09. Net Present
Value
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NPV demonstrates the expected return on investment, which is a great way to justify your marketing budget. I use your sales funnel to calculate the probability-adjusted value of your customers, then decide a discount (risk) factor and work out how much it'd be if a proposed marketing programme hit its goals. The basic rule: if NPV>0, the project is worth doing.
The basis of NPV is that a pound in your pocket today is worth more than a pound promised to you next year; the risk of not delivering that promise reduces the present value of that future pound. NPV calculus lets you work out how much an increase in value (i.e. a growth in sales) tomorrow is worth today, letting you put costs and ROI into your marketing plan.
NPV puts you on the same page as your project sponsors: it shows them what they'll get back. See more on sales funnels, or head back to the toolbox.
Back to toolbox
NPV demonstrates the expected return on investment, which is a great way to justify your marketing budget. I use your sales funnel to calculate the probability-adjusted value of your customers, then decide a discount (risk) factor and work out how much it'd be if a proposed marketing programme hit its goals. The basic rule: if NPV>0, the project is worth doing.
The basis of NPV is that a pound in your pocket today is worth more than a pound promised to you next year; the risk of not delivering that promise reduces the present value of that future pound. NPV calculus lets you work out how much an increase in value (i.e. a growth in sales) tomorrow is worth today, letting you put costs and ROI into your marketing plan.
NPV puts you on the same page as your project sponsors: it shows them what they'll get back. See more on sales funnels, or head back to the toolbox.