November 04, 2018

Carrying Capacity

Here's the biological definition of Carrying Capacity (click here).

In marketing, the Carrying Capacity of a brand is the amount of new customers that can be acquired while satisfying short-term and/or long-term brand profitability requirements.

There are few things more important to the new Marketing Leader than knowing the Carrying Capacity of the brand on Day One of a new job. The new Marketing Leader first sits down with the CFO and learns what the short-term and long-term profitability targets are. Then, the new Marketing Leader runs a handful of simulations, measuring what happens to both short-term and long-term profit as customer acquisition spend is varied.

Tomorrow, I'll show you an example of what Carrying Capacity really means to the new Marketing Leader.


Merchandise Lifetime Value - MLV - Depends On First-Year Performance

Let's say that a new item performs in the bottom 45% of the assortment. Five-Year Cumulative Demand = $348. Let's say that a n...