test

term direct marketers may use for experiment

random assignment

a component of a valid experiment that refers to the fact that both control and experiment group subjects must be assigned completely randomly so that the differences between groups occur by chance alone

matchback

the procedure by which an order response is tracked back to the starting place (catalog or offer) from which it was generated

split test

a test where at least two samples are taken from the same list, each considered to be representative of the entire list, and used for package tests or to test the homogeneity of the list

hypothesis testing

an assertion about the value of the parameter of a variable (research decides) on the basis of observed facts such as the relative response to a test of variation in advertising

null hypothesis

the statistical hypothesis that there is no difference between the means of the groups being compared

alternative hypothesis

the hypothesis that is determined when a null hypothesis is proven wrong

type 1 error

results when the decision maker rejects the null hypothesis (even though it is true)

typer 2 error

occurs when the decision maker accepts the null hypothesis (when it is not true)

chi-square (c2) test

a statistical technique for determining whether an observed difference between the test and the control in an experiment is significant

degrees of freedom

the number of observations that are allowed to vary

market penetration

the proportion of customers to some benchmark

break even

point at which the gross profit on a unit sale equates to the cost of making that unit sale

source code

the media, media vehicle, or means by which the person has responded to become a customer

conversion

movement of a prospective customer to a definite buying customer

conversion rate

the rate at which leads are converted into sales

gross sales

total sales made

cost of goods sold

all costs related to manufacturing or producing a good or service

variable costs

costs that vary with production and number of units sold

fixed costs

costs associated with a business that do not vary with production or number of units sold

unit margin

the amount of money each sale provides to cover fixed costs (AKA unit contribution, unit profit, or trade margin)

allowable margin

the amount of money that can be spent to get an order while still permitting some left over for media costs and the designated profit to be made (AKA advertising allowable)

net profit

amount of money company retains after the fixed costs are subtracted from the gross revenues and before taxes (AKA net profit margin)

cost per inquiry (CPI)

promotion costs divided by the number of inquires (people who responded but did not yet order) AKA cost per lead (CPL)

cost per response (CPR)

total promotion budget divided by total number of orders and/or inquires received

return on investment (ROI)

popular tool of measurement in business, this is the net profit divided by average amount invested in company in one year