Next week we're going to discuss something I call "Marketing Margin".
- Marketing Margin = Demand - Discounts/Promotions + Shipping Revenue - Shipping Expense - Marketing Ad Cost - Loyalty Expenses - Cost of Goods Sold.
Why would we measure Marketing Margin?
Well, the issue isn't so much that we're measuring Marketing Margin (we measure Profit, and Profit is more important than Marketing Margin) ... the issue is that we do not have a full understanding of how we allocate scarce resources.
In other words, we have limited resources, and as marketers we seem to want to spend every single dollar we're given. This limits the company from doing other smart things.
So next week, we'll look at Marketing Margin, ok?