It’s rare to see a Sale increase revenue.
I once had a client who was obsessed with price promotions. They got giddy every time they “smashed their sales record” from another “successful” email marketing campaign.
The problem was that they were pulling revenue forward and down through the price decreases. This created a dip in sales the week after, and a decrease in overall revenue.
Despite their intention, it never led to a measurable increase in customer lifetime value, even with some extra “why not” upsell and halo items in the cart. Nor did the campaigns help them acquire new customers. Nor did we see any signs of increased loyalty to the brand.
In fact, after a prolonged period of on-and-off flash sales, we could observe that they had effectively trained their existing customer base to never buy at the full price. (And no, the client wasn’t DFS.)
All of this was exacerbated by their cost-plus pricing strategy (very much the accountant’s pricing strategy), meaning any reduction in retail price took a severe bite into their margins.
After many months of collaboration, I talked them into sense using a simple formula, which became the metric by which they assessed the success of their price-reduction promotions:
Lift in promoted-item sales, plus halo (upsells), minus cannibalisation (the price reduction), minus pull-forward (lost revenue in the subsequent weeks).
After analysing their past two years of campaigns, they dropped the frequency of their price-reduction promotions from twice a month to twice a year: just before Christmas, and the first week of the school summer holidays, when they saw a dip in sales anyway.
After an initial shock, it miraculously led to an increase in revenue month-on-month.