Transcript Financial Aspects of Marketing Management
Financial Aspects of Marketing Management Graduate Marketing Certificate Program Chip Besio Cox School of Business
Relevant Accounting Concepts
Variable Costs
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Costs of Goods Sold
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Indirect Variable Costs
Fixed Costs
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Programmed Costs
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Committed Costs
Relevant Accounting Concepts
Relevant Costs
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Expected Future Marketing Related
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Vary According to Alternative Chosen
Sunk Costs
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Past Expenditures Irrelevant to Future Planning
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Research & Development Previous Advertising Expenditures
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Sunk Cost Fallacy
Relevant Accounting Concepts
Gross Margin
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Total Revenue - Total C.O.G.S.
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Unit Selling Price - Unit C.O.G.S.
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Expressed as Dollars or Percentage
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Can Be Impacted by a Change in:
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Volume C.O.G.S.
Selling Price Mix of Products Sold
Relevant Accounting Concepts
Trade Margin
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Each Level of Distribution Chain
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“Markup or Mark-On”
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Usually Determined on Selling Price
Net Profit Margin
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Sales Revenue less:
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C.O.G.S.
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Other Variable Costs Fixed Costs
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Equal Net Profit Margin (Before Taxes)
Contribution Analysis
Break Even Analysis
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Total Revenue = Total Variable Costs + Total Fixed Costs
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Break Even = Total $ Fixed Costs / Unit Selling Price - Unit Variable Costs
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Unit Contribution= Unit Selling Price Unit Variable Cost/Unit Selling Price
Contribution Analysis
Sensitivity Analysis
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Unit Contribution Has Many Applications
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Vary Each Element to Look at Alternative Strategies
Contribution Analysis
Sensitivity Analysis
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Evaluate Each Product in Mix
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Managers Should Evaluate Each Element:
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Unit Price Sales Volume Unit Variable Costs Total Variable Costs Unit Contribution Total Contribution Net Profit
Contribution Analysis
Cannibalization Assessment
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New Products May Attract Existing Product’s Customers
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Determine the Financial Impact of New Product on Existing Products
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Compare Current Product Gross Margin against Gross Margin of New Product Mix
Other Financial Concepts
Pro-Forma Income Statements
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Anticipated Revenues vs. Related Costs
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Based on Managers Strategic Scenarios
Other Financial Concepts
Market Share
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Market Share is your company’s piece of the pie
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Market Share = Your Company’s Sales/Total Sales In Your Category