Review the calculations contained in the Marketing Arithmetic Calculations spreadsheet in this weeks Readings, which demonstrates how to arrive at the values

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  • Read the Star, Heskett, and Levitt article found in this week’s readings. At the end of the article, read the Brand X scenario contained within the Exercises (but do not answer the questions that follow).
  • Review the calculations contained in the Marketing Arithmetic Calculations spreadsheet in this weeks Readings, which demonstrates how to arrive at the values requested in questions 1 through 4 of the article.
  • Experiment with changing initial data values listed at the top of the spreadsheet, paying attention to the effects those changes have on the calculated values listed under each question.

 

Submit the completed Marketing Arithmetic Exercise Calculations spreadsheet. In addition, submit a separate Word document in which you answer the following questions:

  • If the retail price is fixed at $1.00, what effect does increasing the retail and wholesale margins have on the manufacturer’s selling price? Explain why this is the case.
  • Define unit contribution in your own words. Is a high or low unit contribution preferable for profitability? Justify your answer.
  • How do increases in the retail and wholesale margins (again, with a fixed retail price) affect the unit contribution? Be sure to explain why.
  • If you increase any of the fixed cost factors, what happens to 1) the number of units the company needs to sell to break even and 2) the market share necessary to break even? If fixed costs rise, is this good, bad, or of no importance? Explain your answer.
  • What change (increase or decrease) to the following factors increases the profit impact and why?
    • Retail margin/unit
    • Brand market share
    • Advertising budget
  • Many marketing decisions have multiple implications. For example, while increasing price improves profit per unit, too large a price increase may decrease unit sales, ultimately decreasing profits overall. Keeping this kind of tradeoff in mind, explain how changes to the three factors mentioned in the prior question could potentially conflict with one another in terms of strategy for increasing the profit impact.