Marketing

Question 1

Calculating Margin

Answer 1

Selling Price = Cost to Produce + Margin
SP = Cost + Margin
Margin = Customer’s Purchase Price - Cost to Produce or Acquire
Margin = SP - Cost
Margin (%) = Selling Price (100%) - Cost (%)

Question 2

Margin %

Answer 2

Margin % = (Selling Price – Cost) / Selling Price
% Margin = (SP – Cost) / SP

% Margin = $ Margin / SP

Question 3

Calculating Selling Prices Across the Channel

Answer 3

Selling Price = Cost / (1 - % Margin)

Question 4

Calculating Selling Prices Across the Channel - Chaining Backwards

Answer 4

Cost (or supplier selling price) = Selling Price * (1 - % Margin)

Question 5

Price Def

Answer 5

Revenues = Units Sold x Price.

Question 6

Unit Market Share

Answer 6

Unit Market Share = Unit Sales / Total Market Unit Sales

Question 7

Revenue Market Share

Answer 7

Revenue Market Share = Sales Revenue / Total Market Sales Revenue

Question 8

Market Penetration

Answer 8

Market Penetration = Customers who purchased a product in the category /
Total population

Question 9

Relative Market Share

Answer 9

Relative Market Share =
Brand’s Market Share ($ or Units) /
Largest Competitor’s Market Share ($ or Units)

*Note that this is equivalent to Brand Sales / Largest Competitor Sales

Question 10

Total Costs

Answer 10

Total Costs = Total Fixed Costs + Total Variable Costs

Total Costs = FC + VC = Fixed Costs + (Unit Var. Cost * Units Sold)

Question 11

Unit Variable Cost

Answer 11

Unit Variable Cost = Total Variable Costs for 1 Unit of Production

Question 12

Total Variable Costs

Answer 12

Total Variable Costs = Unit Variable Costs * Units Sold

Question 13

Average Costs

Answer 13

Average Costs = Total Costs / Units Sold

Question 14

Total Revenues

Answer 14

Total Revenues = Selling Price * Units Sold

Question 15

Total Contribution

Answer 15

Total Contribution = Total Revenues – Total Variable Costs

Total Contribution = Unit Contribution * Units Sold

Question 16

Profit (or Loss if negative)

Answer 16

Profit (or Loss if negative) = Total Revenues – Total Costs

Profit = Total Contribution – Fixed Costs

Question 17

Unit Contribution

Answer 17

Unit Contribution = Selling Price per unit – Variable Cost per unit

Unit Contribution = SP per unit – VC per unit

Note: Unit Contribution is significant because it measures a net inflow of funds to a company as additional units are sold.

Question 18

Contribution Margin %

Answer 18

Contribution Margin % = Unit Contribution / Selling Price per unit

Contribution Margin % = Contribution / Selling Price

Question 19

Breakeven

Answer 19

total revenues = total costs (Variable and Fixed)

Question 20

Two types of breakeven analysis

Answer 20

Unit Breakeven = How many unit sales need to be made to cover fixed costs?

Revenue Breakeven = What level of sales are needed to cover fixed costs?

Question 21

Unit Breakeven

Answer 21

Unit Breakeven = Fixed Costs / Unit Contribution

Unit Breakeven = Fixed Costs / (Selling Price – Variable Cost)

BE (units) = Fixed Costs / (Selling Price – Variable Cost)
or Fixed Costs / Unit Margin

Question 22

Revenue Breakeven

Answer 22

Revenue Breakeven = Fixed Costs / Contribution Margin %

Revenue Breakeven = Fixed Costs / (Unit Contribution / Selling Price)

BE ($) = Fixed Costs / ((Selling Price – Variable Cost) / Selling Price)
or Fixed Costs / Margin %

Question 23

Converting Breakeven

Answer 23

Revenue Breakeven = Breakeven in units * Unit Price

Breakeven in Units = Dollar Breakeven / Unit Price

NOTE: With either measure it is simple to calculate the other, using price to convert.

Revenue Breakeven = Breakeven in Units * Unit Price

Breakeven in Units = Revenue Breakeven / Unit Price

Question 24

Target Profit Breakeven

Answer 24

Target Profit Breakeven = (Fixed Costs+Target Profit) / Contrib Margin %

Question 25

cannibalization rate

Answer 25

The Big Block cannibalization rate would be calculated as follows: = (Regular Umbrella purchasers opting for Big Block) / (Total Big Block sales)

Question 26

Weighted Cannibalization Rate

Answer 26

Big Block Sales: 50 Cannibalization Rate 60% Regular Umbrella Unit Contribution: $10 “Cannibalized” Regular Unit Contribution: $6 (= 60% x $10) Big Block Unit Contribution: $15 Weighted Big Block Unit Contribution: $9 (= $15 - $6) Marginal Big Block contribution: $450 (50 units x $9 weighted margin) Original Regular Umbrella Total Contribution: $1,000 (100 sales x $10) Lois’ Total Monthly Contribution: $1450

Question 27

Fair Share Draw

Answer 27

‘Fair Share Draw’ assumes that a new entrant to a marketplace will take share from his competitors in direct proportion to their existing market shares. Total market remains at 500 sales. That means that Larry will take: From Sue: 80% market share x 500 total sales x 10% cannib. rate = 40 sales From Dave: 20% market share x 500 total sales x 10% cannib. rate = 10 sales Therefore, the new market shares will be: Sue: 400 – 40 = 360 sales, 72% market share Dave: 100 – 10 = 90 sales, 18% market share Larry: 50 sales, 10% market share

Question 28

% Repeat Purchasing Customers

Answer 28

``` % Repeat Purchasing Customers = Awareness Rate X Availability (ACV %) X Trial Rate X Repeat Purchase Rate ```

Question 29

Forecasted Number of “Triers” (#)

Answer 29

