Efficiency of Marketing Sales Channels

In today's competitive business landscape, identifying the most efficient marketing sales channels is crucial for maximizing profits and staying ahead of the curve. As companies across various industries continue to evolve, it is imperative to examine the performance of different sales channels, including Affiliate, Email, Instagram, and Organic search, in order to optimize marketing efforts and drive sales growth. In this article, we will analyze the business models of each channel, focusing on Pricing and Discounting policies, and measure their performance in terms of Sales amount and Profit. Additionally, we will explore the hypothesis that there is a relationship between discount rates and sales amount, based on sales channels, and whether customers exhibit a preference for round discount percentages.

The primary objective of this analysis is to examine the business models of each sales channel with a specific focus on Pricing and Discounting policies, and to measure their performance in terms of Sales amount and Profit in example of the beauty product market. In the beauty market, Instagram and affiliate channels can be highly effective. Beauty influencers on Instagram have a large following and can showcase products and their benefits through visually appealing content. Affiliate partnerships can also be effective in this market as there are many beauty bloggers and influencers who have a highly engaged audience.

The second hypothesis discussed in the article is that there is a relationship between discount rates and sales amount based on sales channels. More specifically, the hypothesis suggests that customers may exhibit a preference for round discount percentages, such as 50%, 60%, and 70%, which would lead to increased sales for those discount rates.

Overall, a company's pricing and discount policies should take into account the cost of each sales channel and the target audience's price sensitivity. The company should also evaluate the impact of pricing and discount policies on each sales channel's effectiveness in generating sales and driving revenue.

Description of sales channels

Affiliate: Affiliate sales channel involves partnering with third-party affiliates who promote and sell the company’s products or services. This can include bloggers, influencers, or other businesses who have a relevant audience. The company provides the affiliates with unique tracking links or promo codes, and the affiliates earn a commission for each sale made through their referral link.

Email: This channel involves using email marketing to promote products or services directly to a company’s subscribers or customers. This can include newsletters, promotional emails, and personalized email campaigns. Email marketing is a cost-effective and measurable way to reach a targeted audience and can be used to drive sales, increase brand awareness, and build customer loyalty.

Instagram: Instagram sales channel involves partnering with influencers on the platform to promote the company’s products or services. Influencers have a large following and can influence purchasing decisions by sharing their experiences with a product or service. Companies can work with influencers to create sponsored posts or product reviews, and the influencers can earn a fee or commission for their work.

Organic search: Organic search refers to the traffic that comes to a website through search engines such as Google. This channel is considered “organic” because it is not paid for, and it can be a significant source of sales for businesses. To improve their organic search rankings, companies can focus on search engine optimization (SEO) strategies such as keyword research, content creation, and link building.

Data analysis

The Figure 1. presents the trend of price, discount rate, and net price (price - discount rate) of two beauty products (out of in total eight analyzed products) for all sales channels over two years.

According to Figure 1, instagram sales channel has high prices and discount rates for both products compared to other channels, while affiliate, email, and organic search channels have relatively similar prices and discount rates. Net prices for all products are consistent across all sales channels, indicating that the producer targets similar profit from each item sold irrespective of sales channel.?

For five out of eight products, Instagram and organic search channels have similar sales amounts (like Product 1 in figure 2), while for three products sales through Instagram are higher than organic search (like Product 2 in Figure 2).

Affiliate and email channels have the lowest sales in the observed period (2009-2021) and lag significantly behind Instagram and organic search channels.

Thus one can conclude that the business model of Instagram sales channel is different from other channels, with significantly higher prices and discount rates but similar net profit per item.

According to Figure 3, the hypothesis that customers prefer rounded discount rates appears to be validated, as customers tend to purchase more products when discounts are offered at rates such as 50%, 55%, 60%, and 65%.

Summary

Based on these findings, it can be concluded that for the personal care and beauty product market, Instagram influencers are the most profitable sales channel. However, it should be noted that the compensation for influencers was not considered in this analysis, and it is critical for companies to analyze this factor to make more realistic conclusions on the profitability of sales channels. Additionally, sales through direct email and affiliate channels are very low for this product market.

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