October 17, 2011

Death Spiral: Promotional Events

I recall being at Eddie Bauer, back in 1997.  This business was entering a Death Spiral, it's just that nobody really realized it at the time.  In a meeting, our Marketing leaders were asked to create a new promotion, a "multi-channel" promotion in stores, catalogs, and the website.  I recall that the promotion was not supposed to compete with other promotions.

I recall that the Marketing Executive told the CEO ... "We have promotions on 30 out of 52 weekends, what would you like for me to do?  All we ever do these days are offer promotions to customers."

When a business is mired in a death spiral, promotions are increasingly used to prop up sales.

And over time, the promotions change in nature ... starting with gift with purchases, then a percentage off a key item, then a percentage off of all items, then twenty percent off of everything.

Log all promotions your company offered during a particular timeframe, during the past five years.  If you observe that the promotional dollars you're giving away increase over time, it is possible that your business is stuck in a death spiral.