Some Things Don't Change

Here's the first attempt at a McDonald's Happy Meal, circa 1975.

Notice the quote "at regular prices". Eventually, there wouldn't be "regular prices". Read a Lands' End email campaign for examples. The world shifted to discounts / promotions.

Yesterday I talked about how everything changes.

Everything, that is, except for discounts and promotions.

Have you ever analyzed how different customers behave?

1. Customer spends $100 at 40% off for a net of $60, gross margin dollars = $25.
2. Customer spends $60 at full price for a net of $60, gross margin dollars = $39.

Which customer would you prefer?

You need nearly 1.6 times as many orders via discounts/promotions to equal the full-priced order in this example. That's a lot of frosting on the cake, don't you think?

One of our absolutely smart readers mentioned how there is a dynamic in business where net sales grow but profit is unchanged. This dynamic happens in inflationary times, obviously. It also happens when the marketing wonks decide to eat into every available dollar of gross margin by offering 40% or 60% off to boost response. You boost response, you harm gross margin dollars.

Some things don't change.