The Philosophy of Building an Investment Recovery Simulation: Generating Profit from Behavior - Beta Version, Logical Direct Marketing (9)

1. What is an Investment Recovery Simulation?

In direct marketing, an investment recovery simulation is not just a table for seeing "when advertising costs can be recovered."
Essentially, it is a
reproduction model of the profit and loss structure centered on customer behavior.

After running an ad, what kind of customers, how often, at what price point, and how many times will they purchase?
And each time, what variable costs are incurred, and where does it become profitable?
All of these are structurally depicted according to the customer's **purchasing behavior (F: Frequency)**.
This is the starting point of an investment recovery simulation.

2. Everything is Depicted by F-Transition: The "Trajectory of Customer Behavior" Determines the Revenue Structure

This simulation is built based on F-transition, which is "how many times a customer has purchased."
As customers repeat purchases—first, second, third, and so on—they become accustomed to the product, trust it more, and the churn rate decreases.
At the same time, elements such as included tools, benefits, and support costs also change.

Therefore, it is necessary to have individual transition rates, unit prices, and cost structures for each F (Frequency).
This enables a realistic business simulation rather than just using average values.

● Structure of F-transition

In other words, all independent variables are set for F0 to F5,
and a structure is used where F6 and beyond are unified as a "steady purchasing state."

By using this model, you can explicitly manage the fluctuations in the number of people, sales, and expenses for each purchase,
and visualize "which F supports the business."

3. How to Calculate Sales: "Number of People × Unit Price × Transition Rate"

Sales for each F can be broken down into a simple formula.

売上（Fn）＝ 前回F（n-1）の購買人数 × F別推移率 × F別単価

This "unit price by F" reflects the actual price system, such as trial discounts, subscription prices, and set sales.
For example, the unit price decreases in F1 for promotional purposes, and returns to the regular unit price from F3 onwards.
Such realities are incorporated into the model as they are.

This allows for a correspondence where **"numerical movement = customer behavior."**

4. Decomposition of Cost Structure and Realistic Reproduction Including "Cumulative Effects"

This simulation is not designed as a simple structure that subtracts variable costs from sales, but rather to reproduce the
multi-layered revenue routes that occur in actual EC/mail-order businesses.

Therefore, sales are composed of three paths.

(1) Subscription Purchases (Transition by F)

The mainstream axis based on the customer's purchasing behavior itself.
Set the transition rate, unit price, promotional expenses, and CC costs for each F, and converge to stable values from F6 onwards.
This is the revenue structure that forms the foundation of the business.

(2) Cross-sell Add-ons (Within Subscription Purchasers)

Using subscription purchasers (total of all Fs) as the denominator,
we reproduce cases of additional purchases of other or related products within the same month as an add-on.

クロスセル売上 ＝ 定期購買者合計人数 × クロスセル率 × クロス単価

This add-on revenue also accounts for standard variable costs (cost of goods, promotion, FF, CC, and collection fees).
It is structurally recorded not just as LTV expansion, but as 'additional profit based on subscription purchases'.

Cross-selling is often managed separately as 'results of CRM measures,' but a feature of this simulation is that it is
quantified as part of the revenue structure.

(3) Non-subscription Purchase Add-ons (Trial Dropout Route)

The segment that purchased a trial but did not convert to a subscription.
Among them, there is a certain percentage of 'customers who return later for one-off purchases'.

We set this as the 'non-subscription purchase rate' and calculate sales as: Number of dropouts × Non-subscription purchase rate × Non-subscription unit price.
By subtracting the corresponding variable costs, it is
added as additional profit.

非定期売上 ＝ トライアル離脱者数 × 非定期購買率 × 単価

This route reproduces 'long-tail profit' that cannot be captured by the subscription structure.

(4) Overall Picture as an Integrated Structure

［広告投資］
     ↓
  F別推移メイン
     ├─ F0（トライアル） → F1 → F2 → … → F6以降（安定）
     │      ↑
     │      └─ 非定期購買ルート（トライアル離脱→単発購入）
     │
     └─ 定期顧客全体（全F） → クロスセル上積み

With this structure, you can visualize the entire picture of customer behavior in a single simulation.
It becomes possible to express the reality of the business with numbers, including not only continuous purchases but also 'expansion of relationships' and 'secondary purchases'.

5. Reading the Recovery Period - Dual Perspective of Base and Add-ons

In this model, you can view the recovery structure for advertising costs from two perspectives.

The difference between these two curves is visualized as the results of CRM, cross-selling, and brand development.
From a management perspective, this serves as an indicator for measuring the 'results of medium- to long-term investment'.

I have tried to write this as clearly as possible, but it still became a somewhat difficult topic.
However, since this way of thinking is an essential concept for business design, please make sure to understand it.
(If it is unclear, please feel free to contact us.)

The next chapter will be about how to translate this 'marginal profit structure + add-on effect' into a 'monthly business PL'—

which is a discussion on management structure design. Please look forward to it.

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▼ This article is part of the following series.

Logical Direct Marketing to the End
─ The Big Picture of Design Philosophy Spanning Advertising, CRM, and Business P&L

Click here for the overall structure and how to read
▶ https://note.com/kawabe_atsushi/n/n879156f50c33
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