Date post: | 28-Jul-2015 |
Category: |
Technology |
Upload: | simon-jones |
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6
Perhaps More Seriously…
Gross Revenue = (Cost to Produce & Sell) – Price Paid
Simple Example
Cost$5: R&D $50: Raw Materials$10: Marketing$5: Inventory$5: Distribution
Price Paid$150
Gross Revenue$150-$80 = $70
7
Fixed vs. Variable Costs
Fixed CostsFixed Costs
Variable CostsVariable Costs
Costs Incl. Rent, Salaries, Etc.Costs Incl. Rent, Salaries, Etc.
Don’t Vary with Sales LevelsDon’t Vary with Sales Levels
Direct Costs: Raw Materials, Inventory Management, Distribution, Etc.Direct Costs: Raw Materials, Inventory Management, Distribution, Etc.
Vary In Line with SalesVary In Line with Sales
11
Traffic -> Close Rate
• Convert Desire to Action
• Traffic Is Elastic– Close Rate Needn’t Be
• Simple Fixes– Languages– Currencies– Payment Types– Processes– Etc…
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Close Rate -> Average Order Value
• When The Wallet Is Open– Extract More
• Never Miss The Opportunity
• Remember Cognitive Load– Don’t Confuse, Inform
15
Retention Rate
• # of Sales / Customer– Rate of 1.0 is 1 per– Rate of 2.0 is 2 per
• Create Retention Benefit– Can be non-economic
• Expand Relationship– From business– To emotional bond
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Put It All Together With Some Math
Revenue = ((Traffic / Close Rate) * Average Order Value) * Retention
• Scenario A– 10,000 Visits, 7% Close Rate, $50 AOV, 1.1 Sales/Customer– ((10,000*7%)*50) * 1.1 = $38,500
• Scenario B: Increase Close Rate by 2%– ((10,000*9%)*50) * 1.1 = $49,500
• Scenario C: Increase AOV by 10%– ((10,000*7%)*55) * 1.1 = $42,350
• Scenario D: Increase Both– ((10,000*9%)*55) * 1.1 = $54,450– >41% Growth in Revenue