Marketing Flashcards
Calculating Margin
Selling Price = Cost to Produce + Margin
SP = Cost + Margin
Margin = Customer’s Purchase Price - Cost to Produce or Acquire
Margin = SP - Cost
Margin (%) = Selling Price (100%) - Cost (%)
Margin %
Margin % = (Selling Price – Cost) / Selling Price
% Margin = (SP – Cost) / SP
% Margin = $ Margin / SP
Calculating Selling Prices Across the Channel
Selling Price = Cost / (1 - % Margin)
Calculating Selling Prices Across the Channel - Chaining Backwards
Cost (or supplier selling price) = Selling Price * (1 - % Margin)
Price Def
Revenues = Units Sold x Price.
Unit Market Share
Unit Market Share = Unit Sales / Total Market Unit Sales
Revenue Market Share
Revenue Market Share = Sales Revenue / Total Market Sales Revenue
Market Penetration
Market Penetration = Customers who purchased a product in the category /
Total population
Relative Market Share
Relative Market Share =
Brand’s Market Share ($ or Units) /
Largest Competitor’s Market Share ($ or Units)
*Note that this is equivalent to Brand Sales / Largest Competitor Sales
Total Costs
Total Costs = Total Fixed Costs + Total Variable Costs
Total Costs = FC + VC = Fixed Costs + (Unit Var. Cost * Units Sold)
Unit Variable Cost
Unit Variable Cost = Total Variable Costs for 1 Unit of Production
Total Variable Costs
Total Variable Costs = Unit Variable Costs * Units Sold
Average Costs
Average Costs = Total Costs / Units Sold
Total Revenues
Total Revenues = Selling Price * Units Sold
Total Contribution
Total Contribution = Total Revenues – Total Variable Costs
Total Contribution = Unit Contribution * Units Sold
Profit (or Loss if negative)
Profit (or Loss if negative) = Total Revenues – Total Costs
Profit = Total Contribution – Fixed Costs
Unit Contribution
Unit Contribution = Selling Price per unit – Variable Cost per unit
Unit Contribution = SP per unit – VC per unit
Note: Unit Contribution is significant because it measures a net inflow of funds to a company as additional units are sold.
Contribution Margin %
Contribution Margin % = Unit Contribution / Selling Price per unit
Contribution Margin % = Contribution / Selling Price
Breakeven
total revenues = total costs (Variable and Fixed)
Two types of breakeven analysis
Unit Breakeven = How many unit sales need to be made to cover fixed costs?
Revenue Breakeven = What level of sales are needed to cover fixed costs?
Unit Breakeven
Unit Breakeven = Fixed Costs / Unit Contribution
Unit Breakeven = Fixed Costs / (Selling Price – Variable Cost)
BE (units) = Fixed Costs / (Selling Price – Variable Cost)
or Fixed Costs / Unit Margin
Revenue Breakeven
Revenue Breakeven = Fixed Costs / Contribution Margin %
Revenue Breakeven = Fixed Costs / (Unit Contribution / Selling Price)
BE ($) = Fixed Costs / ((Selling Price – Variable Cost) / Selling Price)
or Fixed Costs / Margin %
Converting Breakeven
Revenue Breakeven = Breakeven in units * Unit Price
Breakeven in Units = Dollar Breakeven / Unit Price
NOTE: With either measure it is simple to calculate the other, using price to convert.
Revenue Breakeven = Breakeven in Units * Unit Price
Breakeven in Units = Revenue Breakeven / Unit Price
Target Profit Breakeven
Target Profit Breakeven = (Fixed Costs+Target Profit) / Contrib Margin %
cannibalization rate
The Big Block cannibalization rate would be calculated as follows:
= (Regular Umbrella purchasers opting for Big Block) / (Total Big Block
sales)
Weighted Cannibalization Rate
Big Block Sales: 50
Cannibalization Rate 60%
Regular Umbrella Unit Contribution: $10
“Cannibalized” Regular Unit Contribution: $6 (= 60% x $10)
Big Block Unit Contribution: $15
Weighted Big Block Unit Contribution: $9 (= $15 - $6)
Marginal Big Block contribution: $450 (50 units x $9
weighted margin)
Original Regular Umbrella Total Contribution: $1,000 (100 sales x $10)
Lois’ Total Monthly Contribution: $1450
Fair Share Draw
‘Fair Share Draw’ assumes that a new entrant to a marketplace will take
share from his competitors in direct proportion to their existing market
shares. Total market remains at 500 sales.
