October 07, 2021

This Is Where Kevin Says OH BOY

As you know, I hate discounts and promotions. It's the realm of the unimaginative ... when you don't have a single creative idea to grow your business you just give away hard-earned gross margin dollars. It's brain-dead easy and doesn't require any actual marketing chops.

But that doesn't mean the tactic doesn't work.

If you analyze data, you need to be honest when the data doesn't go the way you think it should go.

Such was the case with the brand I just analyzed. Here are first-time buyers by decile (1 = best, 10 = worst). The y-axis shows the percentage of customers who purchased via a discount and/or promotion.

Oh boy.

42% of the customers in the best decile purchased via discounts/promotions.

About 12% of the customers in the worst decile purchased via discounts/promotions.

So this company clearly has an opportunity ... to pursue discounts/promotions.

Of course, this company needs to perform a profitability analysis, because it is possible that at 40% off you are making less money than at full price.

In this specific case, it was more profitable long-term for the brand to offer discounts/promotions.

And I hate that.

But I have to be honest and I have to follow the data, wherever it leads me. In the case of this company, the data leads me down a path I don't like but have to honor.

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