Role of Selling in Marketing

A good place to start understanding the role of value is with a brief review of marketing and the role of selling within marketing. For years, introductory marketing textbooks have talked about the marketing concept as an overarching business philosophy. Companies practicing the marketing concept turn to customers themselves for input in making strategic decisions about what products to market, where to market them and how to get them to market, at what price, and how to communicate with customers about the products. These 4 Ps of marketing (product, place or distribution, price, and promotion) are also known as the marketing mix. They are the toolkit marketers use to develop marketing strategy.

Personal selling fits into the marketing mix as part of a firm’s promotion mix, or marketing communications mix, along with advertising and other elements of the promotional message the firm uses to communicate the value proposition to customers. Other available promotional vehicles are sales promotion, including coupons, contests, premiums, and other means of supporting the personal selling and advertising initiatives; public relations and publicity, in which messages about your company and products appear in news stories, television interviews, and the like; and direct marketing, which might include direct mail, telemarketing, electronic marketing (via website or email or social media), and other direct means.²

These elements of marketing communications are referred to as a “mix” to emphasize that, when developing a strategy and budget for marketing communications, companies must decide how to allocate funds among the various promotional elements.

Several factors may affect the marketing communications mix, as shown in Exhibit 3.1. The size and importance of the purchase, complexity of the product, how much information buyers need, degree of price negotiation, number and dispersion of buyers, and whether postpurchase contact is required all drive decisions about the marketing communications mix.

To ensure that the message about a company and its products is consistent, the firm must practice integrated marketing communications (IMC), as opposed to fragmented (uncoordinated) advertising, publicity, and sales programs. IMC is very important to selling, as it keeps the message about the value proposition consistent, which in turn supports the overall brand and marketing strategy. Key characteristics of effective IMC programs are:

1. IMC programs are comprehensive. All elements of the marketing communications mix are considered.
2. IMC programs are unified. The messages delivered by all media, including important communications among internal customers (people within your firm who may not have external customer contact but who nonetheless add value that will ultimately benefit external customers) are the same or support a unified theme.
3. IMC programs are targeted. The various elements of the marketing communications mix employed all have the same or related targets for the message.
4. IMC programs have coordinated execution of all the communications components of the organization.
5. IMC programs emphasize productivity in reaching the designated targets when selecting communication channels and allocating resources to marketing media.³

FedEx has been very successful at IMC, in both B2B and B2C markets. This is important, since the core of FedEx’s business is adding value through high-priced but fast and dependable service. To achieve this, internally all employees are trained to behave as though they have customers whether they actually interface with external users or not. That is, various departments within FedEx practice relationships-building among each other. Good internal marketing provides a consistency of message among employees and shows that management is unified in supporting FedEx’s key strategic theme of adding value through reliability. Externally, FedEx uses all the elements of the marketing communications mix—advertising, personal selling, sales promotion, public relations/publicity, and various methods of direct marketing, including a strong web and social media presence. FedEx is careful to communicate its value proposition consistently via each element of the mix.

Exhibit 3.1 Factors Affecting the Marketing Communications Mix

Role of Marketing in Selling

You just saw that selling plays a crucial role in the success of marketing strategy. But how do things work in the other direction—that is, how does marketing affect selling? As we discussed, the marketing communications mix (or promotion mix) is one element of the overall marketing mix that a firm uses to develop programs to market its products successfully. Products may be physical goods or services. Some firms market primarily services (such as insurance companies), while others market both goods and accompanying services (such as restaurants).

We know that the marketing mix consists of the famous 4 Ps of marketing: product, place (for distribution, or getting the product into the hands of the customer), price, and promotion (marketing communications). Like the elements of the marketing communications mix, each element of the marketing mix plays a large part in forming and communicating the overall bundle of benefits that a customer ultimately will perceive as the value proposition. This is why salespeople benefit from a well-executed marketing mix strategy.

