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Which promotions are the most successful for your e-commerce business?

E-commerce merchants generally conduct promotions throughout the year. Some are seasonal, such as "free shipping on Valentine's Day flowers" and "20% off for Cyber ​​Monday." Others focus on product categories, such as "Free Socks with the purchase of jeans". Free shipping on all purchases. "

But how can a merchant know if a promotion has been successful? This is the purpose of this article.

Marketing ROI

The most common way to analyze a promotion is to calculate the marketing ROI.

MROI = (Gross Profit – Marketing Investment) / Marketing Investment

The marketing investment could include the discount itself and the cost of the promotion.

Here is an example.

Your business has just completed a 20% promotion on all t-shirts. Before the promotion, your average t-shirt price was $ 29.99 and your average t-shirt cost was $ 9.99. You spent $ 1,000 on advertising for t-shirt advertising using Facebook ads. The average discount per t-shirt was $ 6.00 – $ 29.99 x 20%. After running the promotion for a week, you sold 100 t-shirts.

Gross Profit = Sold T-Shirts x (Average Selling Price – Medium Price)

Gross Profit = 100 x ($ 29.99 – $ 9.99) = $ 2,000

Your investment in marketing was $ 1,600 to $ 1,000 for advertising on Facebook and $ 6 off per t-shirt. So your return on marketing investment is:

MROI = (Gross Profit – Marketing Investment) / Marketing Investment

MROI = ($ 2,000 – $ 1,600) / $ 1,600 = 25%

If you have made several promotions during a quarter, you can compare the MROIs to determine the best performance.

For example, the MROI for the promotion of 20% T-shirt (above) was 25%. Compare this with the following hypothetical promotions and their MROI.

  • "$ 5 discount on all links" = 50% MROI
  • "Free shipping throughout the site" = 120% MROI
  • "50% off all accessories" = 115% MROI

Looking at the data, we can conclude that all the promotions were successful because each of them produced a positive MROI. "Free Shipping Sitewide" was the most profitable, however, at 120 percent MROI.

Hundreds of promotions

With a bit of data manipulation, you can extend the MROI analysis for hundreds of promotions. Here are the steps.

  • Step 1. Download all promotional history (with results) and import it into a spreadsheet, such as Excel or Google Sheets.
  • Stage 2 . Rank each promotion, for example "$ Off", "% discount", "Free shipping" and "Gift with purchase".
  • Step 3. Classify the period as "Christmas", "Valentine's Day", "Mother's Day" and "Not Seasonal".
  • Step 4. Where applicable, classify promotions by type of product, such as "dresses", "t-shirts" and "jeans".

You can now run simple PivotTables for each classification to identify the best-performing type of promotion and product type. You can also classify according to seasonality.

Here is an example.

Season Promotion MROI
Valentine's Day
% of discount 70%
$ Off. 80%
Free Shipping 110%
Gift With Purchase 20%
$ Off 40%
Free Shipping 90%
% Judgment 90%
Gift With Purchase 110%

We can conclude that "Free Shipping" is the best of Valentine's Day promotions while "Gift with Purchase" is the best for Christmas. Ranking in this way also allows you to schedule new promotional tests in other periods. In addition, it provides a reference for this type of promotion, season or type of product.

Long Term Analyzes

To develop multi-year plans, keep track of all your promotions in a database, a business intelligence tool, or even a simple spreadsheet. Create new columns for promotion types, to easily analyze data in several ways, such as:

  • Type of promotion vs. type of product. For socks, does 50% off work better than $ 2.99 off?

For companies with a lot of data – many types of promotions, many products, many deadlines – consider these analyzes. Some involve the addition of new classifications.

  • Type of promotion vs. seasonality in relation to the type of product. Which promotion and product works best, say Christmas?
  • Price this goal. Should promotions for cheaper items be in percentage? Should promotions for high-priced items be paid in dollars? For example, 50% discount for items under $ 10 and $ 250 discount for items sold for $ 1,000 or more.
  • Type of customer. Consider classifying promotions as new customers, repeat customers, high spenders, and casual customers.
  • English Channel Classify promotions based on the promotional channel. For example, you can have a promotional code of 10% for recipients of emails and 5 € discount on Facebook ads.
  • Geography. Regions and cultures react differently to promotions.

The key to analyzing data in many ways is to categorize your promotions accurately. This may seem discouraging. But, from my experience, it will be profitable to launch more promotions and develop a better comparative analysis.

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