(E-commerce) Use the Online Consumer Purchasing Model, Figure 6.11 in Chapter 6,
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Question
(E-commerce) Use the Online Consumer Purchasing Model, Figure 6.11 in Chapter 6, to assess the effectiveness of an e-mail campaign at a small website devoted to the sales of apparel to the young adult market (ages 18–26) in the United States. Assume a marketing campaign of 100,000 e-mails (at $0.25 per e-mail address). The expected click-through rate is 5%, the customer conversion rate is 10%, and the loyal customer retention rate is 25%. The average sale is $60, and the profit margin is 50% (the cost of the goods is $30). Does the campaign produce a profit? what would you advise doing to increase the number of purchases and loyal customers? what web design factors? What communications messages? Please answer all questions :)
Explanation / Answer
If 100,000 e-mails are sent out at a cost of .25 per e-mail address, the cost of the marketing campaign is $25,000. A click-through rate of 15% will result in 15,000 people clicking through to the site. Of those, 10% will be converted to customers, so 1,500 people will make a purchase as a direct result of the e-mail. With an average sale of $60, this would produce gross revenues of approximately $90,000. The profit margin is 50% ($45,000), so the gross profit is $45,000. Subtract the $25,000 cost of the advertising campaign and the net profit on the initial campaign is $20,000 (not including additional operating costs). If the loyal customer retention rate is 25%, then 375 customers can be expected to make at least one additional purchase of $60 within the year for an additional $22,500 in gross revenue, adding an additional $11,250 of gross profit to the bottom line. Thus, the campaign produces an overall net profit of $31,250 over one year’s time.
To increase the number of purchases and the retention rate students can come up with any number of ideas. This is a chance for the marketing students in the class to let the ideas flow. Some possible ideas for Web site design and communication messages that might keep customers coming back to the site are:
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