Power Direct Marketing: The Book
Direct Marketer’s Basic Formulas
What are some of the important things you look for when analyzing your direct marketing program? And how do you measure if the program worked or not?
In addition to the ideas in this chapter, there are some formulas which you might find helpful. Here are five which I found useful as I looked at various campaigns to measure what happened.
Response percentage
Response percentage =
Direct mail: orders received divided by pieces mailed
(200 orders/10,000 mailing = 2% response)
Space ads: orders received divided by circulation
(200 orders/200,000 circulation = 1/10% response)
T.V./Radio: orders received divided by audience
(200 orders/1,000,000 audience = 2/100% response)
Average unit of sale (AUS)
Average unit of sale (AUS) =
Total income divided by number of buyers
($20,000 income/200 buyers = $100 AUS)
Gross profit
Gross profit =
Direct mail: income minus mailing costs
($20,000 income – $7,500 cost = $12,500 gross profit)
Space ads: income minus ad placement costs
(20,000 income – $5,000 cost = $15,000 gross profit)
T.V./Radio: income minus time charges
($20,000 income – $10,000 cost = $10,000 gross profit)
(creative charges are amortized over many promotions)
Cost per sale
Cost per sale =
Direct mail: mailing cost divided by number of sales
($7,500 cost/200 sales = $37.50 cost per sale)
Space ads: space costs divided by number of sales
($5,000 cost/200 sales = $25 cost per sale)
T.V./Radio: time costs divided by number of sales
($10,000 cost/200 sales = $50 cost per sale)
Cost per thousand (CPM)
Cost per thousand (CPM) =
Direct mail: mailing costs divided by pieces mailed x 1,000
($7,500 costs/10,000 mailers x 1000 = $750 CPM)
Space ads: space cost divided by circulation x 1,000
($5,000 costs/200,000 circulation x 1000 = $25 CPM)
T.V./Radio: time cost divided by audience x 1,000
($10,000 cost/1,000,000 audience x 1000 = $10 CPM