Hillstrom's Optimizer: Looking At Incremental Profit

Here is our base case.


Now, let's double the catalog customer acquisition budget for just one year. We end up with this outcome.


Ok, we end up with 322,081 first-time buyers ... the base case yielded 285,830 first-time buyers. Incrementally, then, we have 36,251 additional new buyers.

Now let's compare profit by year.
  • Year 1 = Loss of $1.8 million.
  • Year 2 = Profit of $1.2 million.
  • Year 3 = Profit of $0.8 million.
  • Year 4 = Profit of $0.6 million.
  • Year 5 = Profit of $0.4 million.
Divided by 36,251 additional buyers.
  • Year 1 = Loss of $50.81.
  • Year 2 = Profit of $33.99.
  • Year 3 = Profit of $21.68.
  • Year 4 = Profit of $15.64.
  • Year 5 = Profit of $11.31.
  • $50.81 lost in first year offset by $82.68 profit in years two through five.
Your own Optimizer project should be able to identify these issues. Do you see how useful the Optimizer spreadsheet is? You get to play with different scenarios, you get to run different simulations ... and most important, two things happen.
  1. You figure out what the right path is for your business, moving forward.
  2. You learn more about how business works than others at comparable companies. You end up being so much smarter than everybody else.
This is why we run Optimizer spreadsheets!


P.S.:  Amazon has a luxury problem (click here).

P.P.S.:  Lord & Taylor to sell on Wal-Mart's website (click here). I told you earlier this year that it will be important to carefully pick your partners ... 

P.P.P.S.:  READ THIS DOCUMENT NOW (click here) ... read the bottom of page 77 and the top of page 78. Go read this ... NOW!