Basic Marketing Math

Marketing Math Formulas

These Mathematical formulas will help your marketing ROI
• Identify economic factors that drive marketing profit and loss
• Calculate break even and profit or loss using costs and factors right for your business
• Establish what metrics are the best measures of success
• Ascertain what your customers are worth and how much to spend to acquire new ones
• Track responses in all media, including the Internet.
• Determine which statistical formulas to apply to predict future behavior
You’ll need only basic arithmetic: +, -, x, and ÷. No complex math here – just practical tools presented in a language anyone can understand
Anyone who needs to understand what makes a direct marketing program financially viable. These formulas will prove invaluable to you if you’ve recently begun working in any of the following functional areas of direct marketing:
*Marketing * Analysis * Accounting* Advertising
You will also benefit if you’re a professional working for any of the following support firms serving direct marketers:
*Advertising Agencies * Printers * Service Bureaus * List Brokers

Cost of Goods Sold
COGS = Beginning Inventory + Purchases – Ending Inventory

Gross Margin
Gross Margin = Total Sales – Cost of Goods
Gross Margin Return on Investment
GMROI = Gross Margin $ ÷ Average Inventory Cost

Initial Markup
Initial Markup % = (Expenses + Reductions + Profit) ÷ (Net Sales + Reductions)

Inventory Turnover (Stock Turn)
Turnover = Net Sales ÷ Average Retail Stock

Maintained Markup
MM $ = (Original Retail – Reductions) – Cost of Goods Sold
MM % = Maintained Markup $ ÷ Net Sales Amount

Margin %
Margin % = (Retail Price – Cost) ÷ Retail Price

Markup
Markup $ = Retail Price – Cost
Markup % = Markup Amount ÷ Retail Price

Net Sales
Net Sales = Gross Sales – Returns and Allowances

Open to Buy
OTB (retail) = Planned Sales + Planned Markdowns + Planned End of Month Inventory – Planned Beginning of Month Inventory

Percentage Increase/Decrease
% Increase/Decrease = Difference Between Two Figures ÷ Previous Figure

Quick Ratio
Quick Ratio = Current Assets – Inventory ÷ Current Liabilities

Reductions
Reductions = Markdowns + Employee Discounts + Customer Discounts + Stock Shortages

Sales per Square Foot
Sales per Square Foot = Total Net Sales ÷ Square Feet of Selling Space

Sell-Through Rate
Sell-Through % = Units Sold ÷ Units Received

Stock to Sales Ratio
Stock-to-Sales = Beginning of Month Stock ÷ Sales for the Month

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