Session 7 Flashcards
(40 cards)
What is market share?
% of total market your brand controls
Two ways to calculate it?
- By sales
- By units
What is market share formula? (2 types)
- Mkt sh = Your brand’s sales in $/ Total sales for all brands in $
- = Your brand’s sales in units sold/ Total sales for all brands in units sold
When is step-down analysis used?
When we need to estimate market share but don’t have all of the necessary information available to us
How does step-down analysis work?
Relies on data market proportions to help estimate market share
Costs per unit =
Fixed costs + variable costs
What are fixed costs?
Costs that do not vary with how much units you make (e.g.: lease for factory, product R&D)
What are variable costs?
Costs that vary with level of production (COGS)
What is contribution margin? (2)
- How much money from the sale is left after accounting for variable costs
- Money that can be used to cover (contribute to) paying off the fixed costs we invested in
What is contribution margin % formula?
Contribution margin % = (Price per unit - Variable costs per unit)/Price per unit
What is profit? what is it also called?
- How much money left after all costs (= price - fixed c - variable c)
- Also called profit contribution
Profit margin shown on per unit basis on slides
.
What is markup on costs?
How much price increased (marked up) by the retailer, relative to what they paid the wholesale distributer (aka their COGS)
What is markup on costs % formula?
Markup on costs % = (price per unit - variable costs per unit)/variable costs per unit
What is break even?
Point at which cost and revenue are equal (profit = 0)
What is breakeven (unit) formula? Break Even (Units) =
(Total fixed costs)/(Price (unit) - VC (unit))
What is breakeven ($) formula? Break Even ($) =
(Total fixed costs)/(1-(VC (units)/ P (units)))
What does price elasticity measure?
Measures how responsive demand is to change in price
What is price elasticity formula?
PE = (% change in demand/% change in price)
Where % change = (New-Old)/Old
When in price considered inelastic?
When PE < 1
When is price considered elastic?
When PE > 1
When do we say demand is unit elastic?
PE = 1
What type of elasticity is PE = 1
Unit elastic
What is an inelastic demand?
Decrease in price yields a less than proportional increase in demand
