Three Pillars of Marketing And The Basic Profit Equation

1. Three Pillars of Marketing And The Basic Profit Equation Ted Mitchell

2. Profit Equation • Revenue - Costs = Profit • R - C = Z • Revenue = Selling Price x Quantity • R = PQ • Cost = Variable Costs + Fixed Costs • C = VQ + F

3. The Basic Profit Equation • PQ -VQ -F = Z Where P = Price, Q = Quantity sold, V = Variable cost per unit, F = Fixed costs, Z = Profit (operating income)

4. The Basic Profit Equation • PQ -VQ -F = Z Where P = Price, Q = Quantity sold, V = Variable cost per unit, F = Fixed costs, Z = Profit (operating income) Or • (P -V)Q -A -S -L -O = Z Where A = Advertising Budget or Expenses, S = Sales Force Budget, L = Logistics Budget, Other Non-Marketing Expenses

5. Three Pillars of Modern Marketing Management • 1 Customer Needs (Targeting) • 2 Integrated Marketing Effort (4P’s) • 3 Profit

6. Three Pillars of Modern Marketing Management Are in The Profit Equation • 1 Customer Needs • 2 Integrated Marketing Effort (4P’s) • 3 Profit PQ -VQ -F = Z

7. Three Pillars of Modern Marketing Management • 1 Customer Needs • 2 Integrated Marketing Effort (4P’s) • 3 Profit • PQ -VQ -F = Z • (Price)Q - (Product Cost)Q - Promotion Costs-Place Costs- OperatingCosts = Profit

8. Profit Three Pillars of Modern Marketing Management • Customer Needs • Integrated Marketing Effort (4P’s) • Profit PQ -VQ -F = Z (Price)Q -(Product Cost)Q - Promotion Costs -Place Costs - Operating Costs = Profit

9. Three Pillars of Modern Marketing Management • Customer Needs • Integrated Marketing Effort (4P’s) • Profit PQ -VQ -F = Z • (Price)Q -(Product Cost)Q - Promotion Costs -Place Costs - Operating Costs = Profit All 4 P’s

10. Three Pillars of Modern Marketing Management • Customer Needs • Integrated Marketing Effort (4P’s) • Profit • PQ -VQ -F = Z • Where Q is a customer response function for product design, advertising, channels, ...

11. The Response Function Q=ƒ(Mix-Needs Match) The customer response function reflects how well marketers designed the product and the rest of the mix to serve customer needs. Q Good design satisfies needs Bad design does Not! Marketing Mix

12. Q= ƒ(mix-needs) Three Pillars of Modern Marketing Management • Customer Needs are in Q = ƒ(mix-needs) • Integrated Marketing Effort (4P’s) • Profit • PQ -VQ -F = Z • P ƒ(mix-needs) -V ƒ(mix-needs) -F = Z

13. What are the Three Main Pillars of Marketing Management? • 1) Profit • 2) Integrated Marketing Effort (Four Ps) • 3) Serving Customer Needs and Wants

14. What is the Fundamental Equation for the Net Marketing Contribution? Sales Revenues - (Direct Costs of Making the Product and Marketing the Product to the Customer) = Net Marketing Contribution

15. Any Questions?