Question

Topic: Research/Metrics

Promotion Break Even

Posted by Anonymous on 1/3/2005 at 4:09 AM ET 125 Points
Hi all,

Ray here. I do financial analysis for a telco and we do loads of promotions. My problem is basically this: How do I determine the breakeven for subscribers during the promotion period. The formula used is

BE= Marketing Costs/(AMPUx((0.5xMonths of calculation)-(0.5*Promotion Period))-Cost of Acquisition)

Months of calculation would be the time left in the year less promotion period, i.e. if the promotion runs from Jan - Feb, then Months of calculation would equal 10

Thanks so much
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RESPONSES

  • Posted by Peter (henna gaijin) on 1/3/2005 at 5:14 PM Accepted
    I don't know what the acronym AMPU is in your formula.

    Basically, BE when the cost of the program equals the profit gained from the new customers. Or when:

    Cost = #NewCust * NPV(gross profit from customer)

    If the NPV varies by customer, then it isn't a multiplier, but instead adding up the NPV of all the customers.

    Once you reach BE, new customers then add to your bottom line.
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