Optimizing Promotions for Your Store

There are thousands of different promotions a store can use to attract and boost business. Whether it’s 20% or $5 off your next purchase, many managers check a few cost figures and then arbitrarily throw their favorite promotion into action. By tracking and testing your different promotions, you can optimize and run the most effective sale

The Nuts and Bolts

One great metric to give you a high-level understanding of promotion effectiveness is MROI (Marketing Return on Investment)

MROI = [Gross Profit – Marketing Investment] / Marketing Investment.

A Few Things to Know About MROI

  • ‘Marketing Investment’ includes the cumulative cost of the sale discounts and the total cost of running the promotion.
  • Gross Profit = # of Units Sold x [ Average Selling Price – Average Cost of Unit ]
  • If you don’t know the Gross Profit or Cost of Goods Sold, Gross Sales from the promotion will work in a pinch. Just be sure to be consistent when comparing your MROI figures.

Putting This into Practice:

Your store just finished a promotion for 15% off all jeans in the store before heading into summer. Before you ran the promotion, the Average Selling Price of the jeans were $100, and your Average Cost of per pair was $40. You also spent $2,000 promoting the sale on Facebook and Adwords Campaigns. The Average Discount per pair of jeans was $15.00 [$100.00 x 15%]. After the dust settled and the promotion was completed, your store sold 150 pairs of jeans.

Gross Profit = # of Units Sold x [ Average Selling Price – Average Cost of Unit ]

Gross Profit = 150 x [$100 – $40] = $9,000.00

Remember, Marketing Investment includes both the price of the discounted items AND advertising. In this case, the Average Discount was $15 and we sold 150 pairs of jeans. Marketing Investment = $2,000 + [$15 x 150] = $4,250.00

Now let’s plug in all of our figures.

MROI = [Gross Profit – Marketing Investment] / Marketing Investment.

MROI = [$9,000.00 – $4,250.00] / $4,250.00 = 111.76%

Testing, Comparing and Optimizing Your Promotions

All of this basic data is helpful to understanding the success of an individual promotion, but by keeping track of a few other factors – we can start building a powerful tool.

  1. When did the sale take place? Was it around a seasonal change, holiday or something else?
  2. Was there a specific the promotion was for? Sometimes there are storewide sales, but it’s important to note if its specific to things like accessories or shirts.
  3. Lastly, note what kind of promotion it was. Did you offer a percentage off or was it a dollar amount the purchase?

Storing each promotion into Excel or Google Sheets is a best practice. Keeping this historical data and promotion performance makes it easy to see which types of campaigns perform best at any given time – comparing apples to apples.

It’s important to know your channels and which are the most effective for getting the word out for a given promotion. Sandbox Commerce’s push notification tool is a great way to engage and keep customers up to date.

Keep experimenting and build off your historical data – you’ll soon be maximizing the profits of every promotion you run.

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