The Marketing Process

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Basic Quantitative Analysis for Marketing
Break-even Analysis

Fixed Cost – costs that remain constant over a range of activity irrespective of the quantity produced
• ex: rent, insurance, depreciation, office overheads

Variable Cost – costs that vary directly with the quantity produced
• ex: direct labor, direct materials, sales commissions

Break-Even Point – the point of production at which Total Revenue = Total Cost

Total Revenues = P X Q
Total Cost = TFC + TVC
Total Variable Cost (TVC) = VC/unit X Q
Contribution Margin (CM) = P – VC/unit
Total Contribution = (P – VC/unit) X Q

BEP: BEQ = TFC/CM
Break-Even Sales: BE$ = BEQ X P
BEP w/ profit goal = TFC + Profit Goal/CM
Bross Cord calculations
Given: Price gives
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There are five alternative concepts under which organizations design and carry out their marketing strategies (in chronological order):

Production Concept – the idea that consumers will favor products that are available and highly affordable and that the organization should therefore focus on improving production and distribution efficiency
• Profit maximization through economies of scale
• Can sometimes lead to marketing myopia
• Philosophy during the Industrial revolution

Product Concept – the idea that consumers will favor products that offer the most in quality, performance, and innovative features and that the organization should therefore devote its energy to making continuous product improvements
• Profit maximization through superior product performance
• Can also sometimes lead to marketing myopia

Selling Concept – the idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort
• Profit maximization through the generation of demand for products (through sales volume)
• “Inside-out” perspective—“…any color he wants, so long as it’s black.”
• Typically practiced with unsought goods – goods that buyers do not

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