The point at which a new product in the portfolio has contributed revenue gains equivalent to any revenue losses caused by cannibalizing an older product in the portfolio
The percentage of
New Product Unit Volume
that are sales that would have gone to the
Old Product
had the
New Product
not been introduced. The actual cannibalization rate must be
lower
than the
Break Even Cannibalization Rate
in order for the new product introduction to be profitable.
To understand the size and financial value of market segments, marketers must decide what market segments to target (i.e., what customers to provide products or services for), and how to price, promote, and distribute the offerings. The Chain Model is an approach to estimating segment value; this approach is called chain model because a series of terms are multiplied together.
The financial value of the customer to the firm, beyond the usual time horizon of one year; takes into account the cost of acquiring a new customer and the cost of keeping (and/or) selling more to a current customer. CLV = SUM(t) Cumulative Retention Rate(t) x Net Customer Contribution(t)
The total lifecycle cost (over the course of a given CLV) to the customer for the benchmark competitor's product, including price, start-up cost, post-purchase cost, and reduced by the competitor's incremental value
The probability that the average customer will still be active at time
t; called this because it represents the cumulative effects of the single-period retention rates over time (e.g. if the percentage of customers retained in each period is
r, then after
t
timer periods the Cumulative Retention rate is r (t-¹) (assuming that retention in the first time period is 100%)
The Economic Value to the Customer (EVC) approach to pricing focuses on the customer and how the customer perceives the value of a product. With this view, the purpose of price is not to recover costs, but to capture the customer's perceived value for the product.
The sum of all costs incurred by the firm that are required to produce and deliver the product but cannot be assigned on a per-transaction basis (depending on the situation costs that are shared across products, such as sales force expense, general and administrative expenses, overhead and taxes, may be excluded or may be allocated in some way across products).
When evaluating a marketing tactic, you must show that the action will generate sales and margins that are sufficient to cover the cost of the action.
incremental expenditures / unit contribution.
The gross contribution of the average customer at time
t
less any direct costs associated with the customer (typically separated into acquisition and retention costs).