When asked why the marketer discounted the merchandise so significantly, the marketer showed me a profit and loss statement that looked something like this:
|Up To 60% Off||No Promotions|
|Total Response Rate||0.43%||0.16%|
|Average Order Size||$165||$160|
|Less Marketing Cost||$500||$500|
|Variable Operating Profit||$10,115||$8,398|
|Profit As A % Of Net Sales||17.6%||41.1%|
|Ad/Discount To Sales Ratio||25.9%||2.4%|
|Profit Per Order||$23.27||$52.55|
|Profit Per E-Mail Delivered||$0.10||$0.08|
The marketer told me that, by offering the promotions, response to e-mail marketing campaigns was almost three times better than when full-priced e-mail marketing campaigns were delivered to the customer. Furthermore, profit was a full twenty percent better when significant discounts were offered.
The marketer told me that "... we've built an e-mail file of customers who now demand discounts and promotions. They simply won't buy from us unless we do this."
So I ask you, the knowledgeable direct marketer, if the situation this brand is in is good for the brand? I mean, we see profit and loss statements like this all the time, so it seems like it would be a "best practice" to offer heavy discounts and promotions, right?
One thing that rings consistently true in Multichannel Forensics projects is that full-price customers will buy discounted merchandise, but discount customers aren't thrilled about paying full-price for merchandise. If that holds true for most brands, then this e-mail marketing best practice can alter the composition of the customer file.
Is altering the composition of the customer file a good thing? Do our practices alter the long-term trajectory of the brands we work for without management fully understanding what we are doing?