The idea
Profit change per targeted customer equals the extra buyers times the reduced margin, minus the discount given to buyers who would have bought anyway. In the example a 6-point lift in take-up still loses 9 million kyat. Target discounts at lapsing or at-risk customers, whose baseline purchase rate is low, rather than loyal buyers.
Use it thoughtfully
- Hold out a random control group for every offer.
- Judge offers on contribution per targeted customer.
- Target customers whose baseline purchase rate is low.
An example
ILLUSTRATIVE EXAMPLE: For 100,000 comparable targeted customers, a 3,000 MMK pack initially contributes 2,100 MMK per sale. A 20% discount leaves 1,500 MMK. If take-up rises from 30% to 36%, contribution falls from 63.0 million to 54.0 million MMK, a loss of 9.0 million MMK.
A question to try
For your last targeted offer, what was the purchase rate of a similar group that got no offer?
A useful framework is a starting point, not a guarantee. Effects vary with the audience, product and situation. Use truthful evidence, respect customer choice, and test the result.