Making MROI into a Diagnostic MetricThe operational goal of this paper is to create a metric based on the sensitivity of the promotional efficiency (MROI) to changes in promotional expense, ∆A. The classic price elasticity of demand has the very useful characteristic that it is equal to -1 (i.e., %∆Q/%∆P = -1) when the price that maximizes revenue has been achieved. The goal of this paper is to demonstrate that the elasticity of MROI (i.e., %∆MROI/%∆A) has the same desirable characteristic of reaching -1 when the promotional expenditure that maximizes profit is reached. That is to say, an elasticity that indicates the point at which the optimal promotional expense is reached to achieve maximum profits.
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