July 25, 2017

Circulation Theory, Part 3

Ok, yesterday we filled in the 128 page portion of the table.


Now, you performed a test, and you learned that a 64 page catalog generated 75% of the demand of a 128 page catalog. Given that information, fill in the rest of the grid ... for a 32 page catalog ... a 64 page catalog ... and a 96 page catalog.

What did you learn when you performed the exercise?

I fit an equation ... I have three data points.
  • 0 pages = 0%.
  • 64 pages = 75%.
  • 128 pages = 100%.
The equation creates a relationship that looks like this.


With this relationship, I can forecast the fraction of demand at each page count.
  • 32 Pages = 52.0%
  • 64 Pages = 74.5%
  • 96 Pages = 89.5%
  • 128 Pages = 100.0%
  • 160 Pages = 107.5%
Did you see what I did there? I added in 160 pages, just for the fun of it!

Now I can fill my grid in. Take a look.

We almost have something interesting, don't we?

Let me give you additional data.
  • Cost of a 32 page catalog = $0.26 each.
  • Cost of a 64 page catalog = $0.45 each.
  • Cost of a 96 page catalog = $0.59 each.
  • Cost of a 128 page catalog = $0.71 each.
  • Cost of a 160 page catalog = $0.85 each.
  • 38% of your $-per-book converts to profit.
Given the cost/profit estimates and the dollar-per-book estimates above, tell me what profit is for every page count / segment mailing combination. That's your homework assignment for tomorrow.