BFCM
You know we’re through BFCM when all the SaaS vendors start telling you the amount of GMV they processed. And since they’re all out now: Congrats; you made it.
We’re going to skip the traditional “here’s how much volume we saw,” but still recap BFCM from a customer behavior standpoint—but we're going to do it in a way that challenges how you think about loyalty and its relationship to seasonal promotions, especially Holiday.
We’ve spent time in this newsletter talking about how to rethink loyalty as a merchandising lever and, when doing so, what you might want to look at to quantify that impact. What we haven’t looked at, though, is what loyalty program impact looks like over holiday. To do that, we analyzed returning customer behavior back to January 2023 and the results are interesting.
In short, brands with loyalty programs see returning customers display more subscription-like tendencies—even if they don’t have subscription programs. These tendencies reveal themselves in two ways:
Purchase behavior of loyalty customers is more consistent throughout the year, meaning it’s less impacted by seasonality and major discounting events, like BFCM.
What customers buy is more predictable—with nearly 2/3 of all returning customer orders containing at least one product they purchased before (a rate that’s 25% higher than brands without loyalty programs).
This is a pretty compelling development and a major win for brands looking to improve predictability from their existing customers. The results of this predictably can mean better LTV modeling, better demand planning and higher margins.
So, here’s what it looks like:
In our analysis, we indexed weekly order volumes for loyalty and non-loyalty orders. What you see in the graph above are two huge spikes for BFCM among non-loyalty orders—as you’d expect. What is slightly surprising, though, is how much variance there is below baseline throughout the rest of the year for those non-loyalty customers.
Loyalty, on the other hand, stays very tight to baseline throughout the year—and, yes, even through BFCM. Though you might look at this and say, “hey, why isn’t the spike pronounced at BFCM,” the answer is rooted in the fact that those customers are buying ahead of BFCM and, therefore, saving you margin by not taking advantage of elevated discounting during Holiday season. This is a big win and one worth thinking about. Loyalty, in a sense, smooths out your customer demand, meaning you don’t need to run as many big discount events to deliver sales. It’s a huge margin win.
On the other end of the predictability spectrum, we also found that what customers buy is more consistent when brands offer loyalty programs—even during BFCM.
What we see from brands with loyalty programs is a more regimented routine from customers.
While the percent of customers who only purchase a product they purchased before is identical between loyalty and non-loyalty brands, the difference appears when customers start deviating from that routine. Among brands with loyalty programs, customers try new products, but they more often try new products while keeping a routine around their existing product. These brands, in other words, are earning more shelf space from customers.
Brands without loyalty programs, on the other hand, are swapping shelf space: far fewer customers continue to purchase products they purchased before, even as they explore new ones.
During BFCM this year, this was more apparent than any other point: When a brand had a loyalty program, customers were 50% more likely to include a product they purchased before in their order (when compared to brands without a loyalty program).
Combined, these insights show you that customer behavior doesn’t change all that much during BFCM for brands with loyalty programs. And that’s a good thing. More sales in a more predictable fashion with routine-building habits delivers better value to the brand going forward.