Assignment:
Financial Analysis
As a marketer, you need to justify your marketing activities no matter if it's a promotional campaign or development of a new product or service. You achieve this by first having a solid understanding of the financial impact of your marketing initiative and then presenting your financial analysis in a well-structured manner using industry acceptable framework.
In the financial analysis section, the first thing to show is sales (unit) and revenue ($) forecasts. Usually, this is done for a period of 3 to 5 years. You also need to show how much market share you are expected to get, and most importantly, illustrate its return on investment (ROI) using the Net Present Value (NPV) method. To help the management get a better idea about the feasibility of your marketing plan, a break-even (BE) analysis is often required. After all, nobody wants to invest in a new product or service that will only break even in 20 years' time!
To polish up your work, it is always a good idea to include a sensitivity analysis to show how these forecasts will be changed under various market conditions (good, normal, bad).
In all, your Financial Analysis should consist of the following:
1. Break-even analysis
2. NPV (net present value analysis)
3. Sensitivity analysis for good, normal and bad business scenarios
VI. Pricing Structure
Determine the price you will charge. For your service, determine pricing (this may be based on an "average" price per service rendered). You must:
• Demonstrate that your price allows reasonable profit in accordance with your profitability strategy (indicate this), allowing for your FC and VC that you determined in the preceding section.
• Share the pricing strategy that you have selected, in accordance with those provided by our text author. What is your rationale for the pricing strategy selected?
• Identify your total Year ONE Gross Revenues and projected Gross Profitability. Determine this for a three year window, based on reasonable projections. Does your pricing structure reflect volume discounts or other circumstances that might affect your revenue/profitability?
• If you are using a channel of distribution, describe the profitability approach are you taking with your channel members to ensure appropriate profit at their end so that they will want to promote your product?
• Weigh your pricing strategy with pricing currently offered by your competition. Consider how your proposed price fits into the target market and compares to the competition. Your pricing should allow for sufficient profitability to allow you to cover your essential fixed costs (FC) and variable costs (VC) on which you will want to reflect (but do not have to be listed).
VII. Channels of Distribution
When describing your channels of distribution structure, be sure to identify:
• The rationale for the structure that you have selected
• How you will work with your channel members to help them promote your product to the ultimate consumer. This may include PUSH and PULL promotional strategies. How will you manufacture your product, warehouse it, and move the product to the next channel level?
• What should your channel members expect from you, the manufacturer (marketer) of your product? How will your organization be structured to accomplish this?
As you will have a sales force (or someone who assumes the selling function), discuss the selection, compensation, training, and management of your sales staff. If, on the other hand, you are selling directly to the end-used (direct channel), discuss this here.
If you are providing a service to your target market, you fulfill the responsibilities of a direct channel service provider. You will not use intermediaries (i.e., wholesalers, brokers, retailers, etc.). Instead, describe HOW you will provide the services that you will offer your target market (Note: The Product Description section describes WHAT you will provide). As a service provider, describe your physical facility, how you will deliver your service, and other aspects that suggest you are taking that which is intangible and making it tangible.