What are Baby & Kid brands doing?
We are finding that brands in the Baby & Kid category are over-discounting their consumers by 8-10 percentage points. Brands in this category are on averaging giving away a 20% discount to their consumers and we can prove that this is almost double the mathematical ideal value. According to 2 years of anonymized purchase data, we have seen that a coupons valued at 20% off will move the same amount of product as a coupon valued at 10-12% off.
But how could that be? Intuitively we think back to our college economics classes that taught us when an elastic goods price decreases, demand goes up, and when prices are higher demand goes down. However that is only true on a macro scale - it neglects to identify individuals within the larger group who are very price insensitive or brand enthusiasts/loyalists.
So are you telling me I need to cut my coupon value's in half?
No! Let's be very clear here - we do not suggest brands cut all their coupon values in half. What we are suggesting is to reduce average coupon values by giving each and every consumer the right offer based on their individual level of price sensitivity. This is where RevTrax comes in - our Offer Management Platform (OMP) is powered by over 11 years of purchase data and is able to dynamically predict what level of discount is necessary to convert each and every consumer.
My boss is only interested in maximizing margins, is this for me?
Yes it most definitely is! What we saw was that by leveraging our data on ideal discount intervals - brands can strongly decrease their CPUM (Cost Per Unit Moved.) When it comes to the Baby & Kid category, we would have seen a 34% optimization in CPUM when we use the ideal discount level vs the average across the industry. This trend remained constant for all of the industries we looked at in our report.
Want to learn more about our ideal benchmarks across industries? Download our Discounts across industries benchmark report!