Math

Question 1

Customer value is economic, psychological, functional

Answer 1

Economic: max price willing to pay, based on total life cycle cst, compared to existing/competing products
Functional: Fishbein’s multicast tribute model of importance and perception of product and it’s attributes

Question 2

Marketing cares about customer value and loyalty. New customers are expensive

Answer 2

Base profit: profit margin from average customers is stable
Revenue growth: increase purchase questions over time
Cost savings: existing cost less than new, existing have better knowledge
Referrals: positive word of mouth

Question 3

Operating ratios

Answer 3

Gross margin %: gross margin/net sales
Net profit %: net profit/net sales
Operating expenses %: total expenses/ net sales
Inventory turnover: COGS/ average inventory cost

Question 4

Market potential “upper limit of demand”

Answer 4

Number of buyers x quantity purchased by average buyer per year x price of an average unit

Or

Chain ratio method
Base number x adjusting %

Question 5

Margin, markup, break even

Answer 5

Margin: (price - vc)/price
Contribution per unit: price -vc

Markup: contribution/vc

Break even: point here total contribution=FC
%markup on cost, or price: markup/cost or price
Mark-up price: unit cost/(1-desired return on sales)