October 13, 2008

Free Shipping 24/7/365

One of our loyal readers left a comment recently, suggesting that it was ok to run a free shipping or 20% off offer if you gave up $7 of margin but increased profit by $8 due to increased response.

I've run hundreds of p&ls for free shipping or %-off promotions, always having to prove that the promotion would be profitable.

So when this reader suggested that it was acceptable to run the promotion because it is more profitable to do so, it raised a theoretical question:


If the promotion is truly more profitable, then why isn't the promotion part of your standard business model? In other words, if it is truly more profitable, why ever stop running the promotion? Why stop running the promotion and then accept less sales, and less profit? Aren't we here to maximize sales and profit?


Discuss.