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FEBRUAR R Y 4, 201 0

THOMAA S STE ENBURGH H J ILL AV ERY V

Ma arketing Analysis To oolkit: Breake even Analysis s
Intro oduction
Ma arketing man nagers are ofte called upo to make rec en on commendatio for or aga ons ainst program that ms cost m money to imp plement. Befo expenditu ore ures are made managers w e, want to be sur that they w be re will gettin a return on their investm ng n ment; they w want to ensure that the mo e oney will be w spent and will well d lead t incrementa profits for the firm. On way of asssessing this iis by calculatting the break to al ne keven point. The breakev point calc . ven culates the nu umber of incr remental unit the firm ne eds to sell to cover ts the co of the prog ost gram. If the f firm sells less than the brea akeven point volume, then it is losing m n money -- it is not selling eenough to re coup its inve s estment. If th firm sells m he more than th breakeven point he volum then it is m me, making mone -- it is sellin more than enough to co ey ng over its invest tment. Ma anagers use breakeven a nalysis to as ssess the finaancial feasibi lity of markeeting investm ments. Once a breakeven point is calcu ulated, mana agers need to evaluate wh ether it is fea asible that the firm e will b able to sell that quantity of product. be y Ma arketing mannagers use b breakeven a nalysis to a assess many different ty pes of mark keting progr rams. For ex xample, a firm may want tto assess how many increm m w mental units of product it must sell to recoup the o cost o a $10 millio advertising campaign. Or, a firm m of on g may want to a assess how m many increme ental units of product it m must sell to rec coup the cost of a $5 millio sales prom otion. on Or, a firm may wa to assess h ant how many inc cremental un its of a new p product it mu sell to cov er the ust cost o lost sales of an existing p of f