Friday, October 12, 2012

Use the Breakeven Tool Before Implementing Any Marketing Campaign

Before you begin any marketing campaign, use the breakeven tool to assess whether the campaign can reasonably expect to pay for itself.  In the example below, the campaign is expected to cost $10,000.


If your average gross margin is 35%, then you'll need to generate $29,000 in new sales to pay for the campaign.  If your average sale per transaction is $150, you'll need 190 new customers to bank the $29,000.  If each new customer is worth $1500 to you over the lifetime of your relationship with that customer, then you'll need 19 new customers.  And if you conversion rate of leads to sales is 30%, then you'll have to generate at leas 63 leads to pay for your $10,000 marketing campaign.

Does it seem reasonable that the $10,000 campaign can generate at least 63 leads?  If yes, then go ahead.  If no, then drop the idea.

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