The Buck Starts Here

April 2002
by Brian Jud

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No marketing decision is made in a vacuum. The choice to adjust one part of your marketing mix influences the other marketing functions. Your profitability is determined by your ability to plan and control the interaction among the four major elements of marketing strategy: the product and its price, distribution, and promotion.

The impact of marketing decisions on your profitability is demonstrated in the charts below.

The first one shows the net revenue for a title priced at $14.95 with 1,000 books published and sold through a distributor charging a fee of 65% of sales. The net profit is determined by deducting the Cost of Goods – Sold (COGS)–in this case, $4,500 for editing, cover design, layout, and printing–and the distribution discount from the total revenue. Selling all these books would net $732.

 

 

Quantity

 

 

Distributor’s

Distribution

Net

 

List price

Sold

Revenue

COGS

Percentage

Deduction

Revenue

Distributor-only

$14.95

1,000

$14,950

$4,500

65%

$9,718

$732

How would your profitability be affected by a change in distribution? The chart below shows how much you would increase net revenue if you sold t…IBPA Members – Click here to view the full article (login required).

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