If you are sending promotions through direct mail, Google Adword advertising, e-mail, or even Facebook advertising and you are using a one-time offer, your acquisition cost per order, product costs, and fulfillment expenses are the prime factors for determining the financial viability of your direct marketing campaigns profitability.
But one-time sales are a very difficult business model to keep going over time. Repeat sales from existing customers… or your ability to get increased business from the same group of customers over a period of time will prove to be a far more profitable way to build your business.
Repeat sales have different metrics
Planning for repeat sales involves using a different set of metrics to determine the success and financial viability of your direct marketing campaigns. Your calculation of profitability for repeat sales is more complex because it combines the profitability of the repeat sales with the profitability (if there is any) of the first sale to determine the overall value of the customer.
Repeat sales are more profitable
Your repeat sales to existing customers are likely to achieve a much higher response rate, and a higher average order. This means that your repeat sales are much more profitable.
Many direct marketing professionals are willing to take the portion of these highly efficient profits from repeat sales and put them towards generating a higher volume of the first time sales. In other words they are willing to go in the hole today for a chance at whopping profits tommorow.
If you know in advance exactly how profitable your repeat sales are going to be then you can calculate how much of that profitability you are willing to siphon off in order to generate that higher volume of first time sales.