improving your value in the auction.
The key thing is to improve your CTR through promoting your discount, but also clearly articulating what you’re offering to ensure you’re disqualifying users before they click, helping the system identify users who are most likely to convert.
This will allow you to reap the benefits of running a discount, but keep the quality of your traffic high, which is key to scaling your spend efficiently.
To recap, these are the three things we recommend doing to maximise your efficiency and success during Q4:
- Unit Economics and Forecasting: Collaborate with finance and marketing stakeholders to set clear performance targets based on profitability and past discount performance. Find the right balance between gross margin and CAC to invest wisely and acquire customers efficiently.
- Creative and Promotion: Simplify your creative strategy by clearly communicating promotions while showcasing your products. If discounting isn’t your approach, experiment with bundling to boost AOV and ROAS, though be aware that your CAC will rise but ROAS should remain flat.
- The Two Key Levers: CTR and CVR: Take control of CTR and CVR to excel in digital ad auctions. Optimise CVR by promoting discounts on-site during peak season and enhance CTR by attracting relevant users with clear messaging.
Q4 is a huge time of year for many DTCs, which can come with a lot of pressure, so try and spend some time focussing on these three areas to make the most of peak period. If you’d like to chat with our team about Q4, and how your DTC business can grow, please get in touch.