Marketing also has an important role in gaining input and ultimate buy-in from the sales force on marketing strategies. The best way to do this is to involve salespeople and their managers in the marketing planning process from the ground up. Also, good communication lines must always be open between sales and marketing so that salespeople can contribute their considerable insight gained “on the firing line” to marketers engaged in strategic market planning, product development, and all aspects of IMC strategy development and execution.⁴

In truth, salespeople hold incredible value for marketers. The knowledge shared by salespeople provides a more in-depth understanding of the marketplace and the customer that benefits marketing decision making. Leaders who encourage organization members within sales and marketing to build social connections between each other help to ensure that channels exist for the passage of important knowledge, which is a challenge in organizations where sales and marketing operate in a dysfunctional manner or a total vacuum relative to each other.⁵

Recently, there has been considerable talk of something of a “war” between sales and marketing in many organizations. That is, salespeople are from Mars; marketers are from Venus—the idea being that a variety of differences in the goals and roles of sales and marketing people create tension within a firm that can be a challenge to avoid and, if unchecked, can sub-optimize the customer’s experience. Strong executive leadership on the sales and marketing teams, coupled with an organizational culture of mutual respect for each role, can go a long way toward gaining crucial cooperation and collaboration between sales and marketing. Also, regular joint exercises in goal-setting and planning between sales and marketing are a key toward maximizing the customer’s experience with the firm and its offerings. Finally, identifying some performance metrics that both sales and marketing will be evaluated against greatly helps to promote a spirit of mutual focus on the customer’s experience.⁶

For example, nowadays marketing is directly responsible for generating an increasing number of leads for follow up by sales. Unfortunately, in too many cases sales fails to effectively follow up on the leads. This may be because of sheer volume or due to a perception that the lead quality is poor. To fix this, marketing and sales need to work together to establish better prequalification procedures and then prioritize the leads in the funnel so that sales doesn't feel that marketing is just throwing leads against the wall in quantity to see if they stick.⁷

At the end of the day, in order for an organization to do the best possible job of building relationships and creating value, sales needs marketing and marketing needs sales. Both groups must work together to make the customer’s experience with the firm and its offerings the very best experience possible.

Value Is Related to Customer Benefits

Value may be thought of as a ratio of benefits to costs. That is, customers “invest” a variety of costs into doing business with you, including financial (the product’s price), time, and human resources (the members of the buying center and supporting groups). The customers achieve a certain bundle of benefits in return for these investments.

One way to think about customer benefits is in terms of the utilities they provide the customer. Utility is the want-satisfying power of a good or service. There are four major kinds of utility: form, place, time, and ownership. Form utility is created when the firm converts raw materials into finished products that are desired by the market. Place, time, and ownership utilities are created by marketing. They are created when products are available to customers at a convenient location, when they want to purchase them, and facilities of exchange allow for transfer of the product ownership from seller to buyer. The seller can increase the value of the customer offering in several ways:

• • Raise benefits
• • Reduce costs
• • Raise benefits and reduce costs
• • Raise benefits by more than the increase in costs
• • Lower benefits by less than the reduction in costs.⁸

Suppose you are shopping for a car and trying to choose between two models. Your decision to purchase will be greatly influenced by the ratio of costs (not just monetary) versus benefits for each model. It is not just pure price that drives your decision. It is price compared with all the various benefits (or utilities) that Car #1 brings to you versus Car #2.

Similarly, the value proposition a salesperson communicates to customers includes the whole bundle of benefits the company promises to deliver, not just the benefits of the product itself. For example, Dell Computer certainly communicates the customization and bundling capabilities of its PCs to buyers. However, Dell is also careful to always communicate its service after the sale, quick and easy access to their website, and myriad other benefits the company offers buyers. Clearly, perceived value is directly related to those benefits derived from the purchase that satisfy specific customer needs and wants.

