Customer Acquisition: Full Price or Promotion?

Let's pretend you are the marketing executive at an online retailer.

You have $100,000 to spend acquiring new customers. You can acquire them via normal methods, or you can offer prospects a 20% off your order of $100 or more promotion.

The projected short-term, and long-term results, are included in the following table. Which strategy would you employ, and why?

Profit and Loss Statement
	Acquire With	20% Off Order
	No Discount	of $100+
Customers Acquired	3,400	5,263
Average Order Size	$110.00	$135.00
Total Demand	$374,000	$710,526
Profit Factor	27.0%	27.0%
Contribution	$100,980	$191,842
Marketing Expense	$100,000	$100,000
Discount Expense (70% Utilization)	$0	$99,474
Net Profit	$980	($7,632)
Profit per New Customer	$0.29	($1.45)
Long-Term Value/Profit	$20.00	$18.00
Total Short + Long-Term Profit	$68,980	$87,105