September 10, 2007

E-Mail Marketing Quiz: Full-Price Campaigns, Or Promotional Campaigns?

You are the e-mail Executive at a multichannel brand.

You run a series of tests, measuring how promotions work against an e-mail merchandising strategy offering customers compelling merchandise at full price.

At the end of your series of tests, here is what you learned:

No Promotions:
  • % Of Delivered E-Mails With Clicks = 3%.
  • % Of Clicks Converting To A Purchase = 2%.
  • Purchasers Per 100,000 E-Mails Delivered = 60.
  • Average Order Size = $100.
  • Demand Per E-Mail = 0.03 * 0.02 * 100 = $0.06.
  • Profit Per E-Mail = $0.018.
With Promotions (like 20% off your order of $100 or more):
  • % Of Delivered E-Mails With Clicks = 5%.
  • % Of Clicks Converting To A Purchase = 3.5%.
  • Purchasers Per 100,000 E-Mails Delivered = 175.
  • Average Order Size = $110.
  • Demand Per E-Mail = 0.05 * 0.035 * 110 = $0.1925.
  • Profit Per E-Mail = $0.026.
Clearly, customers respond to promotions.

Your Chief Merchant and Chief Marketing Officer do not want to make your business "promotional" in nature.

Promotions hurt the gross margin. Your Chief Merchant receives a healthy bonus if gross margin percentage is very high.

Your Chief Marketing Officer hates promotions, because she has been charged with growing a full-price brand.

Fortunately, the decision is yours. You are accountable for the e-mail marketing program, and you receive a healthy bonus if you grow e-mail demand, year-over-year.

Do you go with a low-response, full-price strategy? Or do you go with a promotional strategy that makes you look good, but fails to build partnerships with other executives? Do you "split the difference"?