Black Friday and Cyber Monday craze just finished. We all got our inboxes filled with too-good-to-miss deals, and we might have snatched some. But should software companies do sales?
There is no doubt that Black Friday is suitable for companies, and they wouldn't offer sales on subscriptions or licenses if they were losing money. However, there are some elements to keep in mind before doing as everybody else does.
What's wrong with Black Friday sales?
Deals are good when we buy what we need to. However, days like Black Friday encourage over-consumption and over-spending. This article aims not to discuss the problems of those days but more to discuss why a software company can afford not to offer discounts on Black Friday. Or, if they decide to do it, how they can do it safely.
What is the target audience?
Defining which customer you want to target when doing deals on Black Friday is essential.
Most of the people who will pay on Black Friday are either exiting users or people who already know your software but are waiting on a discount. It's easy to contact those people since they are subscribed to the newsletter or follow the company on social media. Black Friday is not a great day to get new users since it's unlikely to grasp people's interest on that day with all the other rebates that are that day.
That's why keeping this information in mind is essential. Black Friday is not a good day to acquire new users, and it's a conversion day where people upgrade their plans. The offered discount should be calculated accordingly to this information. It would be a shame to provide deals that are too good that you lose money when a user upgrades to the next tier.
Squeeze Cash to a Single Month
A company making a successful Black Friday will have many new customers all having their subscriptions starting in November. It's excellent since it will help the business grow and achieve its goals. However, the firm is now facing a new challenge: how to retain those users?
Some users will inevitably cancel their subscriptions in the year, and there aren't many things that companies can do to prevent that. But with Black Friday, this fact can become a problem. Many users with a subscription that starts at the end of November expose the business to an unbalanced money repartition.
The company should be aware of this, carefully plan investments, and keep the cash repartition. It is also essential to have a strategy that considers cases where many users don't renew their subscriptions.
Support Issue in the Long Term
The cash problem discussed before is something to keep in mind for the longer term. There is, however, a shorter-term issue that must be addressed: support and scaling. A company gaining many new subscribers on Black Friday may face a wave of requests for help, and the support team will have to be adapted accordingly. Whether it's chat or email, it's sure that many people will try to contact the company.
On top of that, servers will be stress-tested, and some scaling must be planned. Otherwise, the service might become unavailable for the new customers, which isn't a great start for people who just spent money. Whether you use a service that scales automatically or has more control over the architecture, this scaling will come at a cost. We all heard stories where companies nearly went bankrupt because of an AWS misconfiguration, and that's not something you want to happen to you!
Lately, the large influx of users may cause new bugs to appear. If the software is not very well tested or pretty young, there may still be problems. The development team would have to fix them, impacting the planning of new features.
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How to prepare for a Black Friday?
Now that we know that having Black Friday deals requires preparation and can have short- and long-term impacts on the company. A well-planned discount strategy is needed to reduce the risks of problems. There are some elements to prepare before engaging in those kinds of days:
- Define what's the goal of the discounts. It's essential to know the objective of your Black Friday deals. Do you want to increase your customer base or convert existing users? This critical question will dictate the steps that follow since the traffic and people touched will change.
- Consider those days as a project. This means having a project manager and some organization to ensure that everything is on track. There is only one day of the year called Black Friday, and you cannot miss it. For that reason, considering Black Friday as a project on its own is essential, and you need someone responsible.
- We have a dedicated support team. Having a team that can respond to customers or makes some quick debugging. Your new customer will have a great first experience with your service. Things may get out of control, but a support team will reduce this risk.
- Have a throttling system that can reduce the strain on the servers. A spike in traffic could be a problem, and this is why having a process that can keep the traffic down can be helpful. It can be a system that creates new accounts to go into a waiting list instead of giving them access to the website. This is not optimal since users can be frustrated to wait before using your service, but it's better than having a down website. Besides, this allows you to communicate about the spike on a blog post or in the newsletter.
- Make sure to have a logging system on the place. Receiving emails from customers complaining about bugs is painful, and it's even worse when the development team doesn't know what's happening. This is why having a logging service such as Sentry is critical. It should be implemented on every project from the beginning, but this is something that can be forgotten. Black Friday is a great time to implement such a system to have more insights into the bugs that occur on the platform.
Note that all the elements discussed above will depend on the size of the team and the number of customers the company has. If you're building a service on your own, it's clear that you won't have the capacity (or the need) to hire extra people just for Black Friday. The same applies to a company that wants to offer discount codes to a small part of its customers. The traffic on the site should not increase uncontrollably if only a hundred people are concerned by the discount.
Why wait on Black Friday?
There is one significant difference between and physical and digital products. They don't rely on as many external factors as other products. No raw material shortage can make your product price skyrocket or some ship that blocks a channel and makes your product stuck in the sea. The highest cost of software is the teams that work on it. There are other costs such as the services used, architecture costs, but they are lower than salaries.
I always find it funny to hear salespersons from a company saying that they still have some sales capacity this month. Like the service sold, the limit is virtual, and they could have as many coupons codes as they want.
My point is, why wait on Black Friday to make some discounts on your software when you could do them any day of the year? You could offer rebates on your software anniversary of the founder's wedding day. Any day can be a great excuse to make sales.
Why make discounts?
It's possible that a company doesn't want to participate on Black Friday. This is fine, and none is forced to make deals on that day. There are, however, some elements that can be discussed.
Use a Fair Price to Make Software More Available
One dollar in the US is not the same as one in Switzerland or India. Having a fixed price can make your software cheap at some places and investment at others, and this is why having a price that changes depending on your customer's location is beneficial.
This is a common practice for many items in the physical world. The price of objects is not the same within the same country, let alone across borders. There are always some exceptions, some products are priced the same across the globe, but they are an exception.
It should be time to have those systems implemented in the digital world. This makes your service more accessible and is a way to show care for your customers across the globe.
Of course, people can use a VPN and get a subscription at a discount. The person that "cheats" will use your service, discuss it with friends or family, and those people might create an account. The benefits outweigh the risks, and having a fair price is suitable for companies.
Don't Make Any Sales
Lastly, a company can decide not to make any sales at all. Why offer some discounts when people are willing to pay for the software you build? Nobody is forcing anyone to make a sale on their products.
In the physical world, it makes sense to discount a product. Companies can have too much inventory, or a new product replaces an older one. However, this doesn't apply to the software. The service is virtual, and you can have as many or as little (if none) sales.
There are companies such as Culture Code that don't offer discounts at all (I never saw one as far and I remember). Their work focuses on creating one of the most reputed to-do lists in the world and doesn't feel like offering discounts to customers. On the other hand, companies such as Nord VPN are constantly on sale and omnipresent on YouTube videos with awesome deals.
It's now clear that running a successful Black Friday deal campaign is not to take lightly. It impacts the short- and long-term strategy of the company and can cost a lot of money if done poorly.
That's why companies should take the time to plan ahead of time, define the appropriate strategy and make sure everything is on track. Besides, the engineering team should make sure that the website can withhold the traffic and that they have eyes on issues that can occur. Lastly, the support team must prepare to answer the question of the wave of new customers.
It's also important to keep in mind that the company shouldn't feel pressured to make Black Friday deals. There are plenty of examples of companies that don't offer discounts and are pretty successful; if that's something you want to do, go for it!