No time of year matters more than the holiday season for e-commerce businesses. As one of the largest spending seasons for retails of all kinds, taking advantage of the gift-oriented nature of the winter months is a must for anyone with products to sell.
In 2019, online retail sales over the holidays reached a whopping $137 billion, a new record in e-commerce. With a growth rate of over 13% over the prior year, online sales have been on a meteoric rise over the last decade, and 2020 doesn't look to be any different.
If you want to see revenues rise, tapping into the trends is imperative. The money is there for the taking — provided you're willing to do what it takes to convert customers. And for many e-commerce businesses, that means focusing on payment and pricing options.
Things to consider before you adjust your pricing and payments
Pricing makes a big difference over the holiday season. Most consumers have a lot of planned purchases, which means money may be tighter than usual. While some will be willing to splurge on must-haves, everyone is always looking for sales savings. Before adjusting your online payment and pricing strategies, keep these factors in mind.
1. Review the previous holiday season strategies
Like clockwork, holiday seasons come around every year. As such, for any company with more than a year in business, this won't be its first rodeo.
Before taking any great strides this year, look at what worked and what didn't in the past. Maybe you had a successful promotion that increased sales of your top items. Or perhaps you experienced something different and your customer engagement strategies fell flat and your holiday season was disappointing. Whatever your reality, what did or didn't work in the past can be used as an initial foundation for this holiday's sales strategy.
CRO tools may come in handy in accomplishing this. With the ability to break down the results of varying marketing campaigns and optimize A/B testing, this kind of analytical resource makes it easy to identify what works and what doesn't during the holidays.
2. Your pricing and payment options depend on your competitors
No business exists in a vacuum. Whether you like it or not, your competitors will play a big role in your strategy, for better or worse.
Your individual preferences and plans matter, but only so far as your competitors are concerned. When evaluating whether or not to make a purchase, shoppers will likely compare what you have to offer with what else is on the market. If your competitors are running sales with deep discounts or have added buy now, pay later options, for example, you may want to consider doing the same.
The comparison needs to be an ongoing process, too.
Your competition will be doing the same thing you are in vetting the market, so unless you're willing to do the legwork and pivot as needed, you'll always be at a disadvantage.
Five payment and pricing strategies to drive holiday sales
When you want to maximize sales in the holiday season, the right strategies are essential. These five winning payment and pricing strategies can drive purchases and revenue. You don't necessarily need to employ all of them, but they should all be part of the evaluation process when creating a stellar strategy.
1. Offer payment financing
Buy now, pay later, or BNPL, is one of the biggest current trends in payments. Instead of paying upfront, shoppers can select an option that enables them to pay in installments over time. Most of these programs come at no cost to the borrower, making a payment plan a big motivation to buy.
BNPL comes in many forms, from AfterPay to PayPal's deferred payment model. Popular among younger shoppers, like members of Gen Z, BNPL is revolutionizing payments.
In fact, some transactions wouldn't happen at all without this payment option; one study found that 31% of shoppers wouldn't have purchased at all without a BNPL option. Further, additional research found that order values were 33% higher with buy now, pay later in place.
It's common for the holiday season to put pressure on shoppers' pockets, but a buy now, pay later option can alleviate that, even if only psychologically. Allowing the opportunity to split up payments can make customers feel better about buying because they can stretch their budgets further. In addition, delayed payments can allow time for another paycheck to help cover costs.
By providing a BNPL option on your checkout page, regardless of your preferred vendor, you're giving customers another reason to choose you over the competition. More options provide more flexibility. One survey of customers found that 69% of shoppers are more likely to use BNPL options during the holiday season.
If you employ this option, make sure shoppers are aware at the start of their shopping process. Some buyers only want to use stores with BNPL options, so the clearer you make it, the more likely you are to see sales.
2. Include multiple well-known payment options
Credit cards have long been a staple of online purchasing, but some people only use debit cards linked directly to their bank account. Only one in three millennials have a credit card, leading to a large segment of the market that relies on other payment methods like prepaid cards. To keep up, retailers must offer more payment options than MasterCard and Visa.
When shoppers buy online, they want fast, effective, and safe options for making payments. They also want choices. Everyone has different preferences for making purchases, and if a preferred avenue isn't possible, it's highly likely that buyers will go elsewhere. And, unlike shopping in person, your competitors are a few simple clicks away, not a few miles on the highway.
