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The TL;DR:
Let’s Chat D2C: How to Avoid Common BFCM Pitfalls
What I’m Thinking about this Week: All of the Different SaaS Pricing Models - Which One is Best?
The D2Z Podcast: In this week’s episode, I sat down with Brendan Mahony to discuss the challenges of closing a business, its emotional and financial impact, and what entrepreneurs need to know to make the process smoother.
App Updates & Highlights: Haven - helping entrepreneurs and business owners get their taxes right.
Upcoming Events: I’m in SF until Tuesday, Phoenix until Thursday, and then in Miami for the weekend! Let me know if you’re in the area and want to connect.
Learn AI-led Business & startup strategies, tools, & hacks worth a Million Dollars (free AI Masterclass) 🚀
This incredible 3-hour Crash Course on AI & ChatGPT (worth $399) designed for founders & entrepreneurs will help you 10x your business, revenue, team management & more.
It has been taken by 1 Million+ founders & entrepreneurs across the globe, who have been able to:
Automate 50% of their workflow & scale your business
Make quick & smarter decisions for their company using AI-led data insights
Write emails, content & more in seconds using AI
Solve complex problems, research 10x faster & save 16 hours every week
Let’s Chat D2C - How to Avoid Common BFCM Pitfalls
The holiday season is a double-edged sword for ecommerce brands. On one hand, it represents a surge in online shopping as consumers scramble to find gifts. On the other, the increased traffic and sales bring many challenges that can make or break a brand's quarter.
From inadequate preparation to last-minute scrambles, there are a host of mistakes that can turn BFCM into a stress-filled nightmare. Here are the most common errors ecommerce brands make and how Shopify merchants can avoid them.
Insufficient Inventory Planning
One of the most precarious balancing acts during the holiday season is inventory management. Stock too little, and you risk missing out on sales. Overstock, and you're left with a warehouse full of unsold product come January. This year, supply chain disruptions and production delays have added an extra layer of complexity. Brands must leverage data and analytics to make accurate forecasts, have contingency plans in place for stockouts, and consider options like dropshipping or pre-orders to mitigate risk.
Here's how Shopify brands can prepare their inventory for a successful and stress-free BFCM.
Forecast Like a Pro: Accurate forecasting is the foundation of good inventory management. Analyze your sales data from previous holiday seasons, factoring in any trends or changes in your business. Don't forget to account for any new product launches or marketing initiatives that might impact demand. Shopify's built-in analytics can give you a wealth of data to inform your forecasts.
Diversify Your Suppliers: With supply chains stretched thin, relying on a single supplier is a recipe for disaster. Identify backup suppliers for your most popular items, and consider nearshoring or reshoring to reduce your reliance on international shipping. Shopify's partnership with Global-e can connect you with a network of vetted suppliers across the globe.
Stock Up Strategically: Focus on stocking up on your best-selling items and those you know will be holiday hits. Consider running pre-orders for products with long lead times, and use back in stock alerts to capture demand for items that might be out of stock. Don't tie up too much capital in slow-moving inventory that might not sell.
Implement a Safety Stock System: Even with the best forecasting, surprises can happen. Implementing a safety stock system ensures you have a buffer in case of unexpected demand. Shopify's inventory management features allow you to set reorder points and quantities, so you can automatically order more stock when levels run low.
Leverage Dropshipping: Dropshipping allows you to sell products without holding any inventory, reducing your upfront risk. Shopify has a range of dropshipping apps and integrations, from Oberlo to AliExpress, that allow you to tap into a vast marketplace of products. This can be a great way to offer a wider range of items without the inventory burden.
Get Your Warehouse Ready: Make sure your warehouse is optimized for the holiday rush. Implement efficient picking and packing systems, consider hiring seasonal staff, and ensure your shipping station is stocked with supplies. Shopify Fulfillment Network can also be a lifesaver, giving you access to a network of warehouses and allowing for 2-day shipping.
Have a Plan for Stockouts: Even with the best planning, stockouts can happen. Have a plan in place, whether it's offering pre-orders, recommending similar products, or providing estimated restock dates. Transparency is key - communicate proactively with customers about stockouts and do your best to retain their business.
