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How to Maximize Your Black Friday Success: Smart Markdown Optimization
📌 TL;DR
- Black Friday is a critical sales event, but it often comes at the cost of thin margins and brand value due to indiscriminate discounting.
- Retailers can shift from blanket markdowns to data-driven, strategic pricing, focusing on products with high elasticity and preserving premium items at full price.
- By leveraging PricingHUB’s Markdown & Promo Optimization module, retailers can make smarter, profit-focused pricing decisions that maximize both sales volume and margins.
- Follow a clear check-list—set goals, use real-time data, target the right products, and adjust your strategy—to ensure Black Friday is a strategic growth period, not just a sales spike.
The Black Friday Dilemma for Retailers
Black Friday is one of the most important sales events for retailers.
In 2024:
- Revenue surged by +86% between November 15 and 22 (beginning of the BlackFriday week). Same conclusion between November 16 and 23 with a +74% spike.
- Discounted products played a significant role, seeing discounted products sales increasing by +427% between November 15 and November 22 and by +527% between November 16 and November 23.
(Source: Average results from 30+ retailers – PricingHUB in app data)
However, this growth often came at the expense of margins, with some retailers experiencing negative daily margins.
Retailers face a difficult question:
How to drive sales without compromising profitability and brand image?
The Challenge: The Race to Discount
As Black Friday approaches, retailers feel pressured to participate in the race to discount. The thinking is simple: the larger the discount, the higher the likelihood that consumers will engage. With so many competitors offering big reductions, retailers feel compelled to match them.
However, this race to discount leads to thin margins across the board. While large discounts can create a short-term sales spike, they may harm profitability in the long run. The deeper the markdown, the more it erodes margins and brand value. When discounts are indiscriminately applied across all product categories, it becomes increasingly difficult to differentiate products that truly need discounts from those that don’t.
How Market Pressure Drives Over-Discounting
The pressure to remain competitive is especially intense during retail events like Black Friday. With so many brands offering promotions, the fear of losing out leads retailers to offer deeper discounts. Retailers see their competitors adjusting prices, and often feel they must follow suit, without fully considering the long-term consequences of these decisions.
This over-reliance on discounts can result in retailers lacking the insight needed to optimize pricing based on demand elasticity and inventory turnover. This can lead to missed opportunities and margin erosion. Moreover, consumer preferences are shifting: our study with Converteo shows that 6 out of 10 consumers prefer fewer but more targeted promotions with larger discounts. It’s no longer about offering more discounts, but about offering the right discounts.
Transforming Black Friday into a Strategic Growth Period
Retailers now have an opportunity to redefine their Black Friday strategy. By focusing on data-driven insights, retailers can maintain competitive pricing while maximizing profitability. The opportunity lies in strategic markdowns — offering discounts that are targeted, profitable, and aligned with both demand and market trends.
Instead of continuing with blanket discounts, retailers can shift to a profit-focused model, targeting products with high elasticity that respond well to markdowns, while leaving premium products at full price.
This approach allows retailers to not only boost sales volume, but also preserve margins and enhance their brand value.
Setting an optimal discount for each product
To help retailers seize this opportunity, PricingHUB offers the Markdown & Promo Optimization module, designed to make more strategic pricing decisions. This module leverages advanced data analytics to provide real-time recommendations on the optimal discount for each product, considering key factors such as demand elasticity, inventory levels, and market conditions.
With this tool, you can:
- Target the right products for markdowns: Identify high-elasticity products that will benefit from deeper discounts, while leaving premium products at full price.
- Maximize margins: Make the right discount decisions to clear inventory efficiently without sacrificing profitability.
- Stay competitive: Adjust your pricing strategy in real-time to align with market demand and competitor activity.
PricingHUB ensures that your Black Friday strategy is data-backed, effective, and profitable, allowing retailers to make smarter pricing decisions that drive sales while preserving margins.
Preparing for Black Friday: Checklist for Success
As Black Friday approaches, it’s essential to act strategically and quickly. Here’s a checklist that every retailer should follow to ensure a successful Black Friday:
- Set clear goals: Define your sales and margin objectives for Black Friday.
- Leverage real-time data: Use insights from demand, inventory levels, and competitor activity to adjust your pricing strategy.
- Target the right products for markdowns: Focus on slow-moving products that will yield the highest return, while preserving premium items that offer higher margins.
- Monitor and adjust your strategy: Continuously evaluate your performance throughout Black Friday to ensure your strategy is on track.
By following this check-list, you can ensure that Black Friday isn’t just about quick sales but about strategic growth that benefits both your bottom line and brand value.
👉 Do you want to beyond and reach the expert level in Markdown strategies?
We have created a series of 3 articles entirely dedicated to it. It covers the answer to imortant aspects such as:
- How to balance inventory levels and profitability?
- How can retailers effectively plan and execute markdown strategies?
- How can businesses optimize markdown execution for profitability?
Curious to Know How PricingHUB Can Contribute to Your Black Friday Success?
Book a demo with PricingHUB today to see how our Markdown & Promo Optimization module can optimize your Black Friday strategy and boost your profitability.
