Measuring Marketing

Chapter 58 Direct Marketing Profit Goals

Measurement Need

When setting a direct marketing campaign profit goal, the marketing team must estimate the number of direct marketing communications to achieve the goal.

Solutioni

The formula for direct marketing profit goals uses target profitability levels to determine the number of direct marketing communications. The formula is nearly identical to that for direct marketing revenue goals, except that the denominator includes the target profit percentage, as follows:

$DM=\frac{R_t}{S_a\times P\times R_r\times C_r}$

Where

DMPG = direct marketing profit goals

Rt = revenue target

Sa = average sale

P = profit goal in percentage terms

Rr = response rate

Cr = close ratio

Continuing with the example of our marketer ...