Demand Estimation for UAE
November 20, 2018Social Justice
November 20, 2018
| The CMO for Pete’s Brew is planning his Q3 new customer acquisition strategy. She has collected information on last years new customer acquisition historical performance (below). |
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| The CFO has given her guidelines that new customers should have a present value that pays back the initial acquisition investment in a minimum of 2 years |
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| Based upon last years performance which channels are achieving the financial goals? This requires you to calculate cost per acquisition and LTV of future income |
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| Which channels do you recommend that the CMO expand? Which should be cut back? |
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| Last year total advertising spent in Q3 was $140,000. This year budget is $175,000 … allocate the $175,000 budget across the 3 channels |
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| explain the rationale behind your allocation: |
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| Last year Q3 prospecting performance |
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| Facebook ad buy |
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Google search ads |
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Direct mail |
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| impressions |
20,000,000 |
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impressions |
5,000,000 |
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Circulation |
100,000 |
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| Clicks |
100,000 |
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Clicks |
70,000 |
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| orders (conversions) |
1000 |
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orders (conversions) |
1000 |
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orders (conversions) |
1200 |
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| media cost (cost per 1000 impressions ) |
$ 2.00 |
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media cost (cost per click ) |
$ 0.50 |
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media cost (cost per piece ) |
$ 0.65 |
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| Gross profit % |
50% |
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Gross profit % |
50% |
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Gross profit % |
50% |
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| variable cost per order |
$5.00 |
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variable cost per order |
$5.00 |
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variable cost per order |
$5.00 |
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| Average order value |
$ 50.00 |
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Average order value |
$ 60.00 |
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Average order value |
$ 70.00 |
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| subsequent value from new customer acquisition |
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subsequent value from new customer acquisition |
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subsequent value from new customer acquisition |
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| year 1 |
$ 11.00 |
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year 1 |
$ 13.00 |
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year 1 |
$ 15.00 |
change to $18 |
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| year 2 |
$ 7.00 |
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year 2 |
$ 8.00 |
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year 2 |
$ 10.00 |
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| year 3 |
$ 5.00 |
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year 3 |
$ 5.00 |
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year 3 |
$ 5.00 |
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| year 4 |
$ 3.00 |
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year 4 |
$ 3.00 |
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year 4 |
$ 3.00 |
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| discount rate 8% |
8.0% |
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discount rate 8% |
8.0% |
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discount rate 8% |
8.0% |
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Total |
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| Q3 2017 budget |
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$ 175,000 |
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| Below is great place for calculating CPA and NPV … LTV |
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0 |
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Action |
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Factor |
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Marketing tactic |
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| example |
1 |
increase 13-24 month rebuy rate to 28% |
Offer a 25% off promotion via email to this customer group |
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1 |
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2 |
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4 |
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5 |
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6 |
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use a much space as you’d like. |
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| 2019 |
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Customers beginning |
Rebuy rate |
Customer |
orders per customer |
Orders |
Ave order |
sales |
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| Active buyers |
2,500,000 |
56% |
1,400,000 |
5.0 |
7,000,000 |
$ 135.00 |
$ 945,000,000 |
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| 13-24 mo buyers |
1,000,000 |
23% |
230,000 |
2.0 |
460,000 |
$ 125.00 |
$ 57,500,000 |
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| 24 + buyers |
1,500,000 |
11% |
165,000 |
2.0 |
330,000 |
$ 125.00 |
$ 41,250,000 |
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| New customers |
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900,000 |
1.5 |
1,350,000 |
$ 110.00 |
$ 148,500,000 |
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5,000,000 |
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2,695,000 |
3.4 |
9,140,000 |
$ 130.44 |
$ 1,192,250,000 |
100% |
