Breakeven Response Rate

 

 

Metrics: Breakeven

The Question:

At what point does a campaign become profitable?

Approach:

How many sales do we need to cover all our costs?

Commentary:

We need to understand the Marginal Profit Per unit (ie sale price less variable costs, including COGS, commission, fulfillment etc) Don’t run a campaign or cell unless you expect to breakeven! Test if necessary.The Formula

Breakeven (# of units) = Fixed Costs ($)/ Contribution Per Unit ($)

or

Breakeven (# of units) = Fixed Costs ($)/ (Sale Price($) – COGS($) – Variable Costs($))

WARNING!!!

Remember what are fixed and variable costs!

Fixed Costs = Those that do not vary with volume of sales

Variable Costs = Those that increase with sales

Variable costs can include:

– Commission on sales

– Delivery and packing costs for the item(s) sold

– Free gifts with the order, etc

Per contact DM costs of the marketing campaign must be totalled and added to fixed costs

Metrics: Breakeven Response Rate

The Question:

What response rate do I need for my DM campaign to be profitable?

Approach:

What are my per contact costs, and what is my average profit?

Commentary:

We need to calculate total costs to contact a full list or a test cell, and know our average contributing profits on a sale

The Formula:

Break Even Response Rate (%) = Cost Per Contact ($)/ Contributing Profit Per Sale ($)

Metrics: Size of Test Cell

The Question:

How big should a test cell be, to accurately measure profitability?

Approach:

A formula based on breakeven response rates

Commentary:

We need to mail enough contacts to get a statistically valid result, without wasting any more money than needed

The Formula:

Test Cell Size = 4/ Break Even Response Rate

 

Sales & Marketing

• Marketing Industry, Marketing Trade
• Sales Industry, Sales Trade
• The Sales Funnel

Marketing for Dummies Guides

• Marketing for Dummies
• Marketing Plan
• Marketing Strategy
• Positioning
• Differentiation
• Brand Equity
• Brand Marketing
• Direct Marketing
• RFM – Recency Frequency Monetary
• Breakeven Response Rate
• Customer Profitability
• CLV – Customer Lifetime Value
• Loyalty Program
• The 4 Ps
• The Campaign Framework
• The Marketing Budget
• The Marketing Mix

Measuring, Marketing, Metrics & KPIs

• KPI – The One Key Marketing Metric
• Marketing KPIs and Metrics
• Measuring Marketing
• ROMI – Return on Marketing Investment
• Marketing Finance
• Financial KPIs
• Market Share
• Mind Share
• Customer Satisfaction (Cust Sat)
• Net Promoter Score
• Kano Model

Online Marketing/ Digital Marketing

• CPM Advertising
• CPC Advertising
• CPA Advertising
• Click Through Rate (CTR or Click Thru Rate)
• Conversion Rate
• SEO Marketing
• SERP: Search Engine Ranking Page
• Behavioral Email
• Guerilla Marketing