In a quiet sales, slow news season, Amazon’s July 15 “Prime Day” became the headline story, delivering massive media attention and record-breaking sales. In keeping with Amazon’s “disrupter” reputation, it pulled off what other retailers have long tried to do: created a catalytic event.
And by almost all accounts, they knocked it out of the park. Not only did Amazon’s self-declared anniversary event end up selling more than the biggest Black Friday ever (2014), Amazon also announced that more new members tried Prime than on any single day in Amazon history. The marketing payoff was huge too. By the time July 15 rolled around, an estimated 74 percent of Americans had heard of Prime Day. With stories in just about every major business, news, and trade outlet, Amazon was estimated to have garnered close to $20 million in free media. Traffic was 19 percent and 23 percent greater than Cyber Monday and Black Friday 2014, respectively, while 398 items per second were purchased. Hundreds of thousands of new members enrolled in Prime to be eligible for the sale, adding to the roughly 40 million current Prime members.
So what can retailers learn from this?
Smart retailers are always looking for calculated, market-making plays. For these and others, we see three long-term takeaways from Amazon’s event.
1. Link the event to profit drivers
Amazon didn’t launch Prime Day just to celebrate its anniversary and spur short-term sales. It used the event to drive enrollment in Prime (required for purchase of Prime Day deals)—which offers both a lucrative fee model and expands a membership base that buys two-to-three times more than nonmembers on average. (Prime members spend $1,500 per year on average with Amazon compared with $625 per year for nonmembers, according to the Chicago-based market research firm Consumer Intelligence Research Partners).
Other retailers can do the same by making sure that planned events have solid ROI goals and are tightly focused on expanding the brand’s most profitable programs. Retailers can identify those “value multipliers” by identifying high-value customer segments, high-value behaviors, and high-value actions, and then build events and trigger communications around them. One online travel company, for example, found that rewards-program customers who downloaded the company’s mobile app were nearly twice as likely as other customers to make repeat purchases. Another retailer found that the “first 90 days” was the critical timeframe for a second purchase. This occurrence was the leading indicator of a customer’s lifetime value with a two-to-three times multiplier effect for driving loyalty in “first 90 days.”
These are the kinds of insights companies need to develop when thinking about events and campaigns. That takes sophisticated analytics and a robust understanding of customer lifetime value and purchasing decision pathways in order to determine what sorts of events, promotions, and offerings are most likely to excite that base.
2. Get operations in order before opening the floodgates
In the torrid morning hours of July 15, Amazon’s web pages took two seconds longer than average to load, with some waits as long as 20 seconds. It was a similar story at Walmart.com where customers waited an average of 7.68 seconds for web pages to load. In the world of eCommerce time is money. Amazon’s own research found that each one second of delayed page rendering results in a 1% loss in sales. Criticism on social media spiked citing a poor selection of deals and the speed at which hot items sold out. Customer care resources were also overwhelmed, with reported response times keeping customers waiting much longer than during other peak periods, such as Black Friday and Cyber Monday.
Some of this is the price of experimentation, but it also shines a light on that fact that operations is as much a part of the customer experience as the marketing or sales interaction. We see leading retailers address this issue by pulling together “SWAT teams” – small, multidisciplinary groups comprised of merchandisers, product leads, customer service, fulfillment, media managers, and IT – to coordinate activities in the lead up to the event and as mission control during the day itself. They track operating factors (such as order management and web performance) in real time, troubleshoot issues that arrive based on previously developed and approved protocols, and scale resources as volumes warrant.
One online retailer, for example, deployed a SWAT team approach to enable a truly integrated program, with marketing, merchandising, and product working together to deliver the high profile event and a strong consumer experience. Prior to the event, the SWAT team mapped out various scenarios, forecasted inventory demand, ‘walked the room’ to review consistency across marketing channels, and figured out where the key operational vulnerabilities were likely to be. The retailer established a series of input metrics that tracked incremental customer behavior across the whole buying journey including awareness, consideration, evaluation, and purchase. Within weeks, this approach resulted in an increase of 5 percentage points in consideration, drove more active evaluation, and led to a significant increase in prioritized category / product searches and page views.
3. Be a fast-follower if the value, resources and mindset are in place.
Walmart was the stand-out fast follower on Prime Day, fashioning their own deep discounts without a membership requirement. Walmart only announced their competing Rollback event two days before Prime Day. That allowed them to spend far less on event promotion while still benefitting from the massive media coverage surrounding Prime Day. Even with two days notice, customers responded in droves: Walmart’s online storefront saw a 91% jump in daily sessions compared to the prior three-week average.
The success of this fast-follower approach shows that when an event has captured the public imagination, it can pay to ride the coattails. Having the right operational mechanisms in place, however, to respond quickly and at scale — with the right inventory, IT, merchandising, and marketing flexibility – is a prerequisite for being able to execute on this approach. But we’re finding that retailers are already investing in these kinds of capabilities as a necessity for daily business operations. What’s needed is a shift in mindset whereby companies pro-actively hunt for event activities across regions and sectors looking for opportunities to compete. This more competitive stance still requires careful ROI analysis – a meaningful boost in customer lifetime value and cost / benefit review of financial impact – but opens up many more potential opportunities as well.
There’s little question that with large-scale disrupter events likely to become more frequent (Amazon has already indicated it will run a Prime Day in 2016 while Alibaba has cultivated its Single’s Day event, where sales in 2014 reached $9Bn). Retailers that cultivate a culture of quick, targeted, strategic experimentation with a willingness to be bold and follow fastwill be best positioned to capture incremental growth.
The authors would like to acknowledge the data providers who participated in this research: Cardlytics and SimilarWeb.
This article originally appeared in Forbes