If you don't already have multiple alternative payment methods (APMs) in place, it's time to do so. Failing to provide enough forms of payment can deter buyers when they get to the checkout, leading to a rise in cart abandonment and a switch in loyalty from you to your competition.
AMPs come in many different shapes and sizes, including:
BNPL options, like AfterPay and Klarna
Natori, for example, uses Apple Pay, which enables users to complete the whole checkout process using information stored within Apple devices. Accepting payments like this is essentially tapping into a digital wallet and can lead to an increase in profit margin.
Before picking APMs to employ, be sure you know your demographic. Gen Z and Baby Boomers have different preferences in payments, so knowing who buys your products will help you make the best decisions with payment methods.
3. Try out product bundling
When you want your customers to spend more on your goods, product bundling is an excellent option.
A bundle (a package unit of several items regularly purchased together), empowers customers to buy a variety of items at a discounted price. This may seem counterintuitive—customers getting more for less—but the opposite is true.
Bundling can maximize sales as customers are spending more to get products they may not have purchased otherwise. Someone may have gone to your site to spend $50 on a wok, but spending $70 on a wok and cookbook combo means more money for you.
It's an effective way to make sure products make their way off your shelves at a faster rate than normal, depending on how you choose to bundle.
For example, bundling a best seller with a related item that is less popular can sell more of your less popular products, move inventory and introduce niche items to a larger market.
Pairing like items is also a great strategy for those looking to move products. Take Nintendo, for instance. When the global gaming giant bundled Game Boys with Game Boy games, the bundle sold far better than the standalone product. Nintendo still leans on this concept today.
The cosmetics company Bliss pairs well. For example, their Glow serum: by selling the day and night models together, buyers can create a whole routine easily without picking and choosing—and Bliss can drive more sales.
Be sure to bundle with a strategy in mind. Think about your overall objective in bundling, like which products you'd like to sell more, and use those goals to guide the how and when you'll ultimately bundle.
4. Be picky with sales promotions
Promotions are a great way to attract online customers.
Everyone loves to save money, especially during the holiday season. From promo codes sent to your email list to discounts on top-selling items, the right promotions can win you plenty of sales success in the winter months.
However, if everything is always on sale, you essentially ruin the efficacy of offering sales at all. As such, it's important to be discriminating about how and why you promote your business.
There are plenty of sales avenues that succeed with customers and still offer more advantages than a simple discount code. Using a "buy one get one" sale is a popular way to inspire buyers to purchase an item they normally wouldn't under the illusion of getting something for free.
Sales that promote future purchases are also effective because they bring buyers back to your store.
Things like gift cards for transactions above a certain threshold are essentially a win-win; your business benefits and your customers do, too.
Timing counts with sales as well. For example, Black Friday and Cyber Monday were major days for sales in 2019, topping over $18 billion. When scheduling sales, be sure to focus on the holidays and capitalize on the kinds of deals customers want to see.
5. Provide discounts for bulk purchases
When you want to incentivize this holiday buying behaviors, offering discounts for big purchases is the perfect way to do so.
Promotions are a great way to attract attention on a general level. Still, when some of your promotional strategies deal with bulk purchases, you can give your customers a great reason to prioritize you. If they're buying the kind of products you're selling, they're more likely to invest with your company if they can save a bit.
Discounts for bulk purchases can come about in a few different ways.
A common option includes offering free shipping above a certain threshold. This is particularly effective when combined with a high-speed shipping option, like overnight or two-day shipping — a perfect way to lure in those shopping at the last minute.
Another option is a percentage discount at certain tiers. For example, a 10% discount could kick in after spending $75 and an additional 10% after $150. This gives buyers an added bonus for purchasing more products.
And when promotions take a threshold approach, many buyers purchase items they would not have otherwise in an effort to reach the sale level.
Keeping things simple with an across-the-board sale using a discount code is another option used skilfully by companies like Burrow, who take advantage of any holiday or inventory shift to promote a site-wide sale.
If you've offered sales in the past, you probably know which options perform best among your customer base. By using your knowledge of what entices your regular shoppers, you can plan promotions that are likely to be a success.
There's no better time to reap the rewards of your e-commerce site than the holiday season. Most companies look solely at marketing, but there's more to the season than just effective advertising — including your approach to payment and pricing.