Summary of Marketing Analysis Toolkit:

Pricing and Profitability Analysis

Pricing is one crucial decisions for a firm. These kinds of decisions have an immediate
impact on the financial status of the firm, and It is one of the toughest decisions that
marketing professionals often make.

How is demand determined?

The margin in which a product is priced determines whether the customers are likely to buy it
or not. It is often seen that when the price of a product goes down, the quantity demanded that
product goes up and vice versa. The slope for a demand curve is determined as

Change∈Price
Slope of Demand Curve=
Change∈Quantity Deamnded

The quantity demanded is represented on X-axis, and the price is mentioned on the Y-axis.
The point at (m) in simple line equation y=mx+c. Branding and marketing initiatives often
affect the demand curve.

The firm should have insights about how the consumer preferences change with change in
price or quantity, the change in percentage price to change in percentage quantity demanded
is known as price elasticity of demand. The Price elasticity of demand can be determined by,
usually, the result is in negative and the negative sign is ignored, just the magnitude is
considered and the value ranges from 0 to ∞

Percentage Change∈Quantity Demanded

Price Elasticity of Demand=
Percentage Change∈Price

Revenue, Costs, and Profits

In simple terms, the Revenue of a company is determined by the product of goods or products
it sold with price per unit.

Total Revenue= Price Per Unit * Quantity

The price considered is the price at the next link in the chain. It may or may not be the price
at which goods are sold to the consumer.
Usually, to determine the pricing of any product, the cost incurred by the firm plays a vital
role. A firm incurs two types of costs, Fixed cost, and Variable cost. In an income statement
usually, variable costs feature in COGS, and fixed costs appear in PPE and other line items

Total Costs = Fixed cost + (Variable cost per unit * Quantity Sold)

In general, profit is calculated as a percentage of Total Revenue. And In marketing, there are
four significant, and net income.

Contribution Margin=Total Revenue−( Variable cost Per Unit∗Quantity Sold)

Gross Margin=Total Revenue−Cost of Goods Sold

Direct Contribution Margin=Total Revenue−( Variable cost Per Unit∗Quantity Sold )−Marketing Expenses

Net Income=Total Revenue−Total Cost

Similar to profits calculated by the firm, even retailers calculate retailer margins and profit.
The profit of a retailer is Penny Profit.

Penny Profit=Retail Selling Price−Cost ¿ Retailer

Retailer Margin=Retail Selling Price−Cost ¿ Retailer ¿

Retail Selling Price

Managers should assess changes in profitability under the following situations:

 Whether the price change is going to be permanent or temporary

 What happens to profitability while suggesting a marketing expense
 If suggested product change have an impact on variable cost structure
 When
 when evaluating sales demand. For instance, bulk deals return fewer profits, and small
retail orders are more profitable.

Before making any decision, the financial implications of the firm should be evaluated.