The Marketing Process
Basic Quantitative Analysis for Marketing
Break-even Analysis
Fixed Cost – costs that remain constant over a range of activity irrespective of the quantity produced
• ex: rent, insurance, depreciation, office overheads
Variable Cost – costs that vary directly with the quantity produced
• ex: direct labor, direct materials, sales commissions
Break-Even Point – the point of production at which Total Revenue = Total Cost
Total Revenues = P X Q
Total Cost = TFC + TVC
Total Variable Cost (TVC) = VC/unit X Q
Contribution Margin (CM) = P – VC/unit
Total Contribution = (P – VC/unit) X Q
BEP: BEQ = TFC/CM
Break-Even Sales: BE$ = BEQ X P
BEP w/ profit goal = TFC + Profit Goal/CM
Bross Cord calculations
Given: Price gives 150% markup on variable costs
Variable Cost: P = 2.5VC → VC = 0.4P
Contribution Margin: CM = P – VC → P – 0.4P = 0.6P
Fixed Costs: Salesperson $20,000 Trade Journal $2,500 Trade Promotion $465 Samples $750 Total Fixed Costs $23,715
BEQ = TFC/CM = 23,715/0.6P = 39,525/P
Break-Even Sales Revenue: BE$ = (39,525/P)*P = $39,525
Estimate for growth of sales:
(sales in future period – sales in current period) / sales in current period
CHAPTER 1
Marketing: Creating & Capturing Customer Value
Marketing – the process by which companies create value for customers and build strong customer relationships in order to capture value from the customers in return
• Marketing is managing profitable customer relationships o Attracting new customers o Retaining and growing current customers
The Marketing Process (a five-step model)
1. Understand the marketplace and customer needs and wants
2. Design a customer-driven marketing strategy
3. Construct an integrated marketing program that delivers superior value
4. Build profitable relationships and create customer delight
5. Capture value from customers and create profits and customer equity
1. Understand the marketplace and customer needs and
Break-even Analysis
Fixed Cost – costs that remain constant over a range of activity irrespective of the quantity produced
• ex: rent, insurance, depreciation, office overheads
Variable Cost – costs that vary directly with the quantity produced
• ex: direct labor, direct materials, sales commissions
Break-Even Point – the point of production at which Total Revenue = Total Cost
Total Revenues = P X Q
Total Cost = TFC + TVC
Total Variable Cost (TVC) = VC/unit X Q
Contribution Margin (CM) = P – VC/unit
Total Contribution = (P – VC/unit) X Q
BEP: BEQ = TFC/CM
Break-Even Sales: BE$ = BEQ X P
BEP w/ profit goal = TFC + Profit Goal/CM
Bross Cord calculations
Given: Price gives 150% markup on variable costs
Variable Cost: P = 2.5VC → VC = 0.4P
Contribution Margin: CM = P – VC → P – 0.4P = 0.6P
Fixed Costs: Salesperson $20,000 Trade Journal $2,500 Trade Promotion $465 Samples $750 Total Fixed Costs $23,715
BEQ = TFC/CM = 23,715/0.6P = 39,525/P
Break-Even Sales Revenue: BE$ = (39,525/P)*P = $39,525
Estimate for growth of sales:
(sales in future period – sales in current period) / sales in current period
CHAPTER 1
Marketing: Creating & Capturing Customer Value
Marketing – the process by which companies create value for customers and build strong customer relationships in order to capture value from the customers in return
• Marketing is managing profitable customer relationships o Attracting new customers o Retaining and growing current customers
The Marketing Process (a five-step model)
1. Understand the marketplace and customer needs and wants
2. Design a customer-driven marketing strategy
3. Construct an integrated marketing program that delivers superior value
4. Build profitable relationships and create customer delight
5. Capture value from customers and create profits and customer equity
1. Understand the marketplace and customer needs and