Question #1
The below chart and graph shows the cumulative profit per customer grouped by different new customer discount rates
The new customer discount rate is the discount $ as a % of total product price on a customer’s first order. For example, if the product they are purchasing is priced at $40 and we are giving them a 50% off discount, the new customer discount rate is 50%.
Explain what the chart and graph above are telling us about the difference in customers who were given different new customer discount rates. Focus on the cumulative profit they bring the business after 12 month in the membership program.
Question #2
You are running a test to determine which offer is the most effective in driving new customer conversions. Below are sample results for an offer test where we tested the control offer (25% off 1st Item) against two test offers (50% off 1st Item and 75% off 1st Item). Notice that we spent less money on the test offers than we did on the control offer, so you will need to scale the results to match the control. Also notice that different offers have a different conversion % and different CPAs.
Necessary Calculations & Definitions:
Conversion is defined as the acquisition of a new first time purchaser.
CPA is defined as Cost per Conversion = Media Spend/Conversions
Conversion % is defined as the % of Website Visitors that Convert = Conversions/Visits
Profit = (Product Price – Discount Amount – Product Cost – Shipping Cost)
Assume for all products that the product price is $40, the product cost is $13 and the shipping cost is $4.
a) Using this information, calculate the profit per conversion and total profit each offer would have brought in if we scaled the test offers to represent the results as if we had spent the same amount across all offers. (leave the formulas in the spreadsheet)
b) Based on the total profit we made on the first order, which offer do you recommend we roll out and why?
c) We want to decide which offer we should run to maximize the profit a customer will bring us after 12 months. Using the table from question 1, calculate the total profit by offer after 12 months. Which offer do you recommend we should roll out and why?
Question #3
Please go to www.justfab.com and www.shoedazzle.com and go through the flow as a new customer: do the quiz > register as a lead > go through checkout, and give a brief audit of your experience and what your recommendations are to optimize the experience.
