MKT 100 Lecture 5: METRICS
26 Feb 2019
School
Department
Course
Professor
METRICS
IMPORTANCE forecasting earnings generated by various changes in the unit sales → impact of proposed marketing
campaigns
VARIABLILTY classification of expenses
Variable inc directly proportional to level on sales (units or $); activity of the business
also called unit-level costs, cost of goods sold (COGS)
commission, shipping, delivery, materials, supplies, temporary wages, bonuses
Fixed same regardless of sales
also called operating overhead expenses
marketing, rent, insurance, equipment expenses, licenses, full-time wages
One Time Fixed capital costs; fees associated with initial setup; one-time, fixed, independent
payments may be spread out over years in financial reports and tax returns
land, real estate, buildings, construction, purchase of equipment
PERCENTAGE CHANGE difference in sales over time
%𝐂𝐇𝐀𝐍𝐆𝐄 = 𝒏𝒆𝒘 𝒂𝒎𝒐𝒏𝒕 − 𝒐𝒍𝒅 𝒂𝒎𝒐𝒖𝒏𝒕
𝒐𝒍𝒅 𝒂𝒎𝒐𝒖𝒏𝒕 × 𝟏𝟎𝟎%
MARKET SHARE % of a market accounted for by a specific company (unit or $ market share)
𝐌𝐀𝐑𝐊𝐄𝐓 𝐒𝐇𝐀𝐑𝐄 (%) = 𝐛𝐫𝐚𝐧𝐝′𝐬 𝐬𝐚𝐥𝐞𝐬
𝐭𝐨𝐭𝐚𝐥 𝐦𝐚𝐫𝐤𝐞𝐭 𝐬𝐚𝐥𝐞𝐬 ×𝟏𝟎𝟎%
𝐑𝐄𝐋𝐀𝐓𝐈𝐕𝐄 𝐌𝐀𝐑𝐊𝐄𝐓 𝐒𝐇𝐀𝐑𝐄 (%)= 𝐛𝐫𝐚𝐧𝐝′𝐬 𝐬𝐚𝐥𝐞𝐬
𝐥𝐚𝐫𝐠𝐞𝐬𝐭 𝐜𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐨𝐫′𝐬 𝐬𝐚𝐥𝐞𝐬 ×𝟏𝟎𝟎%
CONCENTRATION total sum of the market shares held by the leading competitors in the market
𝐓𝐇𝐑𝐄𝐄 [𝐅𝐎𝐔𝐑]𝐅𝐈𝐑𝐌 𝐂𝐎𝐍𝐂𝐄𝐍𝐓𝐑𝐀𝐓𝐈𝐎𝐍 𝐑𝐀𝐓𝐈𝐎 = % 𝐦𝐚𝐫𝐤𝐞𝐭 𝐬𝐡𝐚𝐫𝐞 𝟏 … 𝟑 [+𝟒]
HERFINDAHL index rises in markets dominated by larger players
Greater or equal 0.18 market is highly concentrated and uncompetitive
Less than 0.18 market in not highly concentrated and more competitive
𝐇𝐄𝐑𝐅𝐈𝐍𝐃𝐀𝐇𝐋 𝐈𝐍𝐃𝐄𝐗 = Sum [(% 𝐦𝐚𝐫𝐤𝐞𝐭 𝐬𝐡𝐚𝐫𝐞 𝐨𝐟 𝐞𝐚𝐜𝐡)𝟐]
CONTRIBUTION MARGIN amount left from sales revenue, variables deducted, to cover fixed costs (% or $)
𝐂𝐎𝐍𝐓𝐑𝐈𝐁𝐔𝐓𝐈𝐎𝐍 𝐌𝐀𝐑𝐆𝐈𝐍 ($)= 𝐫𝐞𝐯𝐞𝐧𝐮𝐞 − 𝐯𝐚𝐫𝐢𝐚𝐛𝐥𝐞 𝐜𝐨𝐬𝐭𝐬
𝐂𝐎𝐍𝐓𝐑𝐈𝐁𝐔𝐓𝐈𝐎𝐍 𝐌𝐀𝐑𝐆𝐈𝐍 (%)= 𝐜𝐨𝐧𝐭𝐫𝐢𝐛𝐮𝐭𝐢𝐨𝐧 𝐦𝐚𝐫𝐠𝐢𝐧 ($)
𝐫𝐞𝐯𝐞𝐧𝐮𝐞 ×𝟏𝟎𝟎%
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