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Teaching notes · lesson 9 · a 20-minute class

Return on spend and payback

Gross profit back per euro, and how long it takes. Tracks: Finance, Media.

Open the lesson

Learning goalsBy the end, students can

  • Define return on spend in gross profit and explain why not in sales.
  • Read a payback curve and say when a lever breaks even.
  • Compare levers that pay back fast with levers that pay back slowly.

The 20-minute classMinute by minute, with the lab on the projector

  1. 0:003 min, to 3:00

    Cold open

    Ask: an ad returns €3 of sales for every €1. Good? Then add a 50% margin and ask again.

  2. 3:004 min, to 7:00

    The idea

    Define return in gross profit per €1, break-even at €1, and payback as the time to cross it.

  3. 7:005 min, to 12:00

    Lab on the projector

    Put the same money into brand media, activation and a deal. Stretch the horizon and watch each line against break-even.

  4. 12:003 min, to 15:00

    Pairs

    Pairs rank the three levers at one quarter and at the longest horizon, and explain any swap.

  5. 15:003 min, to 18:00

    Discussion

    Take the cash question: when does fast payback matter more than total return?

  6. 18:002 min, to 20:00

    Check

    Three lesson questions.

Discussion questionsWith what a strong answer covers

  1. Why measure return in gross profit rather than sales?

    A strong answer covers
    • Spend is paid from profit, so compare like with like.
    • €3 of sales at 50% margin is €1.50 of profit.
    • Below €1 of profit per €1, the spend loses money unless more comes later.

  2. When would you choose the faster-paying lever even if it returns less in total?

    A strong answer covers
    • When cash is tight or a quarterly target binds.
    • Recognises the trade-off with later share.
    • Mentions the board compares spend with other uses of money.

  3. What does a sales-only return miss for brand spend?

    A strong answer covers
    • Pricing power.
    • The return that keeps arriving in later years.
    • Memory as an asset.

The lab as homeworkAbout 15 minutes for a student

Use the lab to find when each lever pays back.

  1. Put the extra money into brand media and stretch the horizon.
  2. Do the same for activation and for a deal.
  3. Note when, if ever, each crosses €1 back per €1.

They answer: Which lever paid back fastest, which returned most by the longest horizon, and which never paid back?

A strong answer covers
  • Quotes the lab for all three levers.
  • Separates speed of payback from total return.
  • Uses break-even at €1 of gross profit per €1.

Students also answer the lesson's three questions. Their score is worked out on the server from their answers.

Set this lab as homework

Students open a link, do the lab, answer the three questions and write what they found. You see each student's quiz score and finding on your class page.

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