MKT 300 Lecture Notes - Lecture 3: Gross Margin, Contribution Margin, Gross Profit

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2 Feb 2016
Department
Course
Lec 3 (Feb 2)
Segments must be
oMeasurable/distinguishable
oAccessible/reachable
oSubstantial/sizeable
oActionable/meaningful
oProtable
Long tail
oMicro segments of market place, it’s still worth it to invest and target
these segments
oAmazon beats physical book stores as they have no inventory cost,
only royalties to the writer, even if people want a book from smaller
segment, they can still sell those
oSmaller segments have less competition
Example of 7 Ps
o
break even point
units – CM = xed costs
cm = price – var costs
obreak even volume = x costs/cm
obreak even revenue = break even volume / price per unit
ocontribution margin can tell us what proportion of the price can be
allocated towards prot and covering xed costs, taking variable costs
out of the equation
target volume
otarget volume = (x costs + target prots) / cm per unit
otarget revenue = (x costs + target prots) / cm %
gross prot = total rev – COGS (var) also known as gross margin
gross prot margin = gross prot/tot revenue
oCan be compared between di)erent scal years or within the industry
o
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