Question

Q2: Evaluating the ROI of a direct marketing campaign

You are a marketing director for a company that sells smart coffee makers that integrate into a person’s virtual assistant (e.g. Amazon Echo, Google Home, etc). Rather than distribute the coffee makers through stores, your firm opted for a direct marketing focus and uses direct marketing channels to connect with your customer. Last year, you sold 87,500 coffee makers at $120 per unit, with a unit margin of $40 per unit. The firm invested $2,200,000 in the marketing campaign that acquired those sales.

The firm based its campaign on lists of people who recently purchased a smart home device. It allocated its direct marketing budget across 3 channels, as follows:

Channel	Spending	# Sales
Paid Social	$1,000,000	40,000
Direct Mail	$850,000	31,500
Email	$350,000	16,000

1. What is the ROI of the overall campaign?
2. What is the cost of acquisition for each channel? Which channel performed the best?
3. What recommendations would you make for the 2020 budget?

Answer 1