Let's talk about infomercial metrics. Every day we speak to product developers and innovative direct response marketers. I often ask the question to these would be infomercial start ups - How much can you afford per order or per call? Of course our regular direct response media clients know what their allowable is. Allowable cost per order you say? I say you better crunch the numbers and have a plan to get your product out there. Check out this link for an ROI forecasting tool. Well, let's define allowable, or cost per order, or CPO.
Ad Allowable: Your ad allowable tells you how much you can afford on a cost per order basis. The ad allowable is the dollar amount determined to be the maximum media expense for each unit sold in order to generate a legitimate profit.
Another infomercial metric that is widely used is the media efficiency ratio. The MER is a universal metric that is discussed among all infomercial professionals. We use this metric to determine how infomercial television media is performing.
Media Efficiency Ratio (MER): The total number that decides an infomercial's overall success or failure. The ratio is derived by dividing total sales by the media cost. Sales/Media Cost = MER.
To determine MER you must be able to track media efficiency through toll free number tracking and good Internet analytics. Through the use of this analysis, we cancel non performing media buys and renew those that have MER's that are profitable.
Allowable cost per order is such an important concept in all of direct marketing including mail and internet, that you must learn the concept, crunch the numbers and be scientific in your analysis. This is the concept that will drive your media buys, ROI, and overall success of your project.
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