Essay on BASIC QUANTITATIVE ANALYSIS FOR MARKETING

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BASIC QUANTITATIVE ANALYSIS FOR MARKETING
BASIC TERMINOLOGY
Simple calculations often help in making quality marketing decisions.
If we are to assess the likely profit consequences of alternative actions, we must understand the cost associated with doing business as well.
We can calculate the expected revenue generated by each pricing strategy, but without cost information, it is not possible to determine the preferred price. The cost concepts we introduce are:
- Variable cost
- Fixed cost
- Total cost
We combine the cost information with price information to determine unit contribution and total contribution.

This Figure is a good enough approximation of actual cost behaviour

Total cost  The total cost line (the
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MARGIN CALCULATIONS
The term “margin” is sometimes used interchangeably with “unit contribution” for a manufacturer. Margin is also used to refer to the difference between the acquisition price and selling price of a good for a member of the channels of distribution.
For example, consider Figure D, in which we have the videocassette tape manufacturer selling through a wholesaler, who in turn sells to retailers, who then sell to the public. Each of the three members of the channel of distribution(manufacturer, wholesaler, retailer) performs a function and is compensated for it by the margin it receives.

RETAILER’S PERCENT = SELLING PRICE PURCHASE PRICE
MARGIN TO CONSUMERS - FROM WHOLESALER SELLING PRICE TO CONSUMERS

= RETAILER’S DOLLAR MARGIN SELLING PRICE TO CONSUMERS

Note that in the denominator of Equation, we have the selling price to consumers. It would have been as logical to put purchase price from wholesaler there instead. It is only by convention that we divide by the selling price. For any member of
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