How does a change in the response rate affect profit?

The following model demonstrates that profits increase in a linear manner as the response rate varies:

Response Profit

Rate

	$17,400
1%	-$37,200
2%	-$29,400
3%	-$21,600
4%	-$13,800
5%	-$6,000
6%	$1,800
7%	$9,600
8%	$17,400
9%	$25,200
10%	$33,000

The following graph clearly demonstrates the linear relationship:

A 1% increase in the response rate always increases profit by $7800. Each 1% increase in response rate results in 100,000(0.01) = 1000 more orders. Each order yields an average revenue of $40 but incurs a variable cost of $40(80%)=$32 and a $0.20 envelope cost. The net gain in profit is $7.80 per order, or $7800 for 1000 orders.