In plain words
A sensitivity analysis takes a plan and nudges each input in turn: the price, the product cost, the acquisition cost, the renewal rate. Each is moved up and down by a set step while the others stay put, and the change in the result is recorded.
The output is a ranking. Some inputs barely move the result, and some move it a great deal. That tells you which numbers are worth getting exactly right, and which lever is worth pulling first.
Formula
- Effect of an input = result with the input moved by the step − result as planned, all other inputs held
Worked example
A coffee subscriber acquired for $30.00 is worth $23.29 of profit over twelve months. The engine moves five inputs in turn and ranks them.
Raising every renewal rate by five points changes that profit by $18.36, and raising the renewal price by 10% by $14.05. Moving the first-order price by 10% changes it by only $2.95.
The example order
A $40.00 bag of coffee, shipped free, every cost counted
2 declared kinds cost nothing on this option
| Step | Grain | Amount |
|---|---|---|
| Revenue | – | $40.00 |
| Cost of goods | per unit | −$12.00 |
| Pick and pack | per order | −$1.18 |
| Packaging | per parcel | −$0.50 |
| Shipping label | per parcel | −$7.50 |
| Card fee per order | per order | −$0.30 |
| Refunds | percent | −$2.00 |
| Card processing | percent | −$1.16 |
| Contribution margin | – | $15.36 |
| 2 kinds costing nothing | – | $0.00 |
Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.
Sensitivity is not a forecast range
Moving one input at a time shows which input matters. It does not show how wrong the plan could be, because real inputs move together. For the range of outcomes, run many scenarios with the inputs varied at once.
Using it
Use it to decide what to measure and what to test. If the result hangs on the renewal rate, spend your effort on knowing that rate and improving it. Arguing over a few cents of unit cost can wait. Rerun it when the plan changes: the most sensitive input for a new subscription is rarely the one for a mature one.
In Offer Suite
For a subscription offer, Offer Suite's simulator reports how the profit per customer moves with the acquisition cost, the first-order and renewal prices, the product cost and the renewal rates, largest effect first.
Source: Offer Suite's offer simulator.