By getting your inventory strategy right, you can avoid the stress and scrambles that come with BFCM. With accurate forecasting, strategic stocking, and a few trusty Shopify apps, you can ensure you have the right products in stock to meet demand and capture those holiday sales. Remember, inventory management is an ongoing process, so stay nimble and be ready to adjust your strategy as the holiday season unfolds.
Poorly Optimized Sites
Today's online shoppers expect a seamless, frictionless experience. A slow or unresponsive site is a surefire way to lose sales. Sites must be optimized for speed and mobile, with easy checkout options and transparent order tracking. Any hiccups, from slow loading times to confusing navigation, can send customers fleeing to competitors.
Ensure your site is optimized for speed and mobile, and that your hosting can handle a surge in traffic. Shopify's performance monitoring tools and fast checkout options can help.
Social media has raised the bar for customer service, with shoppers demanding quick responses and resolutions to issues. Investing in AI-powered chatbots and proactive service can help meet these heightened expectations.
Lackluster Shipping Options
Even when inventory is perfectly managed, shipping remains a major pain point. Increased order volume puts a strain on carriers, leading to delays and lost packages. This is compounded by the last-minute nature of many holiday shoppers. Brands must build in extra time for delivery, offer in-store pickup options when possible, and communicate proactively with customers about shipping timelines. Free or discounted shipping can be a significant competitive advantage, but only if you can afford the hit to your bottom line.
Generic Marketing
Black Friday and Cyber Monday have become a free-for-all, with every brand offering discounts and promotions. Cutting through the noise is a challenge. Ecommerce businesses must get creative with their marketing, focusing on personalized, omnichannel campaigns that reach customers where they are. Loyalty programs, exclusive early access for subscribers, and limited-time lightning deals can all help capture attention. High-quality product content and stellar customer service also become differentiators in a price-driven market.
Understaffed Customer Service
Long response times can frustrate customers. Hire seasonal support or leverage AI chatbots like Gobot to provide 24/7 support. Shopify's customer service integrations with Gorgias and Reamaze can help manage inquiries.
Here's how Shopify brands can get their customer service teams ready for the BFCM onslaught:
Staff Up: The holiday season is no time to be short-staffed. Bring in temporary hires or train other teams on customer service duties. Consider partnering with a call center or outsourcing to a customer service agency for overflow support. Shopify's partnership with Gorgias makes it easy to manage customer support from a single dashboard.
Implement AI-Powered Chatbots: AI-powered chatbots can be your customer service heroes, providing 24/7 support and answering frequent questions. Shopify apps like Gobot and Reamaze allow you to set up automated chatbots and route complex issues to human reps. This frees up your team to focus on high-value issues.
Create a Knowledge Base: A comprehensive knowledge base or FAQ section can empower customers to find their own answers. Document common questions around orders, shipping, returns, and products, and make this easily accessible from your site. Shopify makes it easy to create and customize a help center.
Equip Your Team with the Right Tools: Make sure your customer service team has access to all the information they need. Shopify's customer profiles give a full view of order history and communication. Consider implementing a tool like Gorgias, which integrates with Shopify and provides a unified customer view.
Develop a VIP Program: For your most loyal customers, consider implementing a VIP program with dedicated support. This could be a phone hotline, email address, or even a WhatsApp group.
Have a Plan for the Unexpected: Even with the best prep, things will go wrong. Have a plan in place for when (not if) things break. This could be a status page for site outages, pre-written responses for common issues, or an escalation procedure for complex problems. Transparency and proactive communication are key.
Train for Empathy: The holiday season can be stressful for shoppers. Ensure your team is trained to respond with empathy and patience. A little kindness can go a long way in de-escalating issues and building brand loyalty.
By preparing your customer service team for the holiday rush, you can turn what could be a stressful time into an opportunity to build customer relationships. With the right staffing, tools, and training, your team can provide the exceptional service that sets you apart and keeps customers coming back long after the holiday lights come down.
Last-Minute Scrambles
Waiting until the last minute to plan promotions or email campaigns can lead to missed opportunities. Start planning your BFCM strategy well in advance, and use Shopify's scheduling features to automate where possible.
It’s a Marathon - Not a Sprint, Plus Not Being Prepared for Returns and Exchanges
While Black Friday and Cyber Monday get the headlines, the holiday season is a long haul. Brands must have a strategy in place for the lull between these major shopping days, as well as a plan for post-Christmas returns and exchanges. Offering gift guides, curated product bundles, and continuing promotions can keep the momentum going. Meanwhile, capturing email addresses and browser data from holiday shoppers sets you up for success in the new year.
