Model Reports: Marketing Costs

Marketing costs can be accessed my clicking the 'Marketing Costs' option on the toolbar of the Model Reports.

Definitions:

  • The Fixed cost is the costs forecast to occur in initiating the marketing activity independently of the volume of data mailed.  For example, this cost might include the costs of copywriting and leaflet design.

  • The Cost per record selected is the cost forecast to occur for each record despatched.  This cost would typically include the data licensing cost, the letter print costs, the mailing cost, etc.

  • The Revenue per Response indicates the forecast revenue that can be expected for each successfully targeted recipient.

  • The Conversion Rate enables you to adjust the calculation made for on the model data to suit your particular business.  This enables you to indicate the likely take up rate for a particular offer, if it is a two stage process e.g. positive response requires further action before a sale.

  • The Marketing Budget enables you to specify a threshold to be used for determining how much of the model data can be used.

  • When the Use Marketing Budget is selected, the number of selected grades is determined automatically so as not to exceed the specified budget.

Note that when the Revenue figure (as displayed in the Gains table and on the Financial Chart) is calculated it uses the Revenue Per Response figure multiplied by the Conversion Rate (i.e. in the above example 750 * 1% = 7.5).  This is to allow for a two stage marketing process.

For example, suppose that you are sending out a mailing to prospects to invite them to test drive a new car.  You have set your marketing costs up to be:

Cost per record selected:  1

Revenue per response: 9,000

Conversion rate: 1%

The first segment in the Gains table contains a total of 1,000 people, with 600 of them indicated as "Yeses" (i.e. they will respond to the mailing).  Therefore the cost to market to this segment will be 1,000 (cost per record multiplied by the total number of people in that segment).  The revenue from this segment will then be 54,000.  This is the number of Yeses (600) multiplied by the conversion rate (1%) multiplied by the revenue per response (9,000).  This gives 600 * 0.01 * 9,000 = 54,000