Tax Day is the due date for filing federal income taxes in the United States. Since 1955, Tax Day takes place on April 15 with a couple of exceptions — if April 15 is a Friday, taxes are due the following Monday, April 18. If April 15 is on Saturday or Sunday, taxes are due the following Tuesday. The date is also different for anyone who files a US tax return but lives outside the US, receiving an automatic 2-month extension that moves their deadline to June 15. Despite these variables, though, Tax Day is well-known to be April 15 and that is considered the norm.
While many taxpayers dislike doing tax paperwork and therefore view Tax Day with a sense of dread, most also look forward to it with anticipation: taxpayers commonly receive a refund soon after filing their taxes, which they can use however they need or prefer. Of course, some of your customers will be ready to shop!
In this article, we'll discuss the basics of Tax Day and how you can build a promotional strategy to appeal to those customers who are looking to spend.
What is a Tax Refund?
Every year, every US taxpayer owes a certain amount of their income to the federal government for income tax. The taxpayer's employer will withhold a portion of each paycheck throughout the year to be used to pay income taxes. When the amount withheld exceeds the amount of tax the person actually owed, the remaining amount will be refunded to them. People who are self-employed or work as independent contractors follow a different procedure, but can end up receiving a refund as well.
A tax refund often signals that the taxpayer withheld too much for their income taxes, but the size of the refund can also be increased by credits resulting from various sources that reflect the taxpayer's situation — for example, a taxpayer could receive a credit to offset their own business expenses or the costs of having children or other dependents.
About 75% of Americans receive a tax refund. The average amount varies by state, but nationwide, the average is approximately $3,000. Since an eCommerce business isn't limited to local customers, the average refund in your state isn't necessarily relevant, but can be if most of your customers come from certain states. If you want to see the specific state-by-state averages, Business Insider has a useful article and infographic they update annually.
How Shoppers Spend their Tax Refund
While many taxpayers choose to save or invest the money or use it to pay off a debt like a credit card balance, some feel like their tax refund is cash burning a hole in their pocket. For them, their tax refund is an exciting windfall that means they can finally splurge a bit. They're eager to spend, whether they've had their eye on a certain purchase for a while or they just love having a chance to shop.
The odds are good that some of these refund recipients are interested in the types of products you have to offer on your eCommerce website. Since 3 out of every 4 taxpayers receive a refund, some of your customers (both current and potential) are likely to be among them.
Why not give these shoppers an incentive to spend some of their tax refund on your online store? Here are a few ways to get your site ready for tax refund season and appeal to these customers.
eCommerce strategies for Tax Day
The most important consideration for a Tax Day promotion is that not everyone receives their tax refund at the same time. The IRS accepts the previous year's tax returns as early as January, so some of your customers are going to get their refund sooner than others. The method they use to request their refund also affects when they receive it, with direct deposit being the fastest. If you run a "Tax Day Sale" promotion on your store, consider leaving it active for long enough to accommodate shoppers that did their taxes later than others. Of course, you can't cater to everyone, but running your Tax Day promotions for 2 weeks in April should be sufficient. You could leave it active for the entire month if you prefer.
Preparing Your Online Store for Customers with Tax Refunds
Before you get into creating Tax Day promotions, you should first cover some basics to ensure your store is ready. Since you're expecting customers who can spend a bit more than usual, now is a great time to ensure your upselling and cross-selling strategy is in place. 3dcart includes upselling and cross-selling tools that give you the power to choose which products are related or otherwise appropriate for upselling.
Product bundles are another valuable method for increasing your average order value. With product bundles, rather than directing the customer toward related items, you offer them a bundle of multiple products with a configurable discount applied to make the bundled purchase more attractive. Bundles can also be used for upselling, e.g. by creating a bundle that includes an item and all its accessories and using that as the upsell for the main product.
You can also use 3dboost to inform customers about your available bundles, as well as helping to avoid abandoned carts by offering a last-minute discount or other incentive. 3dboost lets you create non-intrusive modal popups that can be triggered in several ways. It's a great tool for drawing attention where you want it in your store, and can be used to tell visitors about any active Tax Day promotions you create as well.
