Summary
Application: Oh Market Delights
States :
The delicatessen “Ô Délices du Marché” wants to promote its regional products by offering an exceptional discount during the end-of-year holidays. The products concerned are positioned in a high-end market and require maintaining competitive prices while preserving the target margin. The following data is shared for certain products: the unit sales price, the unit purchase cost and the expected quantity sold. Management wants to calculate the impact of the proposed discounts on profitability.
Work to do :
- Calculate the price after discount if a 10% discount is applied to a product selling for €50.
- Estimate the unit margin after the discount for a product whose purchase cost is €30 and the initial sale price is €50.
- What is the total sales revenue with and without discount for an expected quantity sold of 200 units?
- Determine the margin rate before and after discount.
- Analyze the effect of this discount on the company's pricing strategy in terms of sales volume and customer satisfaction.
Proposed correction:
-
To calculate the price after discount, use the formula: Price after discount = Original price x (1 – Discount percentage).
Replacing: €50 x (1 – 0,10) = €45.
The price after discount is therefore €45. -
The unit margin after discount is determined by: Unit margin = Selling price after discount – Purchase cost.
Replacing the price after discount: €45 – €30 = €15.
The unit margin after discount is €15. -
Turnover without discount: €50 x 200 = €10.
Turnover with discount: €45 x 200 = €9.
Thus, the discount results in a reduction in turnover of €1.
-
Initial margin rate = ((€50 – €30) ÷ €30) x 100 = 66,67%.
Margin rate after discount = ((€45 – €30) ÷ €30) x 100 = 50%.
The margin rate decreases by 16,67% after the discount. -
By reducing the price through a discount, “Ô Délices du Marché” optimizes customer satisfaction through a clear price advantage, potentially stimulating sales volume. However, a critical analysis is essential to ensure that the increase in sales compensates for the decrease in margin.
Formulas Used:
| Title | Formulas |
|---|---|
| Price after discount | Original price x (1 – Discount percentage) |
| Unit margin | Sale price after discount – Purchase cost |
| Turnover | Unit selling price x Quantity sold |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: Innovatech Solutions
States :
The high-tech company “Innovatech Solutions” is planning to launch a new product. To attract the first customers, it offers an initial discount. The sales department must understand the financial implications of this promotional strategy in terms of price, margin and profitability. The data includes the manufacturing cost, standard selling price and estimated launch volume.
Work to do :
- Calculate the new selling price after applying a 15% discount on the initially planned price of €120.
- Determine the loss of unit margin due to the discount knowing that the manufacturing cost is €75.
- Estimate the total lost margin if 500 units are sold with the discount.
- How is the markup rate affected before and after the discount?
- Discuss the strategic considerations Innovatech Solutions must take into account when offering this discount.
Proposed correction:
-
Use the post-discount price formula: Post-discount price = Original price x (1 – Discount percentage).
Replacing: €120 x (1 – 0,15) = €102.
The price after discount is €102. -
The unit margin loss is calculated by: (Initial selling price – Manufacturing cost) – (Selling price after discount – Manufacturing cost).
Replacing: (€120 – €75) – (€102 – €75) = €45 – €27 = €18.
The unit margin loss is €18. -
Total lost margins = Unit margin loss x Quantity sold.
Replacing: €18 x 500 = €9.
Lost margins total €9 for 000 units sold.
-
Initial markup rate = ((€120 – €75) ÷ €120) x 100 = 37,5%.
Markup rate after discount = ((€102 – €75) ÷ €102) x 100 = 26,47%.
The discount significantly reduces the markup rate. -
Innovatech Solutions must weigh the medium/long term interest of capturing customers immediately with lower profits against the potential impact on the perception of the value of their technology. The discount could attract customers quickly, but it is crucial not to compromise the quality image or financial longevity.
Formulas Used:
| Title | Formulas |
|---|---|
| Price after discount | Original price x (1 – Discount percentage) |
| Loss of unit margin | (Initial PV – Manufacturing cost) – (PV after delivery – Manufacturing cost) |
| Total lost margins | Unit Margin Loss x Quantity Sold |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Green House
States :
“Maison Verte”, an organic garden center, needs to boost its sales of ordinary plants during a low seasonal period. A campaign that offers a targeted discount is being prepared. The finance department must analyze the economic viability of these discounts and how they affect the margin of its flagship products. The values provided are used to simulate and adjust promotional operations.
Work to do :
- Calculate the post-25% discount sale price for a plant initially sold at €20.
- Find the unit margin after discount if the cost of purchasing a plant is €12.
- What impact on net turnover for a sales target of 150 plants?
- Determine how the rate of return changes before and after the discount.
- Draw conclusions about the long-term effects of maintaining these types of promotions for the brand.
Proposed correction:
-
To find the price after discount: Price after discount = Original price x (1 – Discount percentage).
Replacing: €20 x (1 – 0,25) = €15.
