Skip to content

Baneharbinger

Help You Grow Your Business

Contribution Margin Benefits to Marketing Strategy

Posted on November 18, 2015August 1, 2022 By Rihanna

Marketing StrategyMaybe you’ve heard the old saying: “Our sales volume goes up, but why don’t we make a profit?”. The main cause is most likely the ineffectiveness of the business’s marketing strategy and efforts. A business or company that experiences such a thing may not knowingly invest its money in a wasted marketing effort. But more to their ignorance of how to take advantage of effective marketing efforts. One way for your business marketing strategy or effort to be effective is to take advantage of the Contribution Margin.

Not only as a Financial Statement Analysis tool but the Contribution Margin concept can also be effectively used in business marketing strategies. By utilizing the Contribution Margin concept appropriately, you can be sure that this adage will not be experienced by your business.

Overview of Contribution Margin

The contribution Margin is the difference between the revenue you generate from sales and the variable costs of your business. And the difference is used as an indicator of your business’s ability to cover fixed costs.

Fixed costs are costs that the company pays to stay alive even if your company is carrying out production activities or not. While variable costs are costs that change depending on how much you sell your product. In particular, marketing costs can be included in the category of variable costs.

Contribution margin equals total revenue minus variable costs. So, if you made $5000 on sales and spent $1000 on variable costs to make it happen, your Contribution Margin would be $4,000.

This article focuses on how you can streamline your marketing costs, which include variable costs. Because marketing efficiency can be a determining factor in whether your company is in a “green” or “red” state.

How to Increase Your Business Contribution Margin?

Regarding the previous explanation, it is clear that a high Contribution Margin is a key to the success of marketing strategies and efforts. But how can you improve it?

The key is to identify which aspects are contributing and which are not in your business marketing strategy and efforts. Get rid of things that don’t contribute to your marketing strategy. And your Contribution Margin will increase.

For example, you are running an SEO (Search Engine Optimization ) marketing strategy. And you may be wasting 76% of your budget to produce articles with keywords that will not lead to your business sales.

Simply cut a percentage of your budget towards an SEO strategy and redirect articles created with more effective keywords. Then you can dramatically increase your Contribution Margin without increasing your marketing spend.

Once you know how to increase your marketing Contribution Margin to 5x or better, your marketing efforts will become the “growth engine” for your company.

While not every business can achieve great results, achieving a Contribution Margin of 5x makes sense for most marketing efforts. You only need time, effort, and precision.

Conclusion

There are many more ways to calculate Contribution Margin related to your marketing strategy and efforts. In this article, we only provide an overview and basic knowledge of how vital the Contribution Margin value is to a business marketing strategy. And finding the Contribution Margin value takes extra time and effort. But if you can do it, you can break the adage mentioned at the beginning of this article. And you will take your company or business to an amazing development.

About, Business, Business Checks, Business Ideas, Business News, Business News Articles, Business Plan, Business Website, Finance, Income, Online, Opportunity Tags:business, business development, business marketing, business strategy, business tips, marketing strategy

Post navigation

Previous Post: Easy Steps to Build Your Business Brand Equity
Next Post: Important Elements in Marketing, What Are?

Recent Posts

  • Clover Solo POS Review
  • What You Need to Know About VoIP Video Conferencing
  • You Can Be The Boss With Proper Internet Marketing
  • Using Internet Marketing To Its Fullest With These Ideas
  • Turning Your Ambition Into Internet Marketing Gold

Recent Comments

No comments to show.

Archives

  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • August 2021
  • July 2021
  • May 2021
  • July 2020
  • May 2020
  • March 2020
  • August 2019
  • January 2019
  • December 2018
  • March 2018
  • September 2017
  • October 2016
  • January 2016
  • November 2015
  • August 2015
  • February 2011
  • December 2010
  • October 2009
  • September 2009
  • July 2008
  • May 2008
  • January 2008
  • October 2007
  • September 2007
  • August 2007
  • May 2007
  • February 2005
  • January 2005
  • December 2004
  • September 2004
  • August 2004
  • June 2004
  • January 2004
  • June 204

Categories

  • About
  • Business
  • Business Checks
  • Business Ideas
  • Business Insider
  • Business Letter
  • Business Line
  • Business News
  • Business News Articles
  • Business Owner
  • Business Plan
  • Business Website
  • Business Week
  • Economic News
  • Finance
  • Financial News
  • Income
  • Money
  • Online
  • Online Business
  • Opportunity
  • Profit
  • Profitability
  • Small Business
  • Small Business Ideas
  • Starting A Business
  • The Business

Copyright © 2023 Baneharbinger.

Powered by PressBook WordPress theme