source evaluation

Source evaluation is a process of analyzing the long-term profitability of each source of business, taking into account all revenue generated and various elements of expense, depending upon the method of source evaluation being used. Source evaluation enables marketers to concentrate their resources on the sources that best suit their long-term strategies, which may include growth, maintenance of present sales levels, or reduction in sales levels.

“Source” is a channel of sale that generated an order or customer. Source evaluation is an essential part of direct and performance marketing.

Sources are evaluated not just by number of orders generated, but in terms of profitability, considering the long-term purchase and payment history of each customer by source.

Depletion method is a method of subscription source evaluation that measures the relative profit (or loss) over time of different sources of new subscribers and that includes both the initial new order promotion expense and the renewal promotion expense as those new orders expire but does not assume any additional new business promotion expense to replace subscribers that do not renew. Since the percentage of subscribers who renew is almost always less than 100%, the number of subscribers will decline over time.

Maintenance method is a subscription source-evaluation technique for projecting the cost of maintaining a constant number of subscribers over time from a particular source, by projecting the renewal, expire, and cancellation rates to be realized from this source and by bringing in new subscribers to replace those that drop out. This is an especially useful technique when considering the acquisition of names from another publication that is going out of business. The additional names will commit the publisher to a higher rate base, and the maintenance method technique will enable the publisher to ascertain the cost of meeting that rate base commitment.

Steady-growth method subscription source evaluation technique that estimates the cost and impact on profitability of building the rate base over time via various sources of business. The cost of acquiring, billing, and renewing subscriptions is taken into account, as well as expected pay-up, cancellation, and renewal rates.


Synonyms: depletion method, maintenance method, steady-growth method

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