Not Tracking and Optimizing
Failing to monitor performance and adjust course can mean leaving money on the table. Use Shopify's analytics to track sales, marketing performance, and customer behavior, and be ready to pivot your strategy based on the data.
Wrapping Up
By being aware of these common pitfalls, Shopify brands can take steps to avoid them and set themselves up for a successful and stress-free BFCM. With meticulous planning, the right tools, and a focus on customer experience, you can turn the holiday season into a time of growth and celebration.
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What I’m Thinking About This Week - All of the Different SaaS Pricing Models
There’s no shortage of different SaaS pricing models, and I’ve considered all of them while building SCALIS. Here’s a breakdown of the most common SaaS pricing models and their pros and cons:
1. Flat-Rate Pricing
One fixed price for access to all features of the product.
Pros:
Simple for customers to understand.
Easier to manage as there is only one price point.
Great for smaller businesses with a narrow customer segment.
Cons:
Limits revenue potential as all customers, regardless of their size or usage, pay the same amount.
Not ideal for businesses that serve both small and large enterprises.
Hard to scale because the pricing doesn’t adapt to different customer needs.
2. Tiered Pricing
Offers multiple pricing tiers based on different features or usage levels.
Pros:
Flexibility to serve different customer segments (small businesses, mid-market, and enterprises).
Allows upselling, as customers can move to higher tiers as their needs grow.
Clear segmentation of features and value propositions across tiers.
Cons:
Can confuse customers if too many tiers are offered.
Requires careful balance of features across tiers to avoid customers feeling cheated.
Some customers may drop down to lower tiers, reducing potential revenue.
3. Per-User Pricing
Pricing based on the number of users or seats.
Pros:
Scales directly with the customer’s growth, making it predictable for both the customer and provider.
Simple to understand and implement, especially for team-based tools.
Encourages customer expansion as they grow their teams.
Cons:
Customers may limit user accounts to keep costs down, which can hurt engagement.
Penalizes companies with large teams but lower individual usage.
Doesn’t account for usage variance; low-usage customers pay the same as high-usage ones.
4. Usage-Based Pricing (Pay-As-You-Go)
Pricing is based on actual usage (e.g., data processed, API calls made).
Pros:
Customers only pay for what they use, making it cost-efficient and attractive.
Scales well with companies that have fluctuating usage patterns.
Encourages larger enterprises to experiment with the product without committing to high upfront costs.
Cons:
Harder to predict revenue for the business.
Usage spikes can result in unexpectedly high bills, leading to customer dissatisfaction.
Difficult to implement effectively without precise tracking and billing systems.
5. Freemium Model
A basic version of the product is offered for free, with premium features available at a paid level.
Pros:
Low barrier to entry, making it easier to attract large numbers of users.
Helps build a loyal customer base and community.
Gives potential customers a taste of the product before committing financially.
Cons:
Conversion rates from free to paid users can be low.
Supporting free users can create a strain on resources, especially for customer support.
You need to offer enough in the free version to attract users but not so much that they never upgrade.
6. Free Trial Model
Users can try the full product for free for a limited time (e.g., 14 or 30 days).
Pros:
Allows users to experience the full value of the product before committing.
Creates urgency to convert before the trial period ends.
Lower churn rate if users successfully experience value during the trial period.
Cons:
If onboarding isn’t optimized, users may fail to see the value in the trial period and not convert.
Once the trial ends, some users may revert to competitor products or free alternatives.
Can attract users who are not serious about purchasing, leading to low conversion rates.
7. Per Feature Pricing
Pricing is based on the specific features the customer chooses to use.
Pros:
Highly customizable for users, allowing them to pay only for what they need.
Can lead to higher customer satisfaction since they control their costs.
Great for SaaS tools with a wide range of use cases and complex features.
Cons:
Can create decision fatigue if there are too many options.
Difficult to implement for businesses with many interdependent features.
Customers might underutilize the product to minimize their costs, limiting engagement.
8. Per Storage/Data Pricing
Pricing based on the amount of storage or data processed (common in cloud storage and hosting services).
Pros:
Transparent and easy to understand for storage-heavy SaaS products.
Scales directly with customer needs, ensuring that larger customers pay more.
