Taking into account kick backs and different VATs when optimising sales to increase advertising profitability
September 23 (3 mins read)
Rajala Pro Shop changed to optimising their advertising against profit rather than revenue, and increased their average gross profit while simultaneously decreasing their advertising spend for the same amount of revenue.
Rajala Pro Shop operates within the camera retail industry, where much business value is driven by kickbacks from suppliers based on purchasing prices. As top-line revenue does not account for kickbacks, this business value was difficult if not impossible to effectively take into consideration when using revenue target-based bidding. Further, as Rajala sells both new and used equipment, the jurisdictions in which they operate impose different VAT percentages across the product range. This is not taken into account either when only using total revenue as the signal.
Using Kuvio, they set up a custom profit calculation that took into account both the kickback structure and the different VATs across the product range, which enabled detailed real-time per-order profit calculations. Feeding this signal into their marketing platforms, they are able to optimise on the business value that actually matters to them – profit.