April 10, 2018

Optimal Profitability

A simple test with nine panels yields a ton of insight, doesn't it?

You execute tests like this all the time, right?

If you have the nine test panels, you can "estimate" what might have happened had you executed more test panels. In our case, I estimated what might have happened had we executed ninety (90) test panels.

That's a lot of test panels!

And we quickly learn that, on average, the most profitable strategy is to mail customers six catalogs within a six month period of time. The test showed a tie ... both four (4) and eight (8) catalogs yielded the optimal outcome. When we expand the test results, we see that six (6) catalogs is most profitable.

Tomorrow, we expand the test results to differing levels of customer quality.

Profit per New Customer

It's common for folks to measure cost per new customer. Total Marketing Cost = $10,000. Total New Customers = 130. Cost per New C...