Cost Based Analysis of Marketing Ratios

Transcription

1 Cost Based Analysis of Marketing Ratios Ted Mitchell Cost Based 2 operating statements Competitive Based 3 External 4 information Customer Based 5 External and Customer 6 information Cost Based Simple Ratios 2 operating statements Competitive Based 3 External 4 information Customer Based 5 External and Customer 6 Two or more information

2 Operating Ratios Return on Investment = ROI = Z/I Return on Sales = ROS = Z/R Markup on Price = Mp = (P-V)/P or G/R Mkting Return on Sales (Efficiency) = NMC/R Profit to Mkting Effort (Productivity) = NMC/T Revenue to Mkting (Effectiveness) = R/T Units per $,000 (Effectiveness) = Q/T BEQ for a $,000 = $,000/(Dollar markup) Promotion to Sales (Budget Control) = T/R Ratios Imply Definitions of Productivity Efficiency Effectiveness Sensitivity Relativity Rates, Speeds, Velocity, Work Ratios Also Imply Relationships 2

3 Return on Investment = ROI = Z/I Profit = ROI x Investment If my ROI is 25% and I increase my Profit investment by $,000, then how much more profit do I earn? Profit = 0.25($,000) = $250 Investment Return on Investment = ROI = Z/I Profit = ROI x Investment If my ROI is 25% and I increase my investment by $,000, then how much more profit do I earn? Profit = 0.25($,000) = $250 Return on Investment = ROI = Z/I Profit = ROI x Investment If my ROI is 25% and I increase my investment by $,000, then how much more profit do I earn? Profit = 0.25($,000) = $250 3

4 Return on Sales ROS Efficiency Return on Sales = ROS = Z/R Profit = ROS x Sales Revenue If my ROS is 0% and I increase my Revenues by $,000, then how much more profit do I earn? Profit = 0.0($,000) = $00 Markup on Price or Gross Profit to Revenue Efficiency 4

5 Markup = Mp = (P-V)/P or G/R Gross Profit = Mp x Sales Revenue If my Markup is 40% and I increase my Revenues by $,000, then how much more gross profit do I earn? Gross Profit = 0.40($,000) = $400 Quantity Sold per $000 Promotion Marketing Effectiveness Sales per $,000 = Quantity/$,000 Units Sold = Units/T x T (in thousands) If my sales per thousand ratio is 50 units and I increase my Promotion by $,000, then how many more units do I sell? Units Sold = (50 per $,000)($,000) Units Sold = 50 Units 5

6 Breakeven Sales volume for $,000 Breakeven for $,000 = BEQ BEQ = ($,000 in promotion)/(dollar Markup) If I increase my Promotion by $,000, then how many more units do I need to sell to breakeven if my markup is $8? BEQ = $,000 / $8 = 25 units Relationships Work Together 6

7 Sales per $000 and BEQ for $000 If I can sell 50 units for a $,000 in promotion And I need 25 units to breakeven on a $,000 investment, then should I invest another $,000? YES! Cost Based Ratios Markup on Price (Efficiency), Mp Return on Sales (Efficiency), ROS Promotion to Revenue (Budget Control), T/R Breakeven Quantity per $000, BEQ Units Sold per $,000 (Effectiveness), Q/T Breakeven Price, BEP = Average Cost per unit =(VQ+T)/Q Net Mkting Profit to Expense (Productivity) = NMC/T Marketing Return on Sales (Efficiency), MROS = NMC/R Cost Based Simple Ratios 2 operating statements Competitive Based 3 External 4 information Customer Based 5 External and Customer 6 Two or more information 7

8 Cost Based 2 operating statements Competitive Based 3 External 4 information Customer Based 5 External and Customer 6 information Any Questions 8