# Demand factor - Ports

12.12.2014

As sales in Internet increase, so does the number of visitors that come to the website. If the number of Internet ports is not enough to process all visits, then some visitors will not be able to place an order. The percentage of visitors who were unable to access the website is directly proportional to the number of unregistered orders in Internet in current period. It is important to minimize the percentage of visitors who could not enter the website (failure rate) - as this is a reserve for increasing sales. For example, if the failure rate was 3%, but became 1%, then sales in Internet will additionally grow by: 3 - 1 = 2%

To calculate number of ports required in the current period, it is necessary to correctly predict the number of visitors, which depends on Corporate advertising. To calculate the number of Internet ports in the current period, you need to correctly predict the number of website visits. Website traffic depends on the number of visits in previous period and Corporate advertising in Internet in the current period.

Formula for calculating visitors in the current period - 85% of visitors in the previous period + 500 * corporate advertising in Internet in the current period.

For example, if the number of visitors in the previous period was 95 000, corporate advertising 75, then number of visitors in the current period will be equal to: 95 000 * 0.85 + 500 * 75 = 118 250 visitors.

The lowest possible failure rate may be 0%, but in practice it is very expensive to reach this level (you need a lot of ports), so target is - 0.1%. The formula for calculating the minimum required number of ports to reach 0.1% will be: visitors in the current period ^ 0.0001 + 6

For example, if the number of visitors is 118 250, then required number of ports will be equal to: 118 250 ^ 0.0001 + 6 = 18 (rounded).

Optimal strategy for Internet ports

For example, on scenario 12C1 each 1% increasing in sales gives additional profit 5 000 (from personal experience), which is equal to buying 5 ports, but in fact ports are cheaper. You should hold minimum failure rate - optimal 0.1%

Payment after buying ports goes with lag of 1 period. Ports purchased in 1 period, will be payed in 2 period, etc. For example, ports purchased in 5 period, you will pay in 6 period, ie never. Therefore, in 5 period you can buy even 99 ports without any costs to your company. On the contrary, ports increasing will reduce failure rate to 0% and give small bonus to sales.

Hints

1. There is no residual effect on demand from Internet ports
2. The dependence of demand on Internet ports is expressed by a linear function
3. The effect on demand from Internet ports only on the Internet is equal for all products
4. The dependence of demand on Internet ports is not influenced by competitors in the group

Automatic demand forecast based on number of Internet ports is built into the Calculation model, which can be purchased in our store.