Application of Marketing MathReference Case:--Basic Quantitative Analysis for marketingLow – Tech Marketing Math (Harvard Business School)

Presented by:--Aritra Banerjee (23/008)Saakshi Nayak (23/028)

Cost - Revenue Analysis

For the purpose marketing analysis of any product or services we need to have to determine :-- Price

( cost + margin)

Volume Distribution ( selling and distribution cost) Competitive forces

Cost- Types

1. Fixed cost : Remains constant irrespective of volume of production or salesa. Total fixed cost (TFC) TFC= K (K: constant)b. Average fixed cost ( TFC/ number of units produced or sold)

k

Pic source : http://www2.owen.vanderbilt.edu

Cost- Types

Variable cost: a cost that varies with the level of output.VC= f(q)

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Total Cost

Total Cost = Total Fixed Cost + Total Variable Cost = k + f(q)

Economics .about.com

Revenue and Profit

Sales (revenue)

xxxxxxx

Less: Variable cost

(xxxxx)

Contribution

xxxxxx

Less: Fixed Cost

(xxxxx)

Profit/loss

xxxxxx Economics .about.com

Break Even Point

The break-even point (BEP) is the point at which total cost and total revenue are equal. There is no profit no loss An indicative tool which helps in making marketing strategies.

Mathematically represented as:--

Break Even Volume = Total fixed cost

contribution per unit

ISO Profit Curve

2500

2000

1500

1000

500

2 4 68 10

Variable cost

ISO curve: same level of profit at every point of the

curve.

volu

me

price

Selling And Distribution Margin

Manufacturer’s margin($3.50) = Manufacturer's selling price to distributers($7.5) -

manufacturing

cost($40)

Wholesalers margin($1.20) = Wholesalers selling price to retailers($8.70) - price paid to

manufacturer($7.50)

Retailer’s margin = Retailer's selling price to consumers($10.00) - price paid to

wholesales($8.70)