December 25, 2018

Check The Stats

It's common for somebody to increase discounts, especially in November and December. You've got to get market share, right? (or do you?).

This year, you sold at 40% off (on average). Last year you sold at 30% off (on average).

So you'll look at your twelve-month buyer file (as of 10/31), and you'll measure a handful of repurchase metrics.
  • Rebuy Rate = 22%.
  • Spend per Repurchaser = $135.
  • Customer Value (rebuy * spend) = $29.70.
Then you'll look at last year.

  • Rebuy Rate = 21%.
  • Spend per Repurchaser = $132.
  • Customer Value (rebuy * spend) = $27.72.
The analytics guru will say that spend increased by 7% (29.70 vs 27.72) and will say that "all is good" and the marketing team will pat themselves on their backs and everybody but the CFO will move on and celebrate a successful season.

Why is the CFO choosing not to celebrate?
  • 2018 Gross Margin Dollars = ($29.70*0.60 - $29.70*0.35) = $7.43.
  • 2017 Gross Margin Dollars = ($27.72*0.70 - $27.72*0.35) = $9.70.
  • Change = -23%.
When measuring response, please check the stats ... don't just look at the stuff Google tells you to analyze ... and don't trust your classic rebuy / spend / value metrics. 

Look at Gross Margin Dollars.

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