For years, firms have been obsessed with measuring customer satisfaction, which at its most fundamental level means how much the customer likes the product, service, and relationship. However, satisfying your customers is not enough to ensure the relationship is going to last. In relationship-driven selling, your value proposition must be strong enough to move customers past mere satisfaction and into a commitment to you and your products for the long run—that is, a high level of customer loyalty. Loyal customers have lots of reasons why they don’t want to switch from you to another vendor. Those reasons almost always are directly related to the various sources of value the customer derives from doing business with you.

Loyal customers, by definition, experience a high level of satisfaction. But not all satisfied customers are loyal. If your competitor comes along with a better value proposition than yours, or if your value proposition begins to slip or is not communicated effectively, customers who are satisfied now quickly become good candidates for switching to another vendor. The reason building relationships with customers is so crucial to building loyalty is that its win-win nature bonds customer and supplier together and minimizes compelling reasons to split apart.⁹

The Value Chain

A famous approach to understanding the delivery of value and satisfaction is the value chain, envisioned by Michael Porter of Harvard to identify ways to create more customer value within a selling firm.¹⁰ Exhibit 3.2 portrays the generic value chain. Basically, the concept holds that every organization represents a synthesis of activities involved in designing, producing, marketing, delivering, and supporting its products. The value chain identifies nine strategic activities (five primary and four support activities) the organization can engage in that create both value and cost.

Exhibit 3.2 The Generic Value Chain

Source: Reprinted with permission of The Free Press, a Division of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance, by Michael E. Porter. Copyright © 1985, 1998 by Michael E. Porter. All rights reserved.

The primary activities in the value chain are:

• • Inbound logistics—how the firm goes about sourcing raw materials for production.
• • Operations—how the firm converts the raw materials into final products.
• • Outbound logistics—how the firm transports and distributes the final products to the marketplace.
• • Marketing and sales—how the firm communicates the value proposition to the marketplace.
• • Service—how the firm supports customers during and after the sale.

The support activities in the value chain are:

• • Firm infrastructure—how the firm is set up for doing business. (Are the internal processes aligned and efficient?)
• • Human resource management—how the firm ensures it has the right people in place, trains them, and keeps them.
• • Technology development—how the firm embraces technology use to benefit customers.
• • Procurement—how the firm deals with vendors and quality issues.

The value-chain concept is very useful for understanding the major activities that can create value at the organizational level. CEOs in recent years have been working hard to align the various elements of the value chain, meaning that all facets of the company work together to eliminate snags that may impair the firm’s ability to secure, build, and maintain long-term relationships with profitable customers.

When the supplier’s value chain is working well, all the customer tends to see are the results: quality products, on-time delivery, good people, and so on. If the value chain develops just one weak link, the whole buyer–seller relationship can be thrown off. For example, a glitch in the value chain of one of Walmart’s vendors can delay delivery, resulting in stockouts in Walmart stores. If this happens repeatedly, it can damage the firms’ overall relationship. To reduce the potential for this happening, Walmart (which is known as a leader in implementing the value chain) requires all vendors to link with its IT system so that the whole process of order fulfillment is as seamless as possible.

Lifetime Value of a Customer

One element depicted in Exhibit 3.2 is margin, which of course refers to profit made by the firm. Back in chapter 1 we were careful to say that the goal of relationship selling is to secure, build, and maintain long-term relationships with profitable customers. If this seems intuitively obvious to you, that’s good. It should. In the past, many firms focused so much on customer satisfaction that they failed to realize that not every satisfied customer is actually a profitable one! Today, firms take great care to estimate the lifetime value of a customer, which is the present value of the stream of future profits expected over a customer’s lifetime of purchases. They subtract from the expected revenues the expected costs of securing, building, and maintaining the customer relationship. Exhibit 3.3 provides a simple example of calculating the lifetime value of a customer.

