Measuring Marketing

Chapter 60 Direct Marketing Net Profit

Measurement Need

Continuing our direct marketing measurement, the marketer needs to determine net profitability from the direct marketing campaign.

Solutioni

Net profit is gross profit minus operating expenses. Calculating this helps determine if the direct marketing campaign produces a positive net profit. This is virtually identical to the formula for direct marketing gross profit, with one new component—operating expenses (cost of direct marketing campaign, in this case):

$P_g=DM\times P\times S_a\times R_r\times C_r-C_{dm}$

Where

Pg = gross profit

DM = number of direct marketing pieces

P = profit goal in percentage terms

Sa = average sale

Rr = response rate

Cr = conversion rate

Cdm = cost of the direct marketing ...