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We did some ROI calculations on purchasing and distributing t-shirts. Do you guys think that we missed anything, or made the wrong assumptions?

objclxt 14y ago
It's a really interesting post - I think one market segment you gloss over is college students. Some products will obviously be better suited to others than this, but a great example I saw recently was Dropbox. Dropbox were sponsoring a CS project fair at my alma matter which I stopped by at. They handed out t-shirts (quite nice ones) to everyone there. For dropbox, college students represent both their potential customers and their potential talent pool. It can be a bit of a bun-fight to recruit the most talented graduates, and the more you can do to get your brand across the better. And of course, students are going to wear those t-shirts across campus, getting hundreds of eyeballs every day. Not to stereotype college students, but they if they're anything like I was they like free stuff, hate doing laundry (so an extra t-shirt is appreciated), and spend lectures frequently googling random crap (like the name on the person's t-shirt next to you). (PS: If anyone from Dropbox is reading this, I am very sad that my less than a year-old Dropbox t-shirt developed a hole in it. Subtle hint!)
loumf 14y ago
Aside from it not being ROI, I thought it was as good as any guess. What I was hoping for was a clever way of measuring some of the things you assumed. I think what you calculated is called customer acquisition cost. ROI is how much you made from your investment in a given time, usually as a multiple of the investment -- sometimes it's quoted in time to breakeven.
- bretthardin 14y ago
  Once I read this comment, I think it clicked. The result of what we calculated is customer acquisition cost. But, we were trying to figure out if T-shirts were worth the upfront cost. I am not a marketer, so I am 100% sure I am confused by the terminology.
  - loumf 14y ago
    To get ROI, you need to also know the value of a customer. If each customer pays 2 x Customer Acquisition cost in the first month, then the ROI is 2 in the first month. If it's a subscription, and 100% stay for a year, then it's 24 (or 2400%) in the first year. Pro-ROI calculations take into account the time-value of money and taxes.
  - hammock 14y ago
    You have calculated Cost per Acquisition. ROI would be (Income / Investment - 1). To get to ROI from CPA, just divide it into your Customer Lifetime Value. I.e. if you think a conversion is worth, on average, $40 over the life of their relationship with your company, then your return would be 40 / 19.05 -1 = 110% or roughly 2-to-1.

objclxt 14y ago

It's a really interesting post - I think one market segment you gloss over is college students. Some products will obviously be better suited to others than this, but a great example I saw recently was Dropbox. Dropbox were sponsoring a CS project fair at my alma matter which I stopped by at. They handed out t-shirts (quite nice ones) to everyone there. For dropbox, college students represent both their potential customers and their potential talent pool. It can be a bit of a bun-fight to recruit the most talented graduates, and the more you can do to get your brand across the better. And of course, students are going to wear those t-shirts across campus, getting hundreds of eyeballs every day. Not to stereotype college students, but they if they're anything like I was they like free stuff, hate doing laundry (so an extra t-shirt is appreciated), and spend lectures frequently googling random crap (like the name on the person's t-shirt next to you). (PS: If anyone from Dropbox is reading this, I am very sad that my less than a year-old Dropbox t-shirt developed a hole in it. Subtle hint!)

loumf 14y ago

Aside from it not being ROI, I thought it was as good as any guess. What I was hoping for was a clever way of measuring some of the things you assumed. I think what you calculated is called customer acquisition cost. ROI is how much you made from your investment in a given time, usually as a multiple of the investment -- sometimes it's quoted in time to breakeven.

bretthardin 14y ago
Once I read this comment, I think it clicked. The result of what we calculated is customer acquisition cost. But, we were trying to figure out if T-shirts were worth the upfront cost. I am not a marketer, so I am 100% sure I am confused by the terminology.
- loumf 14y ago
  To get ROI, you need to also know the value of a customer. If each customer pays 2 x Customer Acquisition cost in the first month, then the ROI is 2 in the first month. If it's a subscription, and 100% stay for a year, then it's 24 (or 2400%) in the first year. Pro-ROI calculations take into account the time-value of money and taxes.
- hammock 14y ago
  You have calculated Cost per Acquisition. ROI would be (Income / Investment - 1). To get to ROI from CPA, just divide it into your Customer Lifetime Value. I.e. if you think a conversion is worth, on average, $40 over the life of their relationship with your company, then your return would be 40 / 19.05 -1 = 110% or roughly 2-to-1.