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Flashcards in Marketing Math Deck (10):

unit contribution

=revenue per unit - variable cost per unit

-VC = changes w/volume of **production** (manufacturing, shipping, sales commissions)
-FC = exec salaires, rent


contribution margin

= unit contribution / revenue per unit

-relative measure of assessing unit contribution compared to selling price, expressed as %
-you can analyze margins thru value chain


break-even volume

= fixed costs / unit contribution

-BEV is the number of units you need to sell to cover total fixed costs
-use to make decisions about new investments


market share

*generally refers to sales
1. = firm sales / total market sales (sales/revenue market share,w/in product category)
2. = firm units sold / total market units sold (volume market share)
3. = firm customers / total customers (customer market share)


profit impact

profit = (unit contribution * units sold) - FC

-impact of a product on company profits
-you can compute #units that must be made and sold to achieve specific profit target


CLV (conceptually)

*value of the entire stream of purchases that the customer would make over a lifetime of patronage

-tells us whether to acquire/retain/let go of an individual customer, an entire customer base, or company
-NPV of all future streams of profits that a customer generates over the life of his biz w/firm


simplified CLV formula

=annual contribution per customer * years as a customer
=unit contribution * units per customer per year * years as a customer

-annual contribution: annual ave amount typical customer would spend with business, with expenses subtracted
-years as customer: typical length of time customer spends w/co (could result in diff customer groups)

-doesn't account for discounting profits over time, segments w/diff values and lifetimes, or retention rate (mortality/attrition)
-retention has biggest impact for % change


expanded CLV formula

= m * (r / 1+i-r) - AC
= profit margin * margin multiplier

m= margin
i= discount rate
r= retention rate
AC = acquisition cost


sunk costs

-when money has already been spent
-usually market research, R&D expenses
-*can't* be a factor in your decisions moving forward bc no matter the course of action, the money is gone and unrecoverable


return on marketing investment

=incremental gain from investment / cost of investment

-measure of efficiency, can be expressed in terms of NI, rev, market share, CM