Trade Marketing Flashcards

Store Profitability

• Retailers allocate shelf space based on profitability, considering rotation and margin.
• Logistics and relational performance are also factors.

Profit Comparison

• Example considers units sold, unit price, income, unit purchase price, and margin to determine product preference.

Direct Product Profitability (DPP)

• Method to quantify profitability per item.
• Profitability = profit/loss after all costs.
• Requires correct allocation of costs by individualizing influencing parameters.

DPP Calculation

• DPP = Gross\ Margin - Direct\ Product\ Cost where:
  • Gross Margin = Retail Sale Price - Purchase Price
  • Direct Product Cost = Costs after product purchase.

Cost Assignment

• Over 70% of Direct Product Cost is generated at the point of sale.
• Cost factors include transportation, replacement, checkout, and space.

Gross Margin Adjustment

• Gross\ Margin\ Adjusted = Consumer\ Price - Acquisition\ Price + Financial\ Discounts + Promotional\ Discounts + Agreements + Additional\ margins due to volume (rappels)

DPP Calculation with Adjustments

• Direct\ Product\ Profitability = Gross\ Margin\ Adjusted - Storage - Transport - Business - Replacement - Space - Stocks - Checkout - Others - Other\ Fix\ Costs

Strategic Matrix (DPP vs Sales Volume)

• Assesses products based on Unit DPP and Sales Volume (Low/High).
• Strategies vary based on position in the matrix:
  • High DPP, High Sales: Maintain strategy, check elasticity (price/volume).
  • High DPP, Low Sales: More advertising/promotions, aggressive display, position in high traffic.
  • Low DPP, High Sales: Review costs/movement methods, pricing, gondola position, reduce promotions.
  • Low DPP, Low Sales: Reduce display, change supplier, review pricing, prune assortment.