Aviation Leadership and Management Skills Development - Marketing Margin Considerations
SofemaOnline (SOL) www.sofemaonline.com Discusses the function of Margin within the Marketing Environment
Introduction – What do we understand by Margin Considerations in Marketing Distribution Channel Considerations
Whilst Profit margin is not considered a particularly complex ratio it is nevertheless a very important indicator of the efficiency of our business.
Note - Net profit margin is a far better representation of financial health than revenues alone. (consider It is possible to increase your company's earnings while decreasing your profit margin)
The Important Need to Measure Margin
Monitoring the profit margins helps you understand the health of the business problems within your business and its ability to grow
Factors Which Influence Margin
The most obvious, easily identifiable, and broad numbers that affect your profit margin are your
» Net profits
» Sales earnings
» Merchandise costs
Net profit margin is a quick way to determine the percentage of the sale after accounting for the costs that went into the sale.
» The most direct factor that affects profit margins is your net or gross profit.
o Adjust the sale price of a product or service to influence the margin.
Net Margin = Net Profit / Revenue.
Net Profit Margin % = Net Income/Revenue x 100.
Note Regarding Terms Used
» Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations.
» Income or net income is a company's total earnings or profit.
The Different Types of Profit Margin?
Gross profit margin - The gross profit margin is your overall gross revenue minus the cost of goods. (It may not reflect other major expenses)
Operating profit margin - Accounts for operating costs, administrative costs, and sales expenses. It includes amortization rates and asset depreciation, (but it does not include taxes, debts and other non operational or executive-level costs)
Net profit margin. - The most difficult type of profit margin to track but provides the most insight into your bottom line. (It takes into account all expenses, as well as income from sources such as investments)
How to Increase Your Profit Margins
» Avoid markdowns by improving inventory visibility
» Have an effective Product Information Management (PIM) system.
» Use multiple channels for marketing
» Effective management of Data
» Elevate your brand and increase the perceived value of your merchandise
o If Possible focus on the emotional and lifestyle values that your brand can offer.
» Reduce operating expenses
» Streamline operations
» Automate specific tasks in your business can reduce the time, manpower, and operating expenses required to run your business.
» Find your most profitable products and position them in high-traffic areas of your store.
Next Steps
Please email team@sassofia.com with any comments, questions, or suggestions
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