Escalation

Have you ever done the math to determine what it takes to make as much money discounting as you make at full price? It's a fun exercise.

In this example, 10% off works if sales increase by at least 10.1% over full price.

Then 20% off works if sales increase by at least 14.3% over 10% off.

Then 30% off works if sales increase by at least 22.5% over 20% off.

As you approach the limits of your cost of goods, the percentage increase required to make as much money increase exponentially.

40% off works if sales increase by at least 42.9% over 30% off.

50% off works if sales increase by at least 150.3% over 40% off.

As 2017 winds to a close, we're learning that we've pushed % off as far as we can push it.

So if the tactic has been pushed as far as it can, one of four things must happen.
  1. We have to lower cost of goods sold to allow us to discount more.
  2. We have to increase list prices to allow us to make the customer think 50% off is an even bigger deal, or that 60% off is a good deal.
  3. We have to increase merchandise productivity.
  4. We have to find new customers at low-cost / no-cost.
We already know which tactic we'll pursue (1/2).

We already know which tactic provides prolonged success (3/4).