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Mkt > Session 7 > Flashcards

Session 7 Flashcards

1
Q

What is market share?

A

% of total market your brand controls

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2
Q

Two ways to calculate it?

A
  1. By sales
  2. By units
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3
Q

What is market share formula? (2 types)

A
  1. Mkt sh = Your brand’s sales in $/ Total sales for all brands in $
  2. = Your brand’s sales in units sold/ Total sales for all brands in units sold
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4
Q

When is step-down analysis used?

A

When we need to estimate market share but don’t have all of the necessary information available to us

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5
Q

How does step-down analysis work?

A

Relies on data market proportions to help estimate market share

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6
Q

Costs per unit =

A

Fixed costs + variable costs

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7
Q

What are fixed costs?

A

Costs that do not vary with how much units you make (e.g.: lease for factory, product R&D)

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8
Q

What are variable costs?

A

Costs that vary with level of production (COGS)

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9
Q

What is contribution margin? (2)

A
  1. How much money from the sale is left after accounting for variable costs
  2. Money that can be used to cover (contribute to) paying off the fixed costs we invested in
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10
Q

What is contribution margin % formula?

A

Contribution margin % = (Price per unit - Variable costs per unit)/Price per unit

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11
Q

What is profit? what is it also called?

A
  • How much money left after all costs (= price - fixed c - variable c)
  • Also called profit contribution
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12
Q

Profit margin shown on per unit basis on slides

A

.

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13
Q

What is markup on costs?

A

How much price increased (marked up) by the retailer, relative to what they paid the wholesale distributer (aka their COGS)

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14
Q

What is markup on costs % formula?

A

Markup on costs % = (price per unit - variable costs per unit)/variable costs per unit

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15
Q

What is break even?

A

Point at which cost and revenue are equal (profit = 0)

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16
Q

What is breakeven (unit) formula? Break Even (Units) =

A

(Total fixed costs)/(Price (unit) - VC (unit))

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17
Q

What is breakeven ($) formula? Break Even ($) =

A

(Total fixed costs)/(1-(VC (units)/ P (units)))

18
Q

What does price elasticity measure?

A

Measures how responsive demand is to change in price

19
Q

What is price elasticity formula?

A

PE = (% change in demand/% change in price)

Where % change = (New-Old)/Old

20
Q

When in price considered inelastic?

A

When PE < 1

21
Q

When is price considered elastic?

A

When PE > 1

22
Q

When do we say demand is unit elastic?

A

PE = 1

23
Q

What type of elasticity is PE = 1

A

Unit elastic

24
Q

What is an inelastic demand?

A

Decrease in price yields a less than proportional increase in demand

25
Q

How do price changes affect profit when prices are inelastic?

A

Lowering price lowers profit, raising prices increases profit

26
Q

Example of inelastic-demand products (3)

A

Gasoline, tap water, strong brands

27
Q

What is an elastic price?

A

Decrease in price yields more than proportional increase in demand.

28
Q

How do price changes affect profit when prices are elastic?

A

Lowering prices raises profit, raising price lowers profit

29
Q

Example of elastic-demand products (3)

A

Beef, commodities like printer paper, products with weak brands

30
Q

What is a unit-elasticity?

A

Decrease in price yields a proportional increase in demand

31
Q

How do price changes affect profit when unit-elastic?

A

Changing price has no impact on profits

32
Q

What is cross-price elasticity?

A

Measures the effect of a price change of one product on the demand change of a second product

33
Q

Link between prices of substitute products?

A

Price increase in one product will lead to an increase in demand for the other product

34
Q

Link between prices of complementary products?

A

Price increase in one product will result in a decrease in demand for the other (e.g., razors and blades, hockey sticks and hockey pucks, etc.)

35
Q

Cross price elasticity formula?

A

PE = % change demand of P2/ % change price for P1

% change = (New - Old)/Old

36
Q

Is CPE positive of negative for complementary products?

A

negative

37
Q

Is CPE positive of negative for substitute products?

A

positive

38
Q

What are price chains?

A

Tools for seeing how prices increase, and contribution margins are split, as product pass trough intermediaries (distributors and retailers)

39
Q

What is % contribution margin formula? % contribution margin =

A

(price - VC)/price

40
Q

What is % markup on cost formula? =% Markup on Cost =

A

(Price-VC)/VC

Mkt (14 decks)

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