April 19, 2023

Parsing Through Channels - Incremental Impact of One Channel

You have a segment of customers. Based on your best guess for attribution, here's how the customer segment behaves.

  • 40% Annual Repurchase Rate.
  • Half of demand is organic - not caused by marketing.
  • 25% of demand is caused by email marketing.
  • 10% of demand is caused by social.
  • 10% of demand is caused by search.
  • 5% of demand is caused by other marketing activities.
Look at email marketing. 25% of the 40% repurchase rate (10%) is caused by email marketing. If you improve email marketing productivity by 15% by featuring better merchandise, you impact rebuy rates by 10% * 15% = 1.5% ... a 40% repurchase rate becomes a 41.5% repurchase rate.

That may not seem like much to you. But follow these assumptions.
  • Base Case Profit = 40% Rebuy Rate * $150 per Repurchaser * 40% Profit Flow-Through - $10 Customer Ad Spend per Year = $14.00 Profit.
  • New Case Profit = 41.5% Rebuy Rate * $150 per Repurchaser * 40% Profit Flow-Through - $10 Customer Ad Spend per Year = $14.90 Profit.
Multiply that out across your email subscriber base and you have something. In Marketing Budget Experiments, you get to see how this becomes compound interest over time ... which is kinda cool to be honest!

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