The sale price after discount is €15. -
Unit margin after discount: Unit margin = Selling price after discount – Purchase cost.
Replacing: €15 – €12 = €3.
The unit margin after discount is €3. -
Net turnover without discount: €20 x 150 = €3.
Net turnover with discount: €15 x 150 = €2.
The effect of the discount reduces turnover by €750.
-
Initial rate of return = ((€20 – €12) ÷ €12) x 100 = 66,67%.
Rate of return after discount = ((€15 – €12) ÷ €12) x 100 = 25%.
The drastic drop in the rate of return makes this strategy risky. -
Maison Verte must assess the perceptual impact of making products consistently available at low prices. While this practice may boost sales in the short term, it must be factored in the prospects of customer loyalty and the appeal of sufficient sales volume to offset reduced margins.
Formulas Used:
| Title | Formulas |
|---|---|
| Price after discount | Original price x (1 – Discount percentage) |
| Unit margin | Sale price after discount – Purchase cost |
| Net sales | Unit selling price x Quantity sold |
| Rate of return | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: Art and Decoration
States :
"Art et Décoration", a store specializing in handcrafted furniture, plans to lower its prices through discounts to mark the store's anniversary. Strategic decisions must be based on in-depth analysis to balance sales volumes and profit margins. Forecast parameters concern unit price, costs and target quantities.
Work to do :
- What would be the final price with a 20% discount applied to a piece of furniture initially costing €250?
- Establish the remaining margin per unit sold if the production cost is €180.
- Calculate the overall margin gain or loss if 100 copies are sold with the discount.
- How does the profit rate adjust following this discount from the initial price?
- Offer a critical reflection on the ideal frequency of such campaigns for Arts et Décoration.
Proposed correction:
-
The final price after discount is obtained by: Price after discount = Initial price x (1 – Discount percentage).
Replacing: €250 x (1 – 0,20) = €200.
The final price of the furniture is €200 after discount. -
Unit residual marginality = Selling price after discount – Production cost.
Replacing: €200 – €180 = €20.
The remaining unit margin after discount is €20. -
Calculation of lost margin for 100 units: (Initial unit margin – Unit margin after discount) x Number of units.
Where Initial unit margin = €250 – €180 = €70; therefore Lost margin = (€70 – €20) x 100 = €5.
The discount wiped out €5 of margin for 000 pieces of furniture.
-
Initial profit rate = ((€250 – €180) ÷ €180) x 100 = 38,89%.
Profit rate after discount = ((€200 – €180) ÷ €180) x 100 = 11,11%.
The discount produces a significant drop in expected profit, requiring strategic adjustments. -
To ensure sustainability, Art et Décoration must frame this strategy of celebratory discounts with a view to continuous analysis. The imperative is to time these discounts at key moments to maximize customer impact while preserving security and financial dynamics.
Formulas Used:
| Title | Formulas |
|---|---|
| Price after discount | Original price x (1 – Discount percentage) |
| Unitary marginality | Selling price after discount – Production cost |
| Total lost margin | (Initial Margin – Unit Margin after Discount) x Number of Units |
| Profit rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: Authentic Flavors
States :
“Authentic Flavors” stands out in the fast food sector with renowned takeaway dishes. To boost a marketing campaign, the brand offers a discount. It is imperative to measure the impact of this discount on the price, margins, and total gross margin in terms of final viability.
Work to do :
- Calculate the new price of a €12 dish with an 18% discount.
- If the cost of manufacturing the dish is set at €7, what will the unit margin be after discount?
- What is the reduction in total margins if 300 dishes benefit from this discount?
- Evaluate the change in the initial margin rate compared to the margin rate after discount.
- Analyze the balance between applying this discount and customer loyalty at Saveurs Authentiques.
Proposed correction:
-
Using the equation: Price after discount = Original price x (1 – Discount percentage).
Replacing: €12 x (1 – 0,18) = €9,84.
The new price after discount is €9,84. -
Unit margin after discount: Selling price after discount – Manufacturing cost.
Replacing: €9,84 – €7 = €2,84.
The unit margin after discount is €2,84. -
Total initial margins: (€12 – €7) x 300 = €1.
Total margins after discount: (€9,84 – €7) x 300 = €852.
The total margin reduction is therefore €648.
-
Initial margin rate: ((€12 – €7) ÷ €7) x 100 = 71,43%.
Margin rate after discount: ((€9,84 – €7) ÷ €7) x 100 = 40,57%.
The analysis requires adjusting the strategy to increase sales without losing too much margin. -
Saveurs Authentiques benefits from discounts that generate increased sales. However, it is crucial that this method does not devalue its unique positioning. Loyalty is based on the discreet alliance between occasional promotions and an unalterable value proposition.
