Expenditure Policy for Mail-Order Advertisers

Abstract

This article is an analytical method for choosing the optimum promotional expenditure of mail-order advertisers, but is also appropriate for advertisers who keep customer sales records and for decisions about the optimum size of the outside salesforce. The only inputs required are the customer decay rate, the cost of money, and the number of customers produced by the advertising (or salesman) in period t. The value of a customer and the stream of future revenue are estimated, from which the optimizing calculation is made.