Context: You are working on a new promotion scheme that looks to increase customers and transactions at an apparel retailer. As part of this, the team plans to contact 20,000 email subscribers and share a newsletter, with a promotion component.
Metric                                                            Promo X     Promo Y     Promo Z
Discount offered to new users                   AED 10        AED 20      AED 25
Conversion Rate                                            4%              6%             10%
Average transaction size of first order     AED 150      AED 180    AED 230
Transactions per year                                    4                  8                 6
Mall promotion fee                                         10%             10%            10%
• Discount offered to new customers: AED taken off at counter upon paying
• Conversion rate: Proportion of customers utilizing promotion, from those contacted
• Average transaction size of first purchase: Size of basket for first purchase only; assume AED 200 average basket size for subsequent transactions
• Transactions per year: Total number of purchases including the first transaction, for new customers
• Mall promotion fee: The proportion of revenue going to mall, with the remainder flowing to the retailer
Exercise:
1. Evaluate the performance of the three promotion options above. Develop a promotion option of your own, using these as a basis
2. If the team is targeting returning a profit on each new customer within 6 months, what is the maximum that could be offered on the promotion?
3. What are some of the ways you can increase the rate of conversion of the promotion?