How to use the 'Campaign Scenario' acquisition and customer value calculator

What happens to our bottom line if we reactivate 2% of our lapsed customers?
If we can raise our gross margin by 1%, increase order frequency by 2% and cut marketing cost by 3%, what additional revenue will we generate?
How much does it cost to recruit a new, long-term customer, and where do we make changes to reduce this cost but maximise profitability?

One of the biggest problems business managers, analysts and data-driven marketers face is being able to quickly answer questions like those above.

Our ‘Campaign Scenario’ calculator can help; you can input your own ‘what-if’ scenarios and calculate the effect of various changes on your company’s bottom line.

This is particularly useful when trying to gain support from within an organisation for investment in marketing tools and services. You can easily demonstrate the financial gains to be made with investment in the right tools and services.

Tech4T’s comprehensive 'five section' campaign calculator allows users to apply varying scenarios to increase customer value, improve acquisition and plan and develop really focused business and direct marketing strategies.

If you find it difficult to enter some of the numbers, you could probably do with some help analysing your data!

Tips for operating the calculator. Use the menu to the top right of each page to move between calculator sections. Fields where you should input values are in blue, the outcome in dark red and gains in dark green. When entering values in boxes, double click to enter value.

To enter a percentage in a box, enter as a decimal - for 5% enter 0.05. When using the slider bars, click on blue circle and drag slowly until the required value/percentage is reached, pause for a second, then release the mouse button. It does take a little getting used to and needs a steady hand, but is necessary to enable you to set a wide range of values.

1. Customer database

This section allows you to set your customer database characteristics and see, from the next section, how small changes to the in-active and lapsed segments impact on your business.

First enter the number of customers on your database by double-clicking in the top box. Then set the sliders to represent the percentage of in-active and lapsed customers you have.

For definition, we term:

Active - individuals who have purchased/traded in the last 12 months
In-active - last traded between 12-24 months
Lapsed - representing customers who traded 24+ months ago

Use the two sliders under the first bar chart to set reactivation percentages. These apply 'what-if' changes to your in-active and lapsed customers. The results can be seen in the second bar chart and in the three boxes underneath the chart. The quantity of active customers you set at the top of this screen together with your 'what-if' changes are carried through to the second section of the calculator.

2. Up-sell and cross-sell to your active customers

At the top of this section you will see two dials. These show the quantities of active customers (from section 1) that will be applied for the next calculations.

First enter the average order/transaction value for your customers together with the average number of orders or transactions made by one customer per year.

Set your 'what-if' sliders to increase or decrease these numbers to simulate cross-sell and up-sell, and see the effect reflected in the boxes to the right. Underneath you will see the turnover calculations and the gains made from reactivation.

Next enter the percentages of the order/transaction value that represents your gross margin and also your marketing cost. Again set the 'what-if' sliders.

Resulting marketing costs, savings and gross profit (after marketing costs have been deducted), together with profit gains are displayed. These numbers are used in the 'final scenario outcome' section.

3. Prospecting - acquisition of new 'Trial' customers

This section will help you plan your prospecting and determine the effect on income and profitability after adjusting varying factors.

We define a 'Trial' customer as an individual (or company) that is new and places a single order or transaction with you.

First enter the number of prospects you plan to contact and how many times (contacts/touches) you will need to contact them to generate an interest.

Next enter the percentage of enquiries that you believe will become 'Trial' customers and set your what-if's. The number of new customers anticipated are shown together with the eventual conversion rate - after taking account of the number of contacts/touches and your change.

Now enter the average marketing cost to mail, email, call etc. for each contact/touch, and your 'what-if' scenario changes. Total marketing costs and also the cost to recruit each customer are automatically calculated. Finally enter the average order value for the first order/transaction and the gross margin. As before, you can now see the overall turnover and gross profit (loss) P/L after taking account of marketing costs.

4. Cross-selling to new customers
(or migrating 'trial' to 'established' customers)

Following on from the numbers entered in the 'Trial' customer acquisition page, this section looks at how some of those customers move on to become 'Established' - i.e. trade with you again.

At the top of this section you will see two boxes. These contain the number of 'Trial' customers from the previous section.

Enter the percentage of 'Trial' customer that you believe will order again and become 'Established', together with their average order/transaction value and the average quantity of orders/transactions they will make per year.

View the calculated turnover and the effects after you apply your 'what-if' calculations. Next enter the percentage of the order/transaction value you consider to be gross margin. This is after deducting the direct cost of goods/fulfilment costs from the order/transaction value. Now enter the percentage of the order/transaction value that would represent the marketing cost.

If you are uncertain as to what percentage to use, you could take the total marketing spend for customer acquisition for the previous year and divide it by the total sales value for newly recruited customers in that year and multiply by 100. Finally enter the number of years you believe each 'Established' customer will continue to trade with you and apply any 'what-if' changes. The gross profit (loss) P/L income is again shown together with the expected gains after you apply your more effective data-driven marketing strategies.

5. Scenario Outcome

This screen shows the overall gains made from all previous calculations.

At the top you can enter the total cost for new technologies and the supporting specialist services needed to help you deploy the necessary DM and analytical activities. Underneath you will see the overall scenario gains after deducting this investment.

The gauges in the top part of the screen summarise the gains from the active customer sections of the calculator. Enter the average lifetime (number of years) you have found these customers have traded with you. Then turn the dial to see the 'what-if' effect that only small lifetime changes can make.

The gauges in the panel below show the gains from your prospecting activities and from converting 'Trial' customers into 'Established' customers. The larger dials in both sections show cumulative gains.

Saving you scenario

In Section 5, 'Scenario Outcome', you will see there is a button that allows you to save your varying scenarios. Click the 'Scenario button', select 'save' and provide a name. To load a previously saved scenario, click the 'Scenario' button and select 'load'.

That's it. We hope that this calculator, together with others on our website, will make it easier for you to plan your Retention, Acquisition, Reactivation, Cross-sell and Up-sell strategies, and more easily be able to demonstrate the probable outcome to others.

If you need help of any kind to use this or any other calculator we supply, would be interested in having calculators or marketing dashboards created from your own data, or require the specialist software and/or services to be able to put your plans into action, please call Tech4T on +44 (0)1733 890790.