``` Forecasted Number of “Triers” (#) = Awareness rate (%) X ACV (%) X Trial rate (%) X Target market size (#) ```

Question 30

Forecasted Trial | Volume (#)

Answer 30

``` Forecasted Trial Volume (#) = Number of Triers (#) X Units per Trial (#) ```

Question 31

Repeat | Volume (#)

Answer 31

``` Repeat Volume (#) = Repeat rate (%) X “Triers” (#) X Repeat purchases per period (#) X Units per repeat purchase (#) ```

Question 32

Forecasted | Volume (#)

Answer 32

``` Forecasted Volume (#) = Trial Volume (#) + Repeat Volume (#) ```

Question 33

Forecasted | Volume

Answer 33

``` Forecasted Volume = target customers X awareness rate X ACV % X trial rate X ( units/trial purchase + repeat rate X repeat purchase/year X units/repeat purchase ) ```

Question 34

Numeric Distribution:

Answer 34

Numeric Distribution: a percentage measure of stores that stock a given SKU or brand compared to the universe of stores in the relevant market. = (# stores that stock a brand or SKU) / (total stores in relevant market) Numeric distribution = (stores carrying Madre’s) / (total # of stores)

Question 35

All Commodity Volume (ACV)

Answer 35

All Commodity Volume (ACV): a percentage measure of the total dollar volume of retail sales of stores stocking an SKU or brand versus total dollar volume sales in all categories. ACV (%) = (total sales of stores carrying a brand) / (total sales all stores) % ACV = (total sales of stores carrying Madre’s) / (total sales all stores)

Question 36

Product Category Volume (PCV)

Answer 36

Product Category Volume (PCV) represents the share of category sales by the stores that stock your brand. Note that the term, Product Category Volume, is not an industry standard. PCV (%) = (category sales of stores carrying a brand) / (total category sales for all stores) % PCV = (tortilla sales of stores carrying Madre’s) / (tortilla sales all stores)

Question 37

PCV Net of Out-of-Stocks

Answer 37

PCV Net of Out-of-Stocks: | the sum of the % PCV of each chain multiplied by (1-% OOS)

Question 38

Total Sales (in $ or Units)

Answer 38

Total Sales (in $ or Units) = Baseline Sales + Incremental Sales - where - Baseline Sales = Expected sales results in the absence of any marketing program or promotion - and - Incremental Sales = Sales “lift” attributable to marketing activities

Question 39

Baseline Sales

Answer 39

Baseline Sales: Expected sales results in the absence of any | marketing program or promotion.

Question 40

Incremental Sales

Answer 40

Incremental Sales: Sales “lift” attributable to marketing activities Incremental Sales: Total Sales – Baseline Sales OR Incremental Sales from Advertising + Incremental Sales from Trade Promotion + Incremental Sales from Consumer Promotion + Incremental Sales from Other Marketing Activities

Question 41

Lift (%)

Answer 41

Lift (%): a key metric in measuring the incremental sales generated from a marketing program, as a percentage of baseline sales Lift (%) = Incremental Sales ($,#) / Baseline Sales ($,#)

Question 42

Cost of Incremental Sales ($)

Answer 42

Cost of Incremental Sales ($): Cost associated with an additional unit of sales Cost of Incremental Sales ($) = Marketing Spend ($) / Incremental Sales ($,#)

Question 43

Return on Marketing Investment (ROMI)

Answer 43

Return on Marketing Investment (ROMI) = a measure of the rate at which spending on marketing contributes to profits Return on Marketing Investment (ROMI) = (Incremental Sales * Contribution Margin – Marketing Spending) / Marketing Spending

Question 44

Overall coupons

Answer 44

Coupon Redemption Rate: the percentage of distributed coupons or rebates that are redeemed by consumers ``` Coupon Redemption Rate (%) = Coupons Redeemed (#) / Coupons Distributed (#) ``` ``` Cost per Redemption ($) = Coupon Face Amount ($) + Redemption Charges ($) ```

Question 45

Coupon Redemption Rate

Answer 45

Coupon Redemption Rate is a key metric in assessing the effectiveness of a coupon distribution strategy, helping to determine if the coupons are reaching those customers most likely to use them.

Question 46

Cost per Redemption

Answer 46

Cost per Redemption helps measure the variable cost associated with each coupon redeemed. Generally, coupon distribution costs are considered to be fixed costs.

Question 47

Pass-Through Percentage

Answer 47

Pass-Through Percentage is the portion of the promotional value provided by a manufacturer to a retailer or distributor that ultimately reaches the end consumer. Definition Pass-Through Percentage (%) = Value of Promotional Discounts Provided to Consumers by the Trade ($) / Value of Promotional Discounts Provided to Trade by Manufacturer ($)

Question 48

Percentage Sales on Deal

Answer 48

Percentage Sales on Deal tracks the percentage of sales that are sold under a temporary discount of any kind. Percentage Sales on Deal (%) = Sales with temporary discount / total sales.

Question 49

Target Volume in Units

Answer 49

Target Volume in Units = (Fixed Costs + Profit Objective) / (SP – VC) Target Volume (units) = (FC + Profit Objective) / (SP - VC) Target Volume (units) = (FC + Profit) / (SP - VC)

Question 50

Target Volume in Dollars

Answer 50

Target Volume in Dollars = (Fixed Costs + Profit Objective) / ((SP-VC) / SP) Target Volume (Revs) = (FC + Profit Objective) / ((SP - VC) / SP) Target Volume (Revs) = (FC + Profit) / ((SP - VC) / SP)

Question 51

Target Revenues

Answer 51

Target Revenues = Unit Target Volume * Selling Price