April 13, 2022

Margin Profiles

I've talked about this a little bit - you can see how marketers impact gross margin dollars.

Let's look at gross margin percentages ... first for Category 06:

  • 51.4% for Category Buyers.
  • 52.3% for Non-Category Buyers with 12mo. Buying Behavior.
  • 51.8% for New/Reactivated Buyers.
  • 51.8% total average.
This is common. This is what happens when specific customers are not targeted.

Let's look at a different category ... Category 19.

  • 37.7% for Category Buyers.
  • 44.4% for Non-Category Buyers with 12mo. Buying Behavior.
  • 46.4% for New/Reactivated Buyers.
  • 43.3% total average.
This is also common. This is what happens when the marketing team decides to take 20% off when marketing the product to prior buyers.

Now, you can do some math and figure out how much more responsive your existing category buyers have to be to make the discount pay off (in the above case, it's about a 20% lift). If you can generate the same amount of gross margin dollars without harming future value, sure, discounting "can" work.

Make sure you run margin profiles for different customer segments within a category ... see if you are negatively impacting profit.

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