April 09, 2018

Profit Outcome

Here's our test from yesterday. Three email contact strategies, three catalog contact strategies, executed for six consecutive months.

You execute tests like this all the time, don't you?

You are about to see why the tests are so darn important!

In our example, we take demand, subtract marketing cost (notice that customers with 0 catalogs and 0 emails still cost $2.00 each ... they incur costs via paid search and Facebook and affiliates, etc), and multiply demand by the profit factor. The net result is total profit (on a variable basis, before fixed costs).

At this time, somebody will point out that the maximum number of catalogs and maximum number of emails is "most profitable". They'll wash their hands of the issue and move on, confident that they've "optimized" the business, end of story!

They would be wrong!!

Tomorrow, we'll take our exercise a step further.

Business Principle #14