Easier to predict costs as customers grow in storage needs.
Cons:
Smaller customers may struggle with costs as data needs increase.
Can lead to dissatisfaction if customers feel they are being “nickel and dimed” for storage.
Hard to implement for SaaS products that don’t primarily rely on data or storage usage.
9. Hybrid Pricing Models
Combines multiple pricing strategies (e.g., per-user + usage-based or tiered + freemium).
Pros:
Highly flexible and can appeal to a wide range of customer segments.
Enables customization to maximize revenue from different types of users.
Can combine the best of different models, reducing their individual drawbacks.
Cons:
Can become overly complex for customers to understand.
Difficult to manage operationally, as it involves tracking multiple factors (users, features, usage).
Requires strong product and pricing teams to balance effectively.
10. Custom Enterprise Pricing
Tailored pricing for large enterprise clients, often involving a mix of features, user licenses, and support levels.
Pros:
Maximizes revenue potential from large clients who have specific needs.
Provides flexibility for complex implementations or long-term contracts.
Can include premium support, training, and SLA agreements, making it a more holistic offering.
Cons:
Sales cycles are typically longer due to negotiation.
Requires more resources to manage (e.g., custom contracts, dedicated account managers).
Not scalable for small or mid-market customers.
11. Pay-Per-Active-User Pricing
Customers pay based on the number of active users in a given period.
Pros:
Fairer than traditional per-user pricing since customers only pay for users actively using the product.
Encourages companies to roll out the product widely without worrying about paying for inactive users.
Tends to have higher user engagement.
Cons:
Harder to forecast revenue as usage can fluctuate.
Requires precise tracking of active users, which may introduce billing complexities.
Some customers may switch to competitors with simpler models.
12. Freemium with a Usage Cap
Free access up to a certain usage limit, then payment is required.
Pros:
Allows users to experience the product and commit once their usage grows.
Ideal for usage-based services, such as cloud or API services.
Creates a natural upgrade path for users who hit the limit.
Cons:
The free tier can be abused by customers trying to stretch the usage limit.
Some users may churn once they hit the limit, opting for other free alternatives.
Requires careful balancing of the free limit to encourage upgrades without losing customers
SaaS Pricing Models - Which One is Best?
Each pricing model suits different types of SaaS products and customer bases, so the key is to select the one that aligns with your target audience and revenue goals. You could even test different models to see which resonates best with your customers!
However, my favorite is combining the freemium model with per-user pricing, so long as you have checks and balances in place so that multiple users don’t just use one login.
This Week’s The D2Z Podcast
#125 – What Every Entrepreneur Should Know About Closing a Business
🎧 Listen Now 🎧
In this week’s episode, I sat down with Brendan Mahony to talk about the challenges of closing a business, the emotional and financial impact, and what entrepreneurs need to know to make the process smoother. We discussed:
💡 The tough but necessary decisions when facing a business closure
💼 Navigating the legal and financial hurdles when winding down operations
🧠 Managing the emotional toll of closing a business and moving forward
🔑 Key lessons learned from Brendan’s own experience and how to apply them
🚀 Insights for future ventures after closure
Learn AI-led Business & startup strategies, tools, & hacks worth a Million Dollars (free AI Masterclass) 🚀
This incredible 3-hour Crash Course on AI & ChatGPT (worth $399) designed for founders & entrepreneurs will help you 10x your business, revenue, team management & more.
It has been taken by 1 Million+ founders & entrepreneurs across the globe, who have been able to:
Automate 50% of their workflow & scale your business
Make quick & smarter decisions for their company using AI-led data insights
Write emails, content & more in seconds using AI
Solve complex problems, research 10x faster & save 16 hours every week
App Updates & Highlights - Haven
What is it: Full Stack Accounting and Tax Partner For Startups
Differentiator: This team is a group of maniacs that will do anything for their customer. They are bringing the best customer experience and support to accounting that you could possibly imagine - so much so, that their average response time in slack is 6 minute. Founders doing accounting, for founders. To them, accounting is and always will be, a financial service.
Starting Price: $300/month for bookkeeping.
How We Use It: We use them for bookkeeping & business taxes, and all things back office finance.
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Upcoming Events
I’m in SF until Tuesday, Phoenix until Thursday, and then in Miami for the weekend! Let me know if you’re in the area and want to connect.
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