Marketing managers are facing increased accountability for the financial implications of their actions. This appendix provides a basic introduction to measuring marketing financial performance. Such financial analysis guides marketers in making sound marketing decisions and in assessing the outcomes of those decisions.

The appendix is built around a hypothetical manufacturer of consumer electronics ­products—HD. The company is introducing a device that plays videos and television programming streamed over the internet on multiple devices in a home, including high­definition televisions, tablets, and mobile phones. In this appendix, we will analyze the various decisions HD’s marketing managers must make before and after the new-product launch.

The appendix is organized into three sections. The first section introduces pricing, break-even, and margin analysis assessments that will guide the introduction of HD’s new product. The second section discusses demand estimates, the marketing budget, and marketing performance measures. It begins with a discussion of estimating market potential and company sales. It then introduces the marketing budget, as illustrated through a pro forma profit-and-loss statement followed by the actual profit-and-loss statement. Next, we discuss marketing performance measures, with a focus on helping marketing managers to better defend their decisions from a financial perspective. In the third section, we analyze the financial implications of various marketing tactics.

Each of the three sections ends with a set of quantitative exercises that provide you with an opportunity to apply the concepts you learned to situations beyond HD.