In the world of retailing cosmetic goods and services, as a corporate member in the industry you must take into account the company’s monetary planning and budget for the fiscal year. As the head of marketing operations you want to oversee global sales and aim for your brand to be a leader in quality and prestige efficiency through different tactics you will communicate and put in place. Maximizing sales and understanding your profit performance will allow you to forecast revenue for the brand and help you better manage your integrated marketing accounts. With any running business, you must consider the only goal to stay afloat in this competitive industry of glamour. Therefore, it is imperative to constantly inquire and manage the monetary value the company drives for success. So yes that means math and working on spreadsheets. You must understand contribution margin and breakeven analysis in order to better allocate your specific marketing asset.
In order to better grasp these two equally important terms, I will introduce variable costs and fixed costs. Variable costs will fluctuate based on the amount of products that are produced and or sold. To produce the best-selling lipstick of the year, you must buy the components necessary for R&D to manufacture it. For instance, the wax, oil, and pigment are a variable cost. Besides, assuming that is not the only lipstick the brand upholds, the countless other variables that come into the mix will forever vary. Moreover, there are fixed costs. These are costs that do not fluctuate based on the volume that is produced and or sold. The cost of leasing a makeup counter where your award winning lipstick is sold will be a fixed cost throughout the fiscal year. If you want a great location in high traffic volume mall, it is going to cost you at a fixed price.
As a marketer being aware of these forms of capital will help you in formulating a budget for your department. Taking economic consideration for the accounts of your partnering departments is necessary for your own marketing achievement. Using the lipstick example, contribution margin is the amount of money that returns to the company to offset your fixed costs. The equation is derived by subtracting the variable costs from the retailing price of the lipstick. Let’s say the lipstick retails for $25, but to assemble it costs $15, therefore the contribution margin is $10. This margin will then be used to understand how many lipsticks are needed to sell in order to cover the fixed costs; this is your breakeven analysis. To calculate your breakeven you must divide your total fixed costs by your contribution margin. If the fixed cost to rent the productive makeup counter is $144,000 a year and your margin is $10, your breakeven point is 14,400. This is the amount of lipsticks your brand must sell in order to stay operating in the mall and pay all debts.