That means that Larry will take:
From Sue: 80% market share x 500 total sales x 10% cannib. rate = 40 sales
From Dave: 20% market share x 500 total sales x 10% cannib. rate = 10 sales
Therefore, the new market shares will be:
Sue: 400 – 40 = 360 sales, 72% market share
Dave: 100 – 10 = 90 sales, 18% market share
Larry: 50 sales, 10% market share
% Repeat
Purchasing
Customers
% Repeat Purchasing Customers = Awareness Rate X Availability (ACV %) X Trial Rate X Repeat Purchase Rate
Forecasted
Number of
“Triers” (#)
Forecasted Number of “Triers” (#) = Awareness rate (%) X ACV (%) X Trial rate (%) X Target market size (#)
Forecasted Trial
Volume (#)
Forecasted Trial Volume (#) = Number of Triers (#) X Units per Trial (#)
Repeat
Volume (#)
Repeat Volume (#) = Repeat rate (%) X “Triers” (#) X Repeat purchases per period (#) X Units per repeat purchase (#)
Forecasted
Volume (#)
Forecasted Volume (#) = Trial Volume (#) \+ Repeat Volume (#)
Forecasted
Volume
Forecasted Volume = target customers X awareness rate X ACV % X trial rate X ( units/trial purchase \+ repeat rate X repeat purchase/year X units/repeat purchase )
Numeric Distribution:
Numeric Distribution: a percentage measure of stores that stock a
given SKU or brand compared to the universe of stores in the relevant
market.
= (# stores that stock a brand or SKU) / (total stores in relevant market)
Numeric distribution = (stores carrying Madre’s) / (total # of stores)
All Commodity Volume (ACV)
All Commodity Volume (ACV): a percentage measure of the total
dollar volume of retail sales of stores stocking an SKU or brand versus
total dollar volume sales in all categories.
ACV (%) = (total sales of stores carrying a brand) / (total sales all stores)
% ACV = (total sales of stores carrying Madre’s) / (total sales all stores)
Product Category Volume (PCV)
Product Category Volume (PCV) represents the share of category
sales by the stores that stock your brand. Note that the term, Product
Category Volume, is not an industry standard.
PCV (%) = (category sales of stores carrying a brand) / (total category
sales for all stores)
% PCV = (tortilla sales of stores carrying Madre’s) / (tortilla sales all stores)
PCV Net of Out-of-Stocks
PCV Net of Out-of-Stocks:
the sum of the % PCV of each chain multiplied by (1-% OOS)
Total Sales (in $ or Units)
Total Sales (in $ or Units) = Baseline Sales + Incremental Sales
- where -
Baseline Sales = Expected sales results in the absence of any
marketing program or promotion
- and -
Incremental Sales = Sales “lift” attributable to marketing activities
Baseline Sales
Baseline Sales: Expected sales results in the absence of any
marketing program or promotion.
Incremental Sales
Incremental Sales: Sales “lift” attributable to marketing activities
Incremental Sales: Total Sales – Baseline Sales
OR
Incremental Sales from Advertising
+ Incremental Sales from Trade Promotion
+ Incremental Sales from Consumer Promotion
+ Incremental Sales from Other Marketing Activities
Lift (%)
Lift (%): a key metric in measuring the incremental sales generated
from a marketing program, as a percentage of baseline sales
Lift (%) = Incremental Sales ($,#) / Baseline Sales ($,#)
Cost of Incremental Sales ($)
Cost of Incremental Sales ($): Cost associated with an additional
unit of sales
Cost of Incremental Sales ($) = Marketing Spend ($) /
Incremental Sales ($,#)
Return on Marketing Investment (ROMI)
Return on Marketing Investment (ROMI) = a measure of the rate at
which spending on marketing contributes to profits
Return on Marketing Investment (ROMI) =
(Incremental Sales * Contribution Margin – Marketing Spending) /
Marketing Spending
Overall coupons
Coupon Redemption Rate: the percentage of distributed coupons or
rebates that are redeemed by consumers
Coupon Redemption Rate (%) = Coupons Redeemed (#) / Coupons Distributed (#)
Cost per Redemption ($) = Coupon Face Amount ($) + Redemption Charges ($)
Coupon Redemption Rate
Coupon Redemption Rate is a key metric in assessing the
effectiveness of a coupon distribution strategy, helping to determine if
the coupons are reaching those customers most likely to use them.
Cost per Redemption
Cost per Redemption helps measure the variable cost associated with
each coupon redeemed. Generally, coupon distribution costs are
considered to be fixed costs.
Pass-Through Percentage
Pass-Through Percentage is the portion of
the promotional value provided by a
manufacturer to a retailer or distributor that
ultimately reaches the end consumer.
Definition
Pass-Through Percentage (%) =
Value of Promotional Discounts Provided to Consumers by the Trade ($) /
Value of Promotional Discounts Provided to Trade by Manufacturer ($)
Percentage Sales on Deal
Percentage Sales on Deal tracks the percentage of sales that are
sold under a temporary discount of any kind.
Percentage Sales on Deal (%) = Sales with temporary discount / total sales.
Target Volume in Units
Target Volume in Units =
(Fixed Costs + Profit Objective) / (SP – VC)
Target Volume (units) = (FC + Profit Objective) / (SP - VC)
Target Volume (units) = (FC + Profit) / (SP - VC)
Target Volume in Dollars
Target Volume in Dollars =
(Fixed Costs + Profit Objective) / ((SP-VC) / SP)
Target Volume (Revs) = (FC + Profit Objective) / ((SP - VC) / SP)
Target Volume (Revs) = (FC + Profit) / ((SP - VC) / SP)
Target Revenues
Target Revenues = Unit Target Volume * Selling Price
