Set Segment-Specific Welcome Discounts for New Shoppers on an E-commerce Site

You are a product manager at an e-commerce site. Decide what percentage discount different kinds of customers should receive during onboarding, and explain how you would arrive at those numbers. ```hint Price the discount against what it buys A discount given to someone who would have bought anyway is pure cost. Think about which new customers a discount actually changes, and what each kind of customer is worth after the first order. ``` ### Clarifying Questions - What does the site mainly sell: items people buy again and again, such as groceries or beauty products, or occasional purchases such as electronics? - Is the goal more first purchases, or new customers who stay profitable over time? Is there a margin floor or acquisition budget the discount must fit within? - What do we know about a customer during onboarding: acquisition channel, location, browsing behavior, whether they are buying for a business? - Does the incentive have to be a percentage off, or can I also propose free shipping, a fixed amount off above a cart threshold, or a discount spread over the first few orders? ### What a Strong Answer Covers - A stated goal and a profit-based rule for when a discount pays for itself, rather than conversion alone - Segments defined by observable intent, expected repeat value and price sensitivity, not sensitive personal attributes - Concrete starting percentages for each segment, with the reasoning for why they differ - An experiment that measures incremental conversion and longer-term margin for each discount level - Risks: subsidizing customers who would pay full price, new-account abuse, training customers to wait for deals, and perceived unfairness ### Follow-up Questions - The largest discount wins on first-order conversion but loses on margin over the following months. What do you ship, and how do you explain it to the growth team? - How would you stop people from creating new accounts to claim the welcome discount again and again? - Customers discover that others received a bigger welcome discount than they did and complain publicly. How do you respond, and would you change the design?