Financial Aspects of Marketing Management Graduate Marketing Certificate Program Chip Besio Cox School of Business

Relevant Accounting Concepts 4 Variable Costs –Costs of Goods Sold –Indirect Variable Costs 4 Fixed Costs –Programmed Costs –Committed Costs

Relevant Accounting Concepts 4 Relevant Costs –Expected Future Marketing Related –Vary According to Alternative Chosen 4 Sunk Costs –Past Expenditures Irrelevant to Future Planning Research & Development Previous Advertising Expenditures –Sunk Cost Fallacy

Relevant Accounting Concepts 4 Gross Margin –Total Revenue - Total C.O.G.S. –Unit Selling Price - Unit C.O.G.S. –Expressed as Dollars or Percentage –Can Be Impacted by a Change in: Volume C.O.G.S. Selling Price Mix of Products Sold

Relevant Accounting Concepts 4 Trade Margin –Each Level of Distribution Chain –“Markup or Mark-On” –Usually Determined on Selling Price 4 Net Profit Margin –Sales Revenue less: C.O.G.S. Other Variable Costs Fixed Costs –Equal Net Profit Margin (Before Taxes)

Contribution Analysis 4 Break Even Analysis –Total Revenue = Total Variable Costs + Total Fixed Costs –Break Even = Total $ Fixed Costs / Unit Selling Price - Unit Variable Costs –Unit Contribution= Unit Selling Price - Unit Variable Cost/Unit Selling Price

Contribution Analysis 4 Sensitivity Analysis –Unit Contribution Has Many Applications –Vary Each Element to Look at Alternative Strategies

Contribution Analysis 4 Sensitivity Analysis –Evaluate Each Product in Mix –Managers Should Evaluate Each Element: Unit Price Sales Volume Unit Variable Costs Total Variable Costs Unit Contribution Total Contribution Net Profit

Contribution Analysis 4 Cannibalization Assessment –New Products May Attract Existing Product’s Customers –Determine the Financial Impact of New Product on Existing Products –Compare Current Product Gross Margin against Gross Margin of New Product Mix

Other Financial Concepts 4 Pro-Forma Income Statements –Anticipated Revenues vs. Related Costs –Based on Managers Strategic Scenarios

Other Financial Concepts 4 Market Share –Market Share is your company’s piece of the pie –Market Share = Your Company’s Sales/Total Sales In Your Category