Selling to this customer is a money-losing proposition in the long run. Firms should not attempt to retain such customers. The analysis raises the prospects of firing a customer, which is a rather harsh way to express the idea that the customer needs to find alternative sources or channels from which to secure the products he or she needs. Of course, this assumes that other, more attractive customers exist to replace the fired one.¹¹ Firms engaged in value-chain strategies who don’t pay attention to margin usually don’t stay in business long.

On the other hand, for profitable customers, increasing the retention rate—meaning keeping customers longer—by increasing loyalty can yield large increases in profits. This is because, as you can see from the calculations in Exhibit 3.3, it is much less costly to retain existing customers than it is to acquire new ones. Exhibit 3.4 shows the potential impact of customer retention on total lifetime profits in different industries. These issues are closely related to CRM, which will be discussed in chapter 5.

Quantifying the value proposition is an important element of successful selling. The Appendix (Selling Math) at the end of this chapter provides an approach, in spreadsheet format, to quantitative analysis of a product and its value to a customer.

Source: Reprinted by permission of Harvard Business School Press. From The Loyalty Effect, by Frederick Reichheld and Thomas Teal. Boston, MA. Copyright 2001 by the Harvard Business School Publishing Corporation, all rights reserved.

So far, we have looked at important issues of value creation from the perspective of the selling firm via the value-chain concept. In the next section, we identify specific value-creating factors the salesperson can communicate to the customer.

Product Quality

David Garvin has identified eight critical dimensions of product quality that can add value.¹²

• • Performance. A product’s primary operating characteristics. For a car, these would be traits such as comfort, acceleration, safety, and handling.
• • Features. Characteristics that supplement the basic performance or functional attributes of a product. For a washing machine, they might include four separate wash cycles.
• • Reliability. The probability of a product malfunctioning or failing within a specified time period.
• • Conformance. The degree to which a product’s design and operating characteristics meet established standards of quality control (for example, how many pieces on an assembly line have to be reworked due to some problem with the output). Conformance is related to reliability.
• • Durability. Basically, how long the product lasts and how much use the customer gets out of the product before it breaks down.
• • Serviceability. Speed, courtesy, competence, and ease of repair for the product.
• • Aesthetics. How the product looks, feels, sounds, tastes, or smells.
• • Perceived quality. How accurately the customer’s perceptions of the product’s quality match its actual quality. In marketing, perception is reality.

For manufacturers of physical goods, product quality is the most fundamental of all sources of value. In the consumer health products space, the name Johnson & Johnson (J&J) has for years been synonymous with product quality. On every dimension listed above, J&J products have excelled. But over the past few years J&J experienced a raft of bad press about contamination in some of its most famous brands of over-the-counter medications. Bottles of tablets and capsules were reported by consumers as containing foreign elements that turned out to be residual materials from a lax production line. For J&J, like any manufacturer, news like this is devastating to its customer relationships—not just end users of the products like us, but also the many retailers that sell J&J products in stores around the globe. The sales force at J&J has been racked by multiple recalls that have left some shelves bare and retail customers scrambling to make up for lost sales and profits by promoting other manufacturers’ items in substitute. The lesson is that, in today’s competitive marketplace, one can never allow product quality to be compromised. At this stage, it remains to be seen if J&J will ever recoup the lost market share based on its highly publicized recent problems in this area.

Channel Deliverables (Supply Chain)

Firms that have excellent supply-chain management systems add a great deal of value for customers. A supply chain encompasses every element in the channel of distribution. FedEx is an organization that brings to its clients excellent supply-chain management as a key value proposition. FedEx salespeople, as well as FedEx’s overall IMC, constantly communicate this attribute to the marketplace.

