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

Marketing Analysis Toolkit: Pricing and Profitability Analysis

by Thomas J. Steenburgh and Jill Avery

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Abstract

Pricing is one of the most difficult decisions marketers make and the one with the most direct and immediate impact on the firm's financial position. This toolkit will introduce the fundamental terminology and calculations associated with pricing and profitability analysis. Users will learn how to produce and interpret demand curves and calculate the price elasticity of demand. The concepts of revenue, costs, contribution margin, gross margin, and net income will be introduced to inform profitability analyses. Finally, retailer profitability metrics including retailer margin and penny profit are discussed. 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; prebuilt Excel models to calculate demand curves, price elasticity, and profitability metrics for firms and their channel partners; and charts and graphs that help visualize the results.

Keywords: Forecasting and Prediction; Price; Profit; Management Analysis, Tools, and Techniques; Marketing Strategy; Demand and Consumers; Measurement and Metrics; Strategic Planning; Mathematical Methods; Retail Industry;

Format: Print 8 pages EducatorsPurchase

Citation:

Steenburgh, Thomas J., and Jill Avery. "Marketing Analysis Toolkit: Pricing and Profitability Analysis." Harvard Business School Background Note 511-028, July 2010. (Revised December 2011.)

About the Author

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Jill J. Avery
Senior Lecturer of Business Administration
Marketing

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More from the Author

  • Case | HBS Case Collection | December 2018 (Revised November 2019)

    Shiseido: Reinvesting in Brand

    Jill Avery and Nobuo Sato

    Shiseido was in the midst of a six year corporate turnaround, trying to reverse the effects of decades of under-investment in R&D and marketing which had led to a cycle of declining customer support and brand value. Would the CEO’s VISION 2020 plan, centered on four strategies: 1.) increasing R&D spending from 1.8% to 3% of sales, 2.) investing an incremental ¥120 billion in brand-building marketing, 3.) moving to a “think global-act local” matrixed brand management structure, and 4.) rethinking brand portfolio strategy, be enough to achieve aggressive 8% per year sales goals while simultaneously increasing the company’s operating margin from 8% to 10% in the highly competitive and slow growing beauty industry?

    Keywords: brand management; Brand Value; turnaround; brand portfolio; brand communication; global brands; digital marketing; Return on investment; marketing ROI; internet marketing; Marketing; Marketing Strategy; Brands and Branding; Value; Growth and Development Strategy; Investment Return; Consumer Behavior; Beauty and Cosmetics Industry; Consumer Products Industry; Japan; Asia;

    Citation:

    Avery, Jill, and Nobuo Sato. "Shiseido: Reinvesting in Brand." Harvard Business School Case 519-026, December 2018. (Revised November 2019.)  View Details
    CiteView DetailsEducatorsPurchase Related
  • Case | HBS Case Collection | November 2019

    Away: Scaling a DTC Travel Brand

    Jill Avery and Joseph B. Fuller

    Away, a direct-to-consumer, digital native e-commerce seller of travel luggage, is debating how to invest its latest round of venture funding. How quickly could and should Away scale and what were the most promising growth trajectories to maximize its potential? Three decisions face the founders. Should Away continue to invest in driving growth in suitcases and other travel bags or was it time to begin to expand into other adjacent travel categories? How should they use the results of the company’s first customer segmentation study to select target segments and quantify their growth aspirations? What were the right distribution strategies moving forward following a series of pilots that included company-owned stores, temporary airport kiosks, and pop-up experiences with retailer partners?

    Keywords: brand management; DTC; e-commerce; brand extension; lifestyle brand; customer segmentation; retailing; Scaling and Growth; Startup; Brands and Branding; Marketing; Marketing Strategy; Marketing Channels; Entrepreneurship; Venture Capital; Consumer Behavior; Growth and Development Strategy; Business Startups; Consumer Products Industry; Travel Industry; United States; North America;

    Citation:

    Avery, Jill, and Joseph B. Fuller. "Away: Scaling a DTC Travel Brand." Harvard Business School Case 520-051, November 2019.  View Details
    CiteView DetailsEducators Related
  • Case | HBS Case Collection | October 2019

    La Roche-Posay: Growing L'Oreal's Active Cosmetics Brand

    Jill Avery, Vincent Dessain and Mette Fuglsang Hjortshoej

    As 2018 neared its end, Laetitia Toupet, international general manager of L’Oréal’s La Roche-Posay brand reflected on the brand’s achievements over the past year. At €1 billion in revenue, La Roche-Posay had recently become the number one dermocosmetics brand in the world. While Toupet was pleased with this feat, she believed that the brand was at a critical juncture. It was time to make some significant marketing decisions related to brand positioning to try to accelerate La Roche-Posay’s future growth trajectory as dermocosmetics moved from serving a niche market to the mainstream.

    Keywords: branding; brand management; consumer products; brand positioning; target market; global brands; global marketing; Marketing; Marketing Strategy; Brands and Branding; Globalized Firms and Management; Consumer Products Industry; Beauty and Cosmetics Industry; Health Industry; France; Europe; Brazil; China; Asia; South America; United States; North America;

    Citation:

    Avery, Jill, Vincent Dessain, and Mette Fuglsang Hjortshoej. "La Roche-Posay: Growing L'Oreal's Active Cosmetics Brand." Harvard Business School Case 520-035, October 2019.  View Details
    CiteView DetailsEducators Related
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