Suppose you are the marketing manager for MyTeam.com, an online seller of jersey

Question

Suppose you are the marketing manager for MyTeam.com, an online seller of jerseys for sports teams. If Philly.com offered to sell you advertising on a pay-per-conversion basis at $10 per conversion and the gross margin on sales is 30%, how big does the average order have to be to justify the cost of the advertising?
Suppose you are the marketing manager for MyTeam.com, an online seller of jerseys for sports teams. If Philly.com offered to sell you advertising on a pay-per-conversion basis at $10 per conversion and the gross margin on sales is 30%, how big does the average order have to be to justify the cost of the advertising?

Explanation / Answer

given margin on sales is 30% =cost of sales/(total sales)c

pay per conversion=10=ad spend /conversions

let x be Average order value

profit =x-0.3x-10=0.7x-10

profit=

average order =revenue /number of orders

x=0.7x-10/number of orders

number of orders=(0.7x-10)/x

average order value should be more

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