Figure 10.12: Alternative Channel Marketing Profitability
INPUT (Yellow Cells)
- Percentages limited to 0% to 100%
| CURRENT | HOLD PROFTS | STRATEGY | |||
| Channel Strategy |
Indirect Distributor |
Direct Sales Force |
Direct Sales Force |
||
| Market Demand | 1000000 | 1000000 | 1000000 | ||
| Market Share | 17.5% | ||||
| Unit Volume | 200000 | 175000 | 200000 | ||
| End-User Price | $1,000 | $1,000 | $1,000 | ||
| Distributor Discount (% sales) | |||||
| Distributor Discount ($) | $200 | ||||
| Wholesale Price | $800 | $1,000 | $1,000 | ||
| Transaction Cost (% sales) | 5.0% | ||||
| Transaction Cost ($) | $20 | $50 | $50 | ||
| Net Price | $780 | $950 | $950 | ||
| Sales Revenue | $156,000,000 | $166,250,000 | $190,000,000 | ||
| Cost per Unit | $500 | $500 | $500 | ||
| Margin per Unit | $280 | $450 | $450 | ||
| Gross Profit (mil) | $56,000,000 | $78,500,000 | $90,000,000 | ||
| Percent Margin | 36% | 47% | 47% | ||
| Marketing & Sales Exp. (%) | 4.8% | 18.0% | 15.8% | ||
| Marketing & Sales Expenses | $30,000,000 | ||||
| Net Marketing Contribution | $48,500,000 | $48,750,000 | $60,000,000 | ||
| Marketing ROS | 31.1% | 29.3.6% | 31.6.3% | ||
| Marketing ROI | 647% | 163% | 200% | ||
| Break-Even Market Share | 2.7% | 6.7% | 6.7% | ||
Instructions: Change any of the yellow cells to explore different sales and profit impacts as well as marketing profitability metrics (Marketing ROS and Marketing ROI). The Hold Profits column will change with changes in any of the yellow input cells.