Should You Offer Discounts or Not?

Dear Dr. pROfIt: My boss thinks that free shipping and 20 percent off promotions are the key to competing with brands online. My team thinks we're giving our business away for free. Who's right?

Dr pROfIt: It’s hard to say who's right. Fortunately, your data can give you the answer. In your database, find customers who ordered between October 2008 and September 2009. Add the customer spend of those customers in the past 12 months to their previous lifetime spend with your brand up until October 2008. Then, determine if the customers are discount/promotion shoppers, mixed shoppers (i.e., buys with discounts and promotions, as well as at full price) or full price-only customers. Finally, measure the net profit of each customer between October 2009 and September 2010.