| Cost Assumptions | ||||||||||||||||||||||||
Although marketing programs can occasionally have very complex budgets, most expenses associated with a program actually fall into one of three simple "buckets": Management costs, one-time Set-Up costs and incremental costs.
Note that, although both management costs and overheads are one-time costs, they are entered separately in the model because, when you compare different programs, these components can vary significantly. For example, an outsourced program may require very little management time, while an in-house program may require quite a lot. Anyway, here are a few examples: Telemarketing Campaigns Most Telemarketing campaigns that are implemented using an outside vendor have a one-time set-up cost, and an hourly or per-attempt cost. You also have to account for your internal costs (e.g. management time, etc.)
The model allows you to input one number for your Management Costs, and one number for your One-Time Costs. But it has two inputs for your Incremental Costs. One input is for the dollars-per-unit (e.g. cost-per-attempt, or cost-per-hour,) and the other is for the number of units (e.g. attempts or hours.) These will be multiplied together to calculate the total Incremental Cost. To be sure, there are many ways to "cheat" the system, and make one strategy look better than another by ignoring one or another cost element. So it's up to you as to how honest and objective your analysis is. But if you want to really understand which is the best option, it is your best interests to be intellectually honest. Email Marketing Campaigns Email marketing can be done in-house or on an outsourced basis, with the variable component being the number of emails sent. If you send multiple emails, run the model for each blast, changing the response rate to reflect the repetition effect, if any.
As above, the model allows you to input one number for your Management Costs, and one number for your One-Time Costs. But it has two inputs for your Incremental Costs. You may have to play with the variable components to get an anverage cost, but you can easily adapt this framework to develop an Excel spreadsheet of your own. Summary To be sure, there are many ways to "cheat" the system, and make one strategy look better than another by ignoring one or another cost element. So it's up to you as to how honest and objective your analysis is. But if you want to really understand which is the best option, it is your best interests to be intellectually honest. |