December 20, 2022

They're Giving Discounts To Which Customer Segment?

You don't always get honest answers when asking questions about discounting strategy.

Here is a "grid" for one category, with corporate orders on the y-axis and category orders on the x-axis. The metrics in the table represent the share of sales that are generated by items selling below their historical average price point. Tell me what you observe:


The upper-left cell is for customers who are placing their first order with the brand and in that order the purchase at least one item from the category being studied. 40.3% of the sales meeting this criteria feature items selling below their historical average.

Meanwhile, the lower-right cell is for customers who are placing their 21st+ order with the brand and are buying from the category for the 11th+ time ... the most loyal of loyal buyers. 25.5% of their sales feature items selling below their historical average.

This brand has a clear strategy within this category ... they are offering discounts to entice prospects to purchase for the first time.

Is that a smart strategy? Maybe. If the customer can be enticed into buying via full price yielding nice gross margins, the downstream math could work out.




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