Key Marketing Metrics, 3rd Edition

3

Margins and profits

Key concepts covered in this chapter:

• Margins
• Selling prices and channel margins
• Average price per unit and price per statistical unit
• Variable costs and fixed costs
• Marketing spending—total, fixed, and variable
• Break-even analysis and contribution analysis
• Target volume

Introduction

Peter Drucker has written that the purpose of a business is to create a customer. As marketers, we agree. But we also recognize that a business can’t survive unless it makes a margin as well as a customer. At one level, margins are simply the difference between a product’s price and its cost. This calculation becomes more complicated, however, when multiple variations of a product are sold at multiple prices, through multiple channels, ...