total cost of goods sold-including product, selling, and delivery costs but not including promotion costs-subtracted from the total sales revenue generated, and divided by the number of units sold. The promotion budget must not exceed the order margin and, in addition, must be small enough to leave a profit margin. For example, assume 100 units are sold by a retailer at a price of $20, yielding $2000 in revenue. The cost of the goods was $300, and all costs associated with warehousing, displaying, and selling the goods in the store totaled $1200. The order margin, therefore, is $15 per unit sold (1200 + 300 ÷ 100), leaving $500 for promotion expense and profit.
Direct marketers generally have a lower order margin than retailers, because they do not have the expenses associated with managing a retail outlet (leased space, salesclerks, electricity, furniture and fixtures, and so forth) and can sell goods at a lower price.
