Predicting Discount Voucher Performance for a Hardware Shop
Unlock the full potential of discount vouchers to boost sales and customer engagement. This analysis provides actionable insights into which voucher types drive the highest revenue and redemption rates, helping businesses optimize marketing efforts and maximize profitability.
Executive Summary
This case study evaluates the performance of different voucher types for a hardware shop, focusing on margin revenue and redemption rates. The analysis, based on a linear regression model, highlights the effectiveness of Product Category Vouchers, which outperform Sales Day Vouchers in both predicted margin and redemption rates. The findings offer actionable insights to optimize future promotional strategies.
Problem Statement
The hardware shop owner sought to identify the most effective voucher type to drive margin revenue and increase customer engagement. The goal was to determine which voucher type yields the highest redemption rates and profit margins to enhance the effectiveness of marketing campaigns.
Approach
A linear regression model was used to predict the total margin and performance metrics for various voucher types. The model's performance was evaluated based on key metrics such as RMSE, total revenue generated, total vouchers issued, redeemed, and the redemption rate for each voucher type. The model's RMSE was 7.50, indicating a reasonable prediction accuracy for the given dataset.
Key Findings
Product Category Vouchers (Best Performing)
Total Predicted Margin: $2,974,923
Total Vouchers Issued: 158,079
Total Vouchers Redeemed: 42,835
Average Redemption Rate: 32.9%
Total Revenue Generated: $2,976,454
Key Product Categories: Hardware, Plumbing, Lawn & Garden, Electrical
Analysis: Product Category Vouchers demonstrate the highest effectiveness, with strong redemption rates (e.g., 36.3% for Electrical) and significant margin contributions. This type of voucher offers the best potential for revenue generation and engagement.
Sales Day Vouchers (Least Performing)
Total Predicted Margin: $2,488,581
Total Vouchers Issued: 142,292
Total Vouchers Redeemed: 34,579
Average Redemption Rate: 28.6%
Total Revenue Generated: $2,489,878
Key Product Categories: Home Safety (high redemption), Electrical (low redemption)
Analysis: Sales Day Vouchers underperform compared to Product Category Vouchers, with lower redemption rates and smaller margins, particularly in the Electrical and Lawn & Garden categories. Optimization is needed for better targeting.
Visualization
Take a closer look at the data visualizations below:
Recommendations
- Prioritize Product Category Vouchers: Focus on promoting Hardware, Plumbing, and Lawn & Garden vouchers, which have shown high redemption rates and significant margin contributions.
- Optimize Sales Day Vouchers: Improve targeting by offering personalized offers or dynamic discounts, especially for underperforming categories like Electrical and Lawn & Garden.
- Reevaluate Voucher Values: Lower the value of Sales Day Vouchers or offer more compelling promotions to align with customer expectations and increase engagement.
- Increase Engagement in High-Performing Categories: Further incentivize the high-performing categories under the Product Category Voucher to maximize redemptions and boost overall sales.
Conclusion
The Product Category Voucher is the best option for maximizing margin and redemptions, while the Sales Day Voucher requires strategic improvements. By prioritizing strong product categories and optimizing voucher offerings, the hardware shop can enhance its marketing efficiency and profitability.