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Circulation Manager

Real-Life Activities

Real-Life Math

You are the circulation manager for a monthly magazine.

You are thinking about using a direct-mail campaign to sell subscriptions. You are planning on mailing sales material to 200,000 people. A typical industry response rate for a mail-out of this type is 1.5 percent. That is, you can expect 1.5 percent of the people to respond by subscribing to the magazine. A one-year subscription costs $60.

The postcards that you are sending out cost $1 each. It costs $0.45 to mail them.

When you send the magazine to subscribers, each copy costs you $4, plus $0.69 postage.

Will you make a profit or experience a loss if you do the mail-out? How much? Should you proceed with the mailing?