Download C + M = S Marketing Calculation Template

1
MARKETING STRATEGY PRICE & FINANCIAL
ANALYSIS CALCULATIONS GUIDE
[Dr. Carter]
A. Marketing Planning Begins & Ends with VALUE and in the Business Organization it is Processed by the VALUE CHAIN
B. The VALUE CHAIN Charts “Inbound/Input,” “Operations/Throughput,” and “Outbound/Output” VALUE Flows
C. Marketing Numbers are PER UNIT Because Marketing Plans “Customer-Oriented” and Customers Pay Per-Unit Prices
D. This VALUE CREATING Marketing Plan Calculation Method Combines KNOWLEDGE & NUMBERS
PER UNIT CALCULATIONS
THROUGHPUT PROCESSES
CREATE MARGINAL VALUE
INPUT SUPPLIES
CREATE COSTS
“C”
Material
+
Labor
[“Product/Variable” Costs]
“M”
[“MARK-UP”]
Operating
&
Marketing
Expense
OUTPUT OFFERINGS
CREATE SALES REVENUE
=
“S”
CUSTOMERS PAY PRICE
Net
Profit
&
Return
E. When we See the Simple Formula “C + M = S” as a Code for the Three Stages of VALUE CREATION it Aids Planning
F. By Setting Up a Table Based on Marketing Planning Assumptions We Can Derive Both Per Unit & Total Unit Financial Analysis
1
2
MARKETING STRATEGY PRICE & FINANCIAL
ANALYSIS CALCULATIONS GUIDE
[Dr. Carter]
Industry Standard Labor Wage
20% of Sales
@ $1.50
1. Marketing Assumptions
PRODUCT: Merchandise Average
2. Percentages (%)
5%
20%
15%
50%
+
C
3. Formula
Investors
Expect 30%
Return
4. Sub-Formula
Mat’l.
5. Dollars ($)
$2 - $1.50= 20% X $10=
$0.50
$2
Labor
80%
$1.50
30%
M
Op. Ex.
50% X $10= 80% X $10= $8
$5
{also $5+$3=$8}
Customers &
Competitive
Market Limits
Price to $10
100%
=
S
Profit
$3
$10
NOTE: Given figures based on “Marketing Assumptions” in RED & Calculated figures derived using simple algebra in GREEN
G. To calculate the “C + M = S” for an entire marketing channel, use the format below, where “Manufacturer” selling price (“S”) is
equal to “Wholesaler” cost (“C”) and “Wholesaler” selling price (“S”) is equal to “Retailer” cost (“C”):
Manufacturer/Producer:
C
+
M
=
S
Wholesaler/Distributor:
C
+
M
=
S
Retailer/Merchant:
C
+
M
=
S
2
3
MARKETING STRATEGY PRICE & FINANCIAL
ANALYSIS CALCULATIONS GUIDE
[Dr. Carter]
H. Now an Operating Statement [Income or Profit & Loss Statement] can be Prepared by Specifying a “DEMAND FORECAST”
--- Let’s say 100,000 merchandise items for a given time period, ok?
PER UNIT
FORMULA
PER UNIT
FIGURES
1,000,000 UNITS SOLD
[Assume No Inventory]
TOTAL UNIT
FINACIAL STATEMENTS
TOTAL UNITS
FIGURES
“S”
$10
X
100,000 Units
Sales Revenue
$1,000,000
“C”
$2
X
100,000 Units
Cost of Goods Sold
$ 200,000
Equals
“M”
$8
X
100,000 Units
Gross Margin
$ 800,000
Less
“OP”
$5
X
100,000 Units
Operating Expenses
$ 500,000
$3
X
100,000 Units
Net Profit
$ 300,000
Less
Equals “P”
I. “Analytical Ratios” can be Computed to Evaluate to Operation “Vital Health Signs” [Sales Revenue ALWAYS Denominator]:
1)
2)
3)
4)
Cost of Goods Sold Ratio = COGS / Sales Revenue …… (same % as “C” / “S” ) ----- THIS IS BAD & WE WANT TO BE LOW
Gross Margin Ratio = GM / Sales Revenue …………….. (same % as “M” / “S” ) ----- THIS IS GOOD & WE WANT TO BE HIGH
Operating Expense Ratio = OE / Sales Revenue ……….. (same % as “Per-Unit” ) ----- THIS IS BAD & WE WANT TO BE LOW
Net Profit Ratio = NP / Sales Revenue ………………… (same % as “Per-Unit” ) ----- THIS IS GOOD & WE WANT TO BE HIGH
3
4
MARKETING STRATEGY PRICE & FINANCIAL
ANALYSIS CALCULATIONS GUIDE
[Dr. Carter]
J. “BREAK-EVEN” unit volume metric can be calculated to determine how much to sell and how soon to reach profitability
* Break Even unit volume = Total Fixed Cost / per-unit $mark-up … $500,000 / $8 = 62,500 units (“treat packages”)
{NOTE: Total Fixed Cost equals Operating Expense + Invested Capital (if included)}
-- If you look closely at the BE formula, it is literally a calculation for getting a “fixed cost monkey” off your company’s back
* After identifying “how much to sell (not just produce) to become profitable, it is essential to chart the unit volume schedule
to determine “how soon” profitability will occur, and decide whether sales force quotas or sales promotion incentives are
necessary to “break-even” sooner in the calendar year and provide a greater chance of reaching a higher profit level (also
known as a “break even profit impact calculation”)
Date (Month)
#Units Sold
$ M-up
Remaining $ Fixed Cost
$Profit
January
February
March
April
May
June
July
August
September
October
November
December
5,000
30,000
7,500
20,000
10,000
6,000
12,000
3,000
4,000
4,000
1,250
1,250
$40,000
$240,000
$60,000
$160,000
$80,000
$42,000
$96,000
$24,000
$32,000
$16,000
$5,000
$5,000
$500,000
$460,000
$220,000
$160,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
$80,000
$122,000
$218,000
$242,000
$274,000
$290,000
$295,000
$300,000
Sales Force Quotas &
Sales Promotion Incentives
Valentines Campaign
Easter Campaign
Mother’s Day Campaign
4th July Campaign
Holiday Competition
Holiday Competition
4