Integrated Marketing Communications (IMC)

We have already seen how important integration of the marketing message is in managing customer relationships. When Lou Gerstner, former CEO of IBM, took the job, one of the first things he noticed as he visited various IBM field operations was that the image, message, and even the logo of IBM varied greatly from market to market. Such variance is almost always due to poor IMC. IMC starts with a firm’s people understanding and accepting its mission, vision, goals, and values. Then the message about the value proposition gets communicated to employees through internal marketing. Finally, it gets communicated to customers and other external stakeholders through all the elements of the promotion mix. Clients expect and deserve consistency in the way your value proposition is put forth. With great IMC, salespeople can refer to a well-known message about their firm that is all around to solidify the client relationship. IBM’s Gerstner put a great deal of emphasis on cleaning up the firm’s global IMC, which resulted in a clear and consistent message about what IBM stands for and how it delivers value to customers.

Synergy between Sales and Marketing

An easy definition of synergy is that the whole is greater than the sum of its parts. Sales and marketing exhibit synergy when they are both working together for the greater benefit of customers. The whole concept of our Model for Contemporary Selling centers on synergy—seamless organizational processes focused on managing customer relationships. When sales and marketing are out of sync, customers are marginalized and the value proposition is weakened. One way to ensure synergy is with cross-functional selling teams that include members of marketing in key roles.

Procter & Gamble is a firm that has put a great deal of energy into this issue. A vivid example of creating value through synergy is the way P&G develops its regular promotion schedule for its brands. Brand management works directly with field sales management to create a schedule and product mix for the promotions that best serve P&G’s clients. Thus, when a salesperson presents a new promotion to a customer, he or she can sell the value of the thoughtful planning that took into account the customer’s needs and wants in making P&G’s promotional decisions.

One important facilitator of synergy between sales and marketing is the use of dashboards by both teams. You will read more about dashboards in Chapter 5, but for now the concept in a nutshell is that marketing and sales agree on a prioritized shortlist of metrics that will be captured and displayed so that members of each group can easily track progress. Often firms display the dashboard as a homepage on a laptop or tablet. Incentives can be offered for salespeople to gather and report information in support of the dashboard elements.¹³

Execution of Marketing Mix Programs

Firms that do a great job of integrating the marketing mix provide opportunities for value-added selling. Salespeople enjoy communicating with clients about their firm’s plans for product changes, new-product development, and product line extensions. And a history of a strong marketing mix program gives salespeople and the firm credibility that helps turn prospects into new customers. Thus, customers have confidence that your firm will support its products through effective marketing mix programs.

Quality of the Buyer–Seller Relationship (Trust)

A key issue in relationship quality is trust. Trust is a belief by one party that the other party will fulfill its obligations in a relationship.¹⁴ Obviously, building trust is an essential element of selling. It represents confidence that a salesperson’s word (and that of everyone at his or her company) can be believed. It signifies that the salesperson has the customer’s long-term interests at the core of his or her approach to doing business. An atmosphere of trust in a relationship adds powerful value to the process.

The value of trust for salespeople is heightened when they are focusing on selling more comprehensive and in turn complex solutions to other organizations. In the critical relationship initiation stage, the greater the intangibility or complexity of what is being offered by the selling organization the greater the need for trust is on the part of the buying organization. This is because intangible products and complex products inherently increase risk perception on the part of buyers.¹⁵

Service Quality

Services are different from products. In particular, services exhibit these unique properties:

• • Intangibility. Services cannot be seen, tasted, felt, heard, or smelled before they are bought.
• • Inseparability. Unlike goods, services are typically produced and consumed simultaneously.
• • Variability. The quality of services depends largely on who provides them and when and where they are provided.
• • Perishability. Services cannot be stored for later use.

These unique properties of services create opportunities for firms to use them to add value to the firm’s overall product offerings and for salespeople to communicate this value to customers. Ethical Dilemma provides you with an interesting situation in which the future viability of service quality as a value-adding aspect of a customer relationship is called into question.