Getting Customers Ready for your Tax Day Sale
Just like with any other promotion, you'll want to ensure your customers are ready and waiting for your upcoming Tax Day event. A sale during tax refund season isn't as common as other promotions such as Black Friday and others during the holidays, so keep in mind some of your customers won't be expecting it. You want to get them excited!
Use email newsletters and social media to give your customers advance notice of your Tax Day sale, and invite them to add products to their Wish Lists for purchase once the sale goes live. Since you can see customer Wish Lists, you can use this information to help determine the products customers want the most. Stock up on inventory of frequently wishlisted items, and take a second look at their pricing — if customers need to wait to receive their tax refunds to consider purchasing, reducing the price on these items could lead to many more purchases throughout the year.
Once your Tax Day promotion goes live, be sure to send out another notification, especially if it's been a while since you originally informed your customers that the sale was on the horizon. You don't want them to forget!
Ways to Create a Tax Day Promotion
3dcart's built-in Advanced Promotion and Coupon Manager gives you plenty of options for creating a Tax Day sale. Your first decision will be whether to create a coupon code, set up active discounts directly on your products, or both.
If you decide to use a coupon, give the code an appropriate name like TAXDAY and distribute it to customers as you see fit, whether by posting it on social media, including it in an email newsletter, or by other channels. You can inform brand-new shoppers about it as well by posting it on your website, perhaps with a banner at the top of the page, or by using a 3dboost modal. Your message could be similar to "Enter TAXDAY at checkout to get [whatever your discount involves]." Displaying the coupon code on your website will ensure new customers can find it even if they don't yet subscribe to your newsletter or follow you on social media, which makes them feel welcome.
You can also create a click-to-apply promotion, which automatically applies the coupon code to a customer's order. This type of coupon is great for sharing on social media or by email, since the customer only needs to click a link to use the coupon right away.
Creating discounts and putting certain products "on sale" is also a great way to run a promotion, especially since 3dcart can dynamically create a category of discounted products. Customers can instantly see everything you have on sale, whether they're new to your site or not.
However you decide to create your promotions, you have full control over which products are eligible, and can include or exclude products, categories, manufacturers, or other variables as needed. Promotions don't have to be strict discounts, either — for example, your Tax Day coupon could offer free shipping on select items.
It's one thing to run a sale during tax refund season, but why not try making it a little more exciting? If you're planning to hold this promotional event for a longer period of time (say, the whole month of April) to ensure more people can spend their refunds on your store, you may worry that the sense of urgency is lost.
This doesn't need to be a concern, but you can get around it in a few ways. You may choose to run rotating deep discounts throughout the month, like changing which products are on sale on a weekly or even daily basis. You can even run a Daily Deal promotion alongside any other sales in your store. 3dcart's Daily Deal feature displays a countdown timer that will certainly bring that sense of urgency back. Group Deals work similarly, but require a certain purchase threshold to unlock the discounted price. This makes them great for social sharing and to help you move stubborn inventory.
If the Group Deal purchase threshold isn't met, it's up to you as to whether you still honor the discount — maybe as part of your Tax Day sale, you'll decide to honor it regardless, which can earn you a great deal of appreciation and loyalty. If you run rotating sales, you could also consider honoring expired Tax Day sale discounts for customers that didn't get their refund in time to buy their desired item at the sale price. (This is one reason using a coupon code might be easier, but honoring "late buyers" could fit in with the brand image you're trying to achieve.)
Another fun option for your Tax Day promotion — which will also encourage customers to make larger purchases — is to offer bonus Reward Points during the sale period. This transforms your Tax Day promotion into a long-term rewards event that will have customers already anticipating how they'll eventually spend their bonus reward points. Since shoppers need to be registered on your website to join your loyalty program, bonus points will also help earn you more registrations, which makes it easier to track and market to customers.
Creating a Tax Day sale can increase your conversions and provide a boost in revenue for your business, as well as earning you long-term customers. The best part is that Tax Day isn't associated with any single type of product, unlike other holidays in the first half of the year — e.g. Valentine's Day, St. Patrick's Day, Easter, or Independence Day — so you have much more freedom. A promotion targeting tax refund shoppers can be treated like a miniature Black Friday in April.
A central part of being an innovative business owner is the ability to recognize new and exciting opportunities for promotions that can attract and please your customer base. Tax Day is one of those occasions, so be ready!