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
Place: These decisions are associated with channels of distribution, which include market coverage, channel member selection, logistics and level of service.
Competitive advantage - Nundies is an innovative product which provides an alternative to visible panty lines; no other company produces the same type of product
Next there is total cost and total revenue. Total cost is what the company spends to produce a certain quantity of its product. This includes the cost of all the materials,
Unit contribution = Unit Price – Unit Variable Cost = $1.80 – $1.40 = $0.40
Decisions will be made by using the concepts of marginal costs and marginal revenue to maximize profit. A mix of pricing and non-pricing strategies will be
3. The policy should be changed and this impact AAA to acquire more Wholesalers and grow their profit margin by allowing the label.
How I can see from the Exhibit the intracompany sales of hours give me a contribution margin from $ 76,116.50, which means that they are covering this amount of the fixed cost.
Discuss what is meant by the term “customer orientation”. Illustrate with examples how companies demonstrate their customer orientation by reference to at least two elements of the marketing mix.
Top managers develop long-range plans, called strategic plans that define the company's overall mission and goals. Strategic planning focuses more on issues that affect the company's future survival and growth. To develop strategic plan, top managers also need information from outside the company, such as economic forecasts, technology trends, competitive threats, governmental issues and shareholder concerns.
Margin in a business are a ratio of profitability calculated as net income divided by sales.
Determining the unit cost is a quick way to check if companies are efficient in producing their products. The cost information system plays an important role in every organisation within the decision-making process. An important task of management is to ensure the control over operations, processes, activity sectors, and not ultimately on costs.
The status of a company's contribution margin is exceedingly important for the functioning of that particular business. Not only does the contribution margin allow managers and workers to understand where the company stands financially, but it is further essential in decision-making within the company and the company's reporting. Essentially, the contribution margin within a company is the difference between the selling price minus all variable costs, or the marginal profit per unit sale that a company sees (Tsui, 2011, p.1).
As is known, pricing is one of the most important steps for business plan which needs good research, calculations and formulations. There are different pricing strategies to put into effect due to the market and product conditions, such as premium pricing, penetration pricing, economy pricing, price skimming(Voice Marketing, 2012). These four pricing strategies are main pricing policies. They form the bases for the exercise. However there are other important approaches to pricing. These pricing strategies are: Psychological pricing, product line
When looking to add a new product to the market, traditionally five steps occur in marketing research and lead to marketing actions. Of these five steps, step number three covers the collection of marketing data. Marketing data can be collected through either primary research or secondary research. The goal of this assignment is to describe both primary and secondary research, provide examples of each and determine how the author’s organization could benefit from each. The author will begin with a description of primary marketing research.
Marketing is an essentially about marshalling the resources of the organization so that they can meet the changing needs of the customers on whom the organization depends. As a verb, marketing is all about how an organization addresses its markets. Marketing is “The management process which identifies, anticipates and supplies the customer requirements efficiently and profitability”.