Background Note | HBS Case Collection | February 2010 (Revised July 2011)

Marketing Analysis Toolkit: Breakeven Analysis

by Thomas J. Steenburgh and Jill Avery

Abstract

Marketing managers are often called upon to make recommendations for or against programs that cost money to implement. Before expenditures are made, managers want to be sure that they will be getting a return on their investment. One way of assessing this is by calculating the breakeven point. In this note, we introduce the concept of breakeven analysis and show how it is used to guide marketing decision making. This analysis helps students assess the feasibility of proposed fixed and variable marketing expenditures, the feasibility of permanent pricing changes, and the feasibility of a new product introduction. The note gives students a foundation for analyzing marketing cases, as well as providing an analytical structure and process for completing a marketing plan. The note is accompanied by a free Excel worksheet that contains sample problems, pre-built Excel models to calculate breakeven, and charts and graphs that help visualize the results.

Keywords: Decision Making; Investment Return; Spending; Management Analysis, Tools, and Techniques; Marketing Strategy; Strategic Planning; Mathematical Methods;

Citation:

Steenburgh, Thomas J., and Jill Avery. "Marketing Analysis Toolkit: Breakeven Analysis." Harvard Business School Background Note 510-080, February 2010. (Revised July 2011.)