Saturday, February 4, 2012

DRTV – How to Calculate Cost Per Order or CPO

CPO, Cost Per Order, Allowable Cost Per Order. These are the key metrics for successful direct marketing. And for 20 years, I have been educating my clients, potential clients and members of this great industry. I’ve been blogging about the DRTV and Infomercial business for 4 years and the keywords usually center around the cost to produce or air an infomercial or Direct Response TV commercial. But make no mistake, you can’t make money or break even or execute any direct marketing strategy without knowing your Allowable Cost Per Order. Let’s define the terms for this blog or click here for an Infomercial Glossary.


Cost per Order (CPO): The average cost of television media to generate one product order, determined by dividing the cost of a specific infomercial telecast by the total number of orders received from it.

Ad Allowable: Your ad allowable tells you how much you can afford on a cost per order basis. The ad allowable is the dollar amount determined to be the maximum media expense for each unit sold in order to generate a legitimate profit. Also referred to as Allowable Cost Per Order.

In order to calculate your cost per order, you must be able to track response and sales by media airing, week, month and so forth. DRTV and DR Radio are accountable forms of advertising (unlike branded advertising), and your DRTV Media Agency must have a media management system that tracks calls, web hits, and orders for each airing, broadcast week and broadcast month. Handled properly, the direct marketer should receive data daily that estimates the CPO and receive data weekly with reconciled reporting that tracks the CPO to the penny.

We provide our clients a report called an Allowable Report. Upon setting up a campaign, we crunch the numbers, consult with the client and establish an Ad Allowable or Allowable Cost Per Order. Our custom report shows the client at a glance all of the stations, networks and airings that are below the Allowable and all of the media that is above the Allowable. A savvy and responsive media buyer cancels all media that is under performing the allowable and reorders the media that is working.

To learn more about DRTV Media Rates and Rollout strategies – click here. Don’t forget to subscribe so you receive all of the latest info on the DRTV Media business.