How brands and retailers are planning their marketing spend during the holiday season to avoid diminishing returns

As this holiday shopping weekend maintains its crown as the tentpole event for consumers, retailers continue to react in kind, focusing a significant amount of their ad dollars around Black Friday. But if shoppers are still going to spend around this event regardless, are retailers truly maximizing their ad investment?

Analyzing last year’s Black Friday promotions and whether they contributed to actual profit will help determine how brands should plan their investments ahead of this year’s holiday season.

More spend doesn’t necessitate more return

In analyzing the spending trends in the Keen platform for 2024, December saw significant investments as retailers looked to capitalize on a late start to the holiday shopping season. However, when reviewing revenue contributions and sum of revenue to determine the impact of investments on revenue, that investment only contributed to 29% of all revenue, including for the same year and beyond. This ranked lower than months like August and September, where brands saw their investments contribute to 33% of future revenue. 

Similarly, the net profit value of brands’ December investments was lower than that of months like April, July and September. This demonstrates that brands investing in advertising around the peak holiday are not getting a significant amount of revenue or profit that justifies the spend.

Identifying inflection points, testing limits and year-round marketing are key to maximizing spend

Instead of investing significant amounts of money during the holiday season, brands should consider identifying their point of diminishing returns and adjust accordingly. Even during peak seasons, there is a point where each additional dollar returns less than one dollar. When brands find that inflection point, they can then adapt their plan to spend up to that level for each channel or week, ensuring that they’re not funneling their dollars into something that won’t deliver results.

While this strategy works for most brands, some retailers whose revenue is heavily dependent on the holiday season can take a different approach. These brands can consider testing the limits of their peak season to see which time periods yield the highest return.

Once they identify that peak, they can then begin building sales beyond that apex by extending each end of the peak a few weeks, activating marketing before the peak and pushing past it after it wanes to help extend the buying cycle.

For example, a highly seasonal brand that works with Keen Decision Systems used a strategy to build momentum ahead of its key season to maximize the value of its prime weeks. This approach resulted in a 6% growth of new revenue and a 49% increase in profit ROI, helping the brand maximize a pivotal period and leading to more long-term growth.

However, brands should also maintain year-round marketing activity. So long as a product is available, marketing support helps drive sales. With this brand equity in place, a retailer can continuously earn mindshare, whether a seasonal product or one that is only relevant during the holiday season. As such, they’re able to lower their marketing costs long term and increase their chances of seeing improved revenue contributions from their ad spend.

Black Friday and the holiday season represent pivotal time periods for retailers looking to finish the year strong. However, brands and retailers shouldn’t hold their entire ad budget for that last month in hopes of generating more profit. Consumers are going to spend regardless, so any additional spending is leading to diminishing returns. Instead, retailers need strategies that disperse their dollars or ensure that they’re properly maximizing their peak season.

Sponsored by Keen Decision Systems