Practical Management Science
Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
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Question

9.2 Marketing Channel Profitability (Figure 9-5)

  1. How does the net marketing contribution and marketing ROI change if the business modifies its sales mix to 30% direct sales, 40% agent distributor, and 30% distributor retailer?
  2. How does the net marketing contribution and marketing ROI change if the business replaces the direct sales channel with the agent-distributor channel, with a sales mix of 60% agent distributor and 40% distributor retailer?
FIGURE 9-5 CHANNEL STRATEGIES AND CHANNEL TRANSACTION PROFITABILITY Area of Performance Direct Mixed Indirect Total Channel Strategy Direct Agent Wholesaler Sales & Dealer & Dealer Target Customer Large Medium Small Served Accounts Accounts Buyers Market Percent of Sales 40% 20% 40% 100% Revenue per Purchase $10,000 $3,000 $1,000 $5,000 Retailer Discount 20% Wholesale Price $3,000 $800 Distributor Discount 15% 15% Sales Agent Commission 5% 0% Net Price $10,000 $2,400 $680 $4,752 Company Sales Commission 0% 0% 0% Transaction Cost 5% 2% 1% Pocket Price $9,500 $2,352 $673 $4,540 Cost of Goods Sold $6,000 $1,500 $500 $2,900 Percent Margin 36.8% 36.2% 25.7% 36.1% Marketing & Sales Expense (%) 15.0% 8.0% 5.0% 9.6% Marketing & Sales Expense ($) $1,425 $188 $34 $436 Net Marketing Contribution $2,075 $664 $140 $1,204 Marketing ROS 21.8% 28.2% 20.8% 26.5% Marketing ROI 146% 353% 415% 276%
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Transcribed Image Text:FIGURE 9-5 CHANNEL STRATEGIES AND CHANNEL TRANSACTION PROFITABILITY Area of Performance Direct Mixed Indirect Total Channel Strategy Direct Agent Wholesaler Sales & Dealer & Dealer Target Customer Large Medium Small Served Accounts Accounts Buyers Market Percent of Sales 40% 20% 40% 100% Revenue per Purchase $10,000 $3,000 $1,000 $5,000 Retailer Discount 20% Wholesale Price $3,000 $800 Distributor Discount 15% 15% Sales Agent Commission 5% 0% Net Price $10,000 $2,400 $680 $4,752 Company Sales Commission 0% 0% 0% Transaction Cost 5% 2% 1% Pocket Price $9,500 $2,352 $673 $4,540 Cost of Goods Sold $6,000 $1,500 $500 $2,900 Percent Margin 36.8% 36.2% 25.7% 36.1% Marketing & Sales Expense (%) 15.0% 8.0% 5.0% 9.6% Marketing & Sales Expense ($) $1,425 $188 $34 $436 Net Marketing Contribution $2,075 $664 $140 $1,204 Marketing ROS 21.8% 28.2% 20.8% 26.5% Marketing ROI 146% 353% 415% 276%
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