Allocating a ₹60,000 lead-generation budget across two channels with a dealer cap
A branch has ₹60,000 for this month's two-wheeler loan lead generation and cannot carry unspent budget forward. Two channels are open. Digital: cost per lead is ₹200, 10% of leads become applications, and 50% of applications are approved and disbursed. Dealer co-marketing: cost per lead is ₹400, 20% of leads become applications, and 60% of applications are approved and disbursed, but the largest dealer can supply at most 100 leads in a month. Net contribution from every disbursed loan, after all costs except marketing, is ₹5,000 and is identical for both channels. Spend and disbursal both happen within the same month. The branch's month-end target is 20 disbursed two-wheeler loans, and the branch head wants both the highest possible contribution and the target met.
1. Which allocation of the ₹60,000 maximises net contribution, and how many loans does it generate? Support the choice with per-lead economics.
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Value each lead by expected contribution, not by cost per lead:
- Dealer: 0.20 × 0.60 × ₹5,000 = ₹600 per lead, at a cost of ₹400, so net ₹200 per lead and a return of 600/400 = 1.50 per rupee spent.
- Digital: 0.10 × 0.50 × ₹5,000 = ₹250 per lead, at a cost of ₹200, so net ₹50 per lead and a return of 250/200 = 1.25 per rupee.
Dealer leads are better per rupee, so buy them first, up to the cap: 100 leads at ₹400 = ₹40,000, producing 20 applications, 12 disbursals, contribution ₹60,000. Put the remaining ₹20,000 into digital: 100 leads, 10 applications, 5 disbursals, contribution ₹25,000.
Total: ₹60,000 spent, 250 leads, 17 disbursals, contribution ₹85,000, net ₹25,000. Shifting ₹400 from dealer to digital would forgo ₹600 and gain 2 digital leads worth ₹500 - a ₹100 loss - so the mix is optimal. Going all-digital gives only 15 disbursals and ₹15,000 net.
2. The dealer will lift the cap to 200 leads but now wants ₹500 per lead. Should the branch accept? At what price would the dealer's leads still be the better buy?
Read the worked answer
Re-evaluate the dealer at ₹500. Expected contribution is still ₹600 per lead, so the return falls to 600/500 = 1.20 per rupee, which is now below digital's 1.25. The dealer has become the inferior channel.
If the branch accepts ₹500 and buys only dealer leads with the whole ₹60,000, it gets 120 leads, 24 applications and 14.4 disbursals - contribution about ₹72,000 and net about ₹12,000. That is worse than the ₹25,000 net available from the ₹400-plus-digital mix, and worse than all-digital at ₹60,000 (300 leads, 15 disbursals, ₹75,000 contribution, ₹15,000 net).
The indifference price is where the two returns are equal: 600/CPL = 1.25, so CPL = ₹480. Above ₹480 the branch should put everything into digital; at or below ₹480 the dealer is again worth buying, still subject to the 100-lead cap being the binding constraint. The counter-offer should be ₹480 with the cap at 100 leads.
3. Realistically the branch will not reach 20 disbursals. What should it report, and what specifically should it ask for to close the shortfall?
Read the worked answer
The maximum attainable under the current terms is 17 disbursals, so the shortfall is 3 loans. Reporting 17 is not a failure of effort; it is the arithmetic ceiling created by the dealer cap and the 50% approval rate, and it should be reported with that explanation rather than padded with applications or 'pipeline'.
To close the gap, the officer needs 3 more disbursals. Through digital, each disbursal needs 1/(0.5 × 0.10) = 20 leads at ₹200 = ₹4,000, so 3 extra disbursals need ₹12,000 of additional budget. Through the dealer at ₹400, 3 disbursals need 3/(0.6 × 0.20) = 25 leads = ₹10,000, but the dealer cap has to rise from 100 to 125 leads. The dealer route is cheaper, so the ask should be: either ₹10,000 more budget with a 125-lead dealer cap, or a cap increase to 125 leads within the same ₹60,000 (which would mean shifting ₹10,000 from digital and is worth checking, since that trade costs ₹1,500 of contribution).