In this Marketing Budget Experiment, we compare what happens when business is "as is" vs. a 2.5% bump in merchandise productivity via rebuy rates / new customers ... and a 2.5% bump in merchandise productivity via increased spend per customer.
You'll likely need to click on the image to see it properly.
The jump in rebuy rate and spend impacts profit increasingly over time.
- $3.8 million in year one.
- $4.4 million in year two.
- $4.8 million in year three.
- $5.2 million in year four.
- $5.6 million in year five.
Mind you - I didn't compound productivity gains ... they are 2.5% in response and spend for year one, then they are the same 2.5% each year thereafter ... no subsequent gains. But the impact is not unlike compound interest. You have more customers, those customers spend more.
Tomorrow we'll see how the business responds to a 5% increase in rebuy/newbies and a 0% increase in spend.
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