Marketing Math

Question 1

Evolution of Marketing

Answer 1

Product Orientation –> Sales Orientation –> Competitor Orientation –> Customer Centricity/Value Marketing Era

Question 2

Marketing Concept

Answer 2

Desires of customers should guide actions. It is product and demand oriented.

Question 3

What does Customer Centricity involve?

Answer 3

Value, service, solving customer problems, loyalty, long-term approach, customer lifetime value.

Question 4

What are the Value Imperatives?

Answer 4

Market-driven organization

• Organizational Culture
• Superior ability to understand, attract, and keep valuable customers

Delivering Customer Value

• Creating compelling customer value proposition and innovation
• Satisfaction and loyalty
• Managing for retention/relationships (CLV)

Brand Equity

• Managing reputation
• Development of distinctive and hard to imitate resources - innovation, product portfolios, market space
• Contract/promise

Question 5

5 Cs:

Answer 5

Involved in situation analysis. Strategic.

• Context
• Competitors
• Collaborators
• Consumers
• Company

Question 6

4Ps

Answer 6

“Marketing Mix.” Implementation. Tactical.

• Price
• Product
• Promotion
• Place

Question 7

SWOT

Answer 7

• Strengths
• Weaknesses
• Opportunities
• Threats

Question 8

Unit Contribution

Answer 8

Unit Contribution = Revenue per unit - Variable Costs per Unit

Question 9

Profit Margin

Answer 9

Margin = Unit Contribution / Revenue per Unit

Question 10

Margin Analysis

Answer 10

Manufacturer Variable Costs (costs of production) –> Manufacturer Price (wholesale price) –> Retail Price (price charged to consumer)

Question 11

Break-Even Volume

Answer 11

Break-Even Volume = Fixed Costs / Unit Contribution

Question 12

Market Share

Answer 12

Generally refers to sales, but it can have multiple definitions:

• Sales/Revenue Market Share
• Volume Market Share
• Customer Market Share

Question 13

Sales/Revenue Market Share

Answer 13

The percentage of sales accounted for by that firm, within the product category.

Firm Sales / Total Market Sales

Question 14

Volume Market Share

Answer 14

The percentage of units accounted for by that firm, within the product category.

Firm Units Sold / Total Market Units Sold

Question 15

Customer Market Share

Answer 15

The percentage of customers the firm has relative to the total customers.

Firms Customers / Total Customers

Question 16

Profit Impact

Answer 16

Impact of a product on company profits; using this expression one can also compute the number of units that must be made and sold to achieve a specific profit target.

Profit = (Unit Contribution * Units Sold) - Fixed Costs

Question 17

Customer Lifetime Value

Answer 17

CLV = Annual Profit per Customer * Years as Customer

More complex version:

CLV = Annual Margin * Retention Rate / (1 + discount rate - retention rate)

Annual Profit per Customer: average amount that a typical customer would spend with the business, with expenses subtracted: Unit Contribution * Units per customer per year

Question 18

Premium

Answer 18

The % of manufacturer price (retailer cost) that is added to get to the retail price (different from margin)

Question 19

Depreciation

Answer 19

A method for accounting large fixed costs over time. Straight-line depreciation simply divides the total investment by the years it should be depreciated across.

Question 20

Return on Investment

Answer 20

Ratio of net profit to the investment used to make the net profit.

Question 21

Depreciation

Answer 21

A method for accounting large fixed costs over time. Straight-line depreciation simply divides the total investment by the years it should be depreciated across.

Question 22

Return on Investment

Answer 22

Ratio of net profit to the investment used to make the net profit.