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:
- % 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.
- % 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.
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"?