Theory
Direct marketing businesses must record the revenues and profits received from merchandise sales in order to satisfy basic legal requirements and calculate tax liabilities. Sales of individual items must be tracked in order to fulfill customer orders and manage inventories. As a result, the gross profit and profit margin for each item sold can be calculated as a means of determining which items are most profitable to the business and its owners.
The costs of producing and distributing mail-order catalogs can also be measured. These costs include graphic design, copywriting, photography, print production, postage, and mailing list rental. These costs are typically tracked and totaled for entire publications, rather than for individual items of merchandise offered for sale on the pages of the publication. Square-inch analysis provides the means of allocating these costs to individual items according to the amount of space their sales offers occupy on pages, on a percentage basis (as measured in square inches).
Read more about this topic: Square-inch Analysis
Famous quotes containing the word theory:
“The great tragedy of science—the slaying of a beautiful theory by an ugly fact.”
—Thomas Henry Huxley (1825–1895)
“If my theory of relativity is proven correct, Germany will claim me as a German and France will declare that I am a citizen of the world. Should my theory prove untrue, France will say that I am a German and Germany will declare that I am a Jew.”
—Albert Einstein (1879–1955)
“The human species, according to the best theory I can form of it, is composed of two distinct races, the men who borrow and the men who lend.”
—Charles Lamb (1775–1834)