May 08, 2024

How Discounts Are Administered/Analyzed Matters

  • "Kevin, you bought those items because HeadAmp offered you discounts and promotions. Discounts and promotions work"

Discounts and promotions can work, yes, absolutely.

The secret for a discount/promotion to work is incrementality ... did the action cause something to happen that wouldn't have happened otherwise? It's hard to measure this stuff ... you kind of need A/B tests to know for sure, but it can be inferred in many instances. Sadly, most discounts/promotions do not add enough incrementality to create a profitable outcome.

If you analyze the discount from an incremental standpoint, you get a different result. Here's an example where the promotion was 40% incremental instead of the 100% incremental that almost every marketer assumes in their analytical work.



Most of us would evaluate the promotion and say "it worked". On an incremental basis, only 40% of what we think happened was caused by the promotion ... that 40% was not profitable.

We have to offer discounts/promotions that actually cause a customer to do something the customer wouldn't otherwise do. If you can prove you're doing that on an incremental basis, by all means, have fun!

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