Because of the unique properties of services, it should not be too surprising that the dimensions of service quality are different from those for goods:

• • Reliability. Providing service in a consistent, accurate, and dependable way.
• • Responsiveness. Readiness and willingness to help customers and provide service.
• • Assurance. Conveyance of trust and confidence that the company will back up the service with a guarantee.
• • Empathy. Caring, individualized attention to customers.
• • Tangibles. The physical appearance of the service provider’s business, website, IMC materials, and the like.¹⁶

Nowadays, even when selling physical goods, these dimensions of service quality often trump other sources of value for customers (assuming no product quality problems, of course!).

Salesperson Professionalism

Your own level of professionalism in the way you handle yourself with customers is a great potential source of value to them. What is professionalism? It includes little things such as clear and concise correspondence, proper dress, good manners, and a positive attitude and can-do demeanor. Part Two of this book covers many aspects of how to exhibit professionalism as you go about relationship selling.

Brand Equity

Brand equity is the value inherent in a brand name in and of itself.¹⁷ Brand equity is a bit like the concept of goodwill on the balance sheet, since if a company liquidated all its tangible assets, a great brand would still add terrific value to the firm. Examples of brands with high equity are Coke, IBM, McDonald’s, and Apple. In selling, when all else is equal, your job is generally easier if you can sell the value of your brand. Global Connection builds an interesting case for salespeople developing their own personal global brand.¹⁸

Corporate Image/Reputation

Closely related to brand equity is the concept of how corporate image or reputation adds value. Some firms that have financial difficulties continue to gain new clients and build business simply based on their reputation. On the other hand, the perils of losing and then trying to regain company reputation are well documented. Many firms in the financial services sector saw their brands tarnished as they were blamed (rightly or wrongly) for contributing to the economic downturn that began in the late 2000s. It is demoralizing for a salesperson to have to represent a firm to customers when its name is in the press as a “bad guy.” Selling for an organization with a strong, positive image provides a leg up on competition, and the confidence that image brings to clients can overcome many other issues in making a sale.

Application of Technology

Some firms add substantial value to customer relationships through technology. Fortunately for the salesperson, communicating this value-adding dimension is usually quite straightforward. Pharmaceutical companies like Pfizer and Merck have developed sophisticated software for medical professionals that help them organize their daily jobs. Such activity is one example of strategic partnerships, which are more formalized relationships where companies share assets for mutual advantage. We’ll look more closely at value-adding technology in chapter 5.

Price

Now we are back to where we started in this chapter: price. As we said before, many salespeople have difficulty transitioning from selling price to selling value. You may be surprised to see price mentioned as a value-adding factor in selling. However, remember the discussion on value as a ratio of benefits to costs. For customers, value is the amount by which benefits exceed their investment in various costs of doing business with you (including the product’s price). And one of the ways we pointed out that you can increase value is by reducing costs (in this case, lowering price).

For some firms, low price is a key marketing strategy. Usually, such firms manage to compete on price by having consistently lower costs than competitors. The lower cost structure may have a number of sources, among them greater production efficiencies, lower labor costs, or a better supply-chain management system. Famously, Southwest Airlines has competed successfully for years using a low-cost strategy. Its operating efficiencies translate into not only lower prices but also better profit margins.

Sometimes firms feel relegated to competing on price because they see themselves as being in a commodity market. That is, their offering has no real differentiation from that of competitors and therefore a purely transactional selling approach is deployed (we discussed transactional selling in chapter 1). Put another way, the salesperson has none of the other value-adding sources above to bring to the customer. An interesting question that is more for a marketing strategy course than a selling course is how or if a firm can escape commoditization and find ways to strategically differentiate itself through some of the means above. For now, suffice it to say that transactional selling is unlikely to provide you with the kind of stimulating career opportunity we laid out in chapter 2 and it is not the approach that is the focus of this book.

Acquisition of new customers

In a retail purchase situation a customer may have many concerns and questions. Often a critical question in taking on a new product or service is, would the addition of your product or service actually bring new customers to the store? Keep in mind that consumers today are overloaded with product choices and a vast array of convenient purchasing options. When was the last time you went out of your way to find a particular product? Most likely this would occur when the product is a specialty good with high brand recognition. In this selling scenario, you would want to prepare a ROI spreadsheet.

