Marketing Performance Tools and Application Exercises
16.1Market Demand and Market Share
Change market demand from $4,000 to $3,800, change market share from 25 percent to 22.6 percent,
and evaluate how sales, profits, and financial performance change.
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Teaching Note: The starting data chart presents the business’s current performance. The analysis chart
reflects the results of the two requested changes. Both changes would take the business in the wrong
direction with respect to performance impact. Sales, gross profit, and the net marketing contribution each
16.2Percent Margin and Marketing Expenses
Lower the revenue per customer to $1,480 and increase market share to 26 percent. Then return
revenue per customer to $1,500 and increase marketing expenses from 17 percent to 18 percent.
Which change has the greatest impact on performance?
Market-Based Management Copyright © 2012
Sixth Edition –40– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
Teaching Note: With less revenue per customer but a greater market share,sales revenues and gross
Teaching Note: An increase in marketing expenses (from 17% to 18%) results in a $10 million decrease
in the net marketing contribution. The lower NMC leads to similar declines in operating income and net
16.3Asset Management and Invested Capital
Increase assets from $1,500 to $1,550 (which lowers the assets to sales ratio from 0.67 to 0.65) and
evaluate the impact on financial performance. Then return assets to $1,500, decrease the long-term
debt from $500 to $400, and evaluate the effects of this change on financial performance.
Teaching Note: A change in assets will not change any of the marketing profitability metrics. It will
Market-Based Management Copyright © 2012
Sixth Edition –41– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall
Teaching Note:The decrease in the long-term debt lowers the company’s cost of capital and helps
improve the return on capital and economic profit. The business is running more efficiently with respect to
Market-Based Management Copyright © 2012
Sixth Edition –42– Pearson Education, Inc.
Instructor’s Manual– Chapter 4 Publishing as Prentice Hall