The Greatest Marketing Analytics Equation of All Time

It's 1992 at Lands' End, and I'm responsible for analyzing mail/holdout tests ... you execute email and/or print mail/holdout tests in 2025, right?

Here's the results of a mail/holdout test.

An average professional doesn't bother with mail/holdout tests.

A smart professional measures profit via the "Increment" line in the table above. The smart professional doesn't overstate results via matchbacks, they leverage the incremental contribution (which likely means they'll spend fewer marketing dollars).

The curious professional notices a relationship.

• 0/3 mailings = $0.
• 2/3 mailings = $8.40.
• 3/3 mailings = $10.50.

The curious professional adjusts the relationship, converting both sides of the relationship to fractions.

• 0.000 mailings = 0.000 spent.
• 0.667 mailings = 0.800 spent.
• 1.000 mailings = 1.000 spent.

The curious professional plots the relationship, then fits a line through the relationship.

The relationship above is fit via what I call a "Power Function". I use CurveExpert software (click here) if you are interested in fitting the equation.

What is the structure of a Power Function?

• Fraction of Demand = a*(Fraction of Mailings) ^ b.

The equation above?

• Fraction of Demand = 1.00 * (Fraction of Mailings) ^ 0.583.

In marketing, your ROAS relationships and/or investment decisions follow a Power Function. Once you see it, you cannot unsee it. In fact, the Power Function is everywhere.

• Price Elasticity.
• The Difference in Customer Segment Performance.
• Paid Social Advertising.
• Product Listing Ad Spend.
• Catalog Mailing Frequency.
• Email Marketing Weekly Contact Frequency.
• Merchandise Assortment Size.
• Creative "Winners" vs. "Experimental Photography".
• Winners vs. Contenders vs. Others within your Assortment.

I could go on and on, for hours.

Power Functions explain most of your investment decisions in marketing. The functions are different ... your Paid Social "b" coefficient is different from your Email Weekly Contact Frequency "b" coefficient.

This is the point in the post where the curious marketer will take the topic further. You're free to email me (kevinh@minethatdata.com) and ask questions. The Power Function is the greatest marketing analytics equation of all time! The equation unlocks the secrets of your business.