Measuring The Wrong Stuff: Cyber Monday Demand vs Incremental Cyber Monday Profit

Instead of measuring sales and cheering the results, why not measure profit?

How many of you #measure profit? Be honest!

Here's an example:
• 2009 = \$1,000,000 demand, 60% gross margin, average discount = 10%.
• 2010 = \$1,300,000 demand, 60% gross margin, average discount = 12%.
• 2011 = \$1,700,000 demand, 60% gross margin, average discount = 16%.
• 2012 = \$2,300,000 demand, 60% gross margin, average discount = 22%.
• 2013 = \$3,000,000 demand, 60% gross margin, average discount = 29%.
Now, your favorite trade journalist will cheerlead the fact that you generated a 30% increase in demand on Cyber Monday (IT WAS A RECORD DAY, AND BRANDS REAPED THE REWARDS).

Variable Operating Profit (after subtracting 10% pick/pack/ship expense from demand):
• 2009 = \$400,000.
• 2010 = \$494,000.
• 2011 = \$578,000.
• 2012 = \$644,000.
• 2013 = \$630,000.
Oh oh.

I'll bet the CFO stops by the office of the CMO and swats him/her over the head with a rolled-up newspaper.

Worse, pretend that the sales were cannibalized from full-price sales that would have happened earlier in the month. Let's say that the cannibalization rate is 50% (which is probably close to accurate). Now look at your profit and loss statement:
• 2009 = \$150,000.
• 2010 = \$169,000.
• 2011 = \$153,000.
• 2012 = \$69,000.
• 2013 = (\$120,000).
This is the real story of Cyber Monday. It happens all the time, all across the country.