Retention or retaining new customers

Does the addition of your product or service allow the buyer to have better customer satisfaction? As we have discussed in relationship selling, exceeding customers’ expectations results in keeping customers. It is much less expensive to keep existing customers than to attract new ones. How much is this actually worth to the company? It is possible to see the value of retaining particular customers through different kinds of analysis.

• • If the goal is to determine the worth of a customer you would use the lifetime value formula (see earlier discussion in this chapter).
• • If the objective is customer retention, you would choose an ROI spreadsheet using the lifetime value of the customer offset by the inventory costs of your product.

Profitability

Profit is generated by a reduction in costs or an increase in sales. Questions that are frequently addressed in this selling scenario include: Does the addition of your product or service reduce labor or operational costs? Will the purchase of the product by the reseller increase sales? The information to address these questions can be measured and dealt with in a quantitative analysis.

If the profitability objective is based primarily on reducing costs, you should choose the ROI spreadsheet. The cost savings would be compared to the cost of purchase to see if the ROI is positive. The bottom line of the ROI spreadsheet is the net savings or return to the company. If the purchase produces a positive ROI—in other words, if the savings are greater than the costs—it is a good match between the buyer’s needs and the seller’s product/service. If the purchase would produce a negative ROI—the cost is greater than the savings—it may mean the prospect is not a qualified buyer or the value proposition is not well developed (for example, there are too many product features relative to the cost targets for the customer).

If the value proposition is profitability based on increasing sales, you should choose the profit margin spreadsheet. The revenue from additional sales would be compared to the cost of purchase to project profit margin. The reseller spreadsheet is a simple calculation of costs less discounts, offset by retail price. An actual seller would supply costs and discounts. It is always important to be as accurate as possible in assigning costs and discounts; a thorough analysis of the customer’s business and your company’s own pricing flexibility is crucial to developing an accurate forecast. All research including interviews with store personnel should be documented and/or presented as evidence in your sales presentation. Let’s examine each of these spreadsheet models.

Understanding the Profit Margin Spreadsheet

• • The Units column indicates the size of the purchase in the multiples in which they are sold. For example, some products are sold only by the case and therefore units would be number of cases. If products were sold individually then it would be the number of individual units.
• • Unit cost is the wholesale price of the unit. If your unit were a case, it would be the price of the case. As stated above, this information would be readily available to you in your industry. It is not easily ascertained outside the company. You might have to find an industry average, ask for a range from an employee, or work backwards from retail price. To work backwards, you could take the retail price less the markup and discover the cost. For example, if you see a product advertised for $100 and you research the industry and discover there is usually 100 percent average industry markup, you can deduce that the cost would be $50. Another option would be to check prices at online discounters or cost clubs. They sell closer to wholesale and you could use their numbers as your wholesale cost.
• • Total cost is number of units multiplied by the unit cost. Be sure you are using concurrent numbers. For example, if you discover the wholesale cost of a bottle of water is. 29, but it is sold in cases of 12, you will first need to translate the unit cost to the cost for a case (12 ×. 29), or break down the number of units from number of cases to number of actual bottles.

Example

• • Manufacturer’s suggested retail price (MSRP) is the price of the product to the end user. It is the price without promotional allowances (markdowns, on sale, clearance, etc.). To find the best MSRP you should go to an actual brick-and-mortar retail location, not a discounter, and research the price at which your product is selling. Online resellers may discount the price and therefore you will not get an accurate MSRP. Manufacturers suggest a retail price to maintain brand equity. If you shop at a reseller location that also maintains strong brand equity you will get a more accurate MSRP.
• • Revenue is the amount of sales generated by the order. The MSRP would be multiplied by the number of units. Be especially careful that you convert units into individual units because the MSRP will be for one unit. If your total cost was figured by the case, you will need revenue projections that include all the units within the case.