How can i run a promotion that i know the market share in a profitable way.Kindly give me the formulas.
To run a promotion in a profitable way while considering market share, you can use the following formulas and steps:
1. Determine the current market share: Calculate the percentage of your sales compared to the total sales in the market. Market share (%) = (Your Sales / Total Market Sales) x 100.
2. Set a target market share: Decide on the desired market share percentage you aim to achieve through the promotion.
3. Calculate the market share increase needed: Calculate the difference between the target market share and the current market share. Market Share Increase (%) = Target Market Share (%) - Current Market Share (%).
4. Determine the promotion costs: Estimate the total costs associated with the promotion, including advertising, discounts, product samples, etc.
5. Calculate the minimum sales increase needed: Determine the minimum increase in sales required to achieve the desired market share increase. Minimum Sales Increase ($) = Promotion Costs / (Market Share Increase (%) / 100).
6. Evaluate profitability: Estimate the additional profit generated from the minimum sales increase. Profitability ($) = (Minimum Sales Increase ($) x Profit Margin) - Promotion Costs.
Note: Profit Margin refers to the percentage of revenue that represents profit after deducting all costs).
By utilizing these formulas, you can assess the viability of your promotion and determine if it is financially feasible to achieve the desired market share increase while maintaining profitability.