The Ecomm Analyst

I worked with a brand last year that ran four promotions a year. Memorial Day, Labor Day, Black Friday, and a small post-holiday sale in January. Their full-price sell-through was healthy, their margins were strong, and their customers seemed happy.

A new CMO came in and decided the calendar needed more action. Within six months they were running ten promotions a year. By the end of year one they were running fifteen.

Revenue went up. Margin collapsed. And here’s the part nobody on the leadership team wanted to admit. Full-price sales went down. Not just as a percentage. In absolute terms. Customers had figured out the rhythm and were waiting.

I tracked this in ThoughtMetric by pulling the time-between-purchase distribution for repeat customers, segmented by whether their first purchase was on promo or off. Customers acquired on a discount had a noticeably shorter average time between purchases, which sounds great. They also had a much lower probability of ever paying full price again. The brand was training a more frequent but more discount-dependent customer base.

The undoing took longer than the doing. Pulling promotions back to a quieter calendar took two full years before full-price behavior recovered. Some customers never came back to it.

Here’s the rule of thumb I’ve landed on, with the heavy caveat that it’s a rule of thumb and you should test it against your own data. If your customer base buys roughly twice a year, you can probably run four to six promotions before you start training behavior. If they buy roughly four times a year, you have more headroom. If they buy once a year, you have almost none, and your promotions are probably doing more damage than you realize.

The signs that you’ve crossed the line are usually visible in the data before they’re visible on the P&L. Time between full-price purchases starts to lengthen. The percentage of revenue coming during promotional windows climbs above 40%. New customer acquisition becomes increasingly concentrated in promo periods, which means your CAC during quiet periods quietly inflates because you’re not running enough volume to keep it down.

The fix isn’t to never promote. Promotions are a legitimate tool, especially for inventory management and acquisition. The fix is to pick a cadence that fits your category and stick to it, even when revenue gets slow and the easy answer is to add another sale.

The brands that hold this line are almost always the ones with the strongest margins three years out. The ones that don’t end up running a different business than the one they started, usually without realizing they made the trade.