Formulas Used:
| Title | Formulas |
|---|---|
| Price after discount | Original price x (1 – Discount percentage) |
| Unit margin after discount | Selling price after discount – Manufacturing cost |
| Total margin reduction | (Initial Margin – Margin after Discount) x Quantity |
| Margin rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: Tech Express
States :
The company "Tech Express", a specialist in electronic accessories, wants to lower the prices of certain products through progressive discounts to accompany the introduction of a new model. It is appropriate to evaluate these adjustments in terms of maintaining margins and sales forecasts.
Work to do :
- Calculate the reduced price of an accessory worth €45 after applying a 12% discount.
- If the production cost is €30, estimate the unit margin after this discount.
- What percentage does the decrease in margin of 500 affected items represent?
- What is the impact on the markup rate for this same product?
- Recommend a strategy to adjust these discounts while maintaining an attractive business model.
Proposed correction:
-
To find the discounted price: Price after discount = Initial price x (1 – Discount percentage).
Replacing: €45 x (1 – 0,12) = €39,60.
The new price after discount is €39,60. -
Unit margin after discount = Selling price after discount – Production cost.
Replacing: €39,60 – €30 = €9,60.
The unit margin after discount is €9,60. -
Total margin reduction for 500 items = (€45 – €39,60) x 500 = €2.
As a percentage: (€2 ÷ (€700 x 45)) x 500 = 100%.
The margin loss on 500 units is equivalent to a 12% discount applied uniformly.
-
Initial markup rate: ((€45 – €30) ÷ €45) x 100 = 33,33%.
Markup rate after discount: ((€39,60 – €30) ÷ €39,60) x 100 = 24,24%.
The rate is falling, highlighting a need for adaptation in terms of sales volume. -
Tech Express should consider a discount policy based on precise segmentations, as encouraging certain customers through targeted offers could generate sales beyond simple volume adjustments, thus improving overall profitability.
Formulas Used:
| Title | Formulas |
|---|---|
| Price after discount | Original price x (1 – Discount percentage) |
| Unit margin after discount | Selling price after discount – Production cost |
| Total margin decrease | (Initial PV – Price after discount) x Quantity |
| Brand taxes | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Chic Style
States :
The ready-to-wear store "Style Chic" is preparing for a sales season with discounts to get rid of old collections. A rigorous calculation is required to calculate prices, understand the reduction on margins, and propose a pricing strategy that maintains turnover.
Work to do :
- Calculate the final price of a dress whose initial price is €60, with a 25% discount allocated.
- A dress costs €30 to produce. What is the profit margin per unit after discount?
- Calculate for 200 dresses, how much margin is lost in total due to the discount.
- Analyze how the profit rate changes before and after the discount.
- Make a recommendation on the frequency and aggressiveness of such discounts for Style Chic.
Proposed correction:
-
Calculation of price after discount: Price after discount = Initial price x (1 – Discount percentage).
Replacing: €60 x (1 – 0,25) = €45.
The final price after discount for the dress will be €45. -
Unit margin after discount = Price after discount – Cost of production.
Replacing: €45 – €30 = €15.
The profit margin per unit after discount is €15. -
Total margin lost for 200 dresses = (Initial margin per dress – Margin after discount) x Quantity.
With Initial Margin: €60 – €30 = €30.
So Lost Margin = (€30 – €15) x 200 = €3.
By applying the discount, Style Chic loses €3 of margin for 000 dresses.
-
Initial profit rate: ((€60 – €30) ÷ €30) x 100 = 100%.
Profit rate after discount: ((€45 – €30) ÷ €30) x 100 = 50%.
The profit rate is halved after the discount, indicating the importance of targeting sales volume. -
Chic Style should position discounts at specific times or on specific items to create exclusivity and urgency. A moderate but targeted discount schedule can keep the excitement going while not reducing the perceived value of the product too much.
Formulas Used:
| Title | Formulas |
|---|---|
| Price after discount | Original price x (1 – Discount percentage) |
| Unit margin after discount | Price after discount – Production cost |
| Total margin lost | (Initial margin per dress – Margin after discount) x Quantity |
| Profit rate | ((PV HT – PA HT) ÷ PA HT) x 100 |
Application: Eco Health
States :
The natural health product chain “Eco Santé” applies discounts on its assortments during health awareness campaigns. The analyses must identify the financial consequences of these reductions on prices, net margin and the sustainability of the pricing model.
Work to do :
- Find the revised price of a health product initially at €15 with an 8% discount.
- Knowing that the production cost is €9, what is the unit net margin after discount?
- What would be the correspondence in the overall margin reduction for 600 products sold on sale?
- Estimate the change in the margin rate caused by applying the discount.
- Evaluate how Eco Santé can use these discounts to create sustainable sales without compromising margin.
Proposed correction:
-
To find the discounted price: Price after discount = Original price x (1 – Discount percentage).
Replacing: €15 x (1 – 0,08) = €13,80.
So the price after discount is €13,80. -
Unit net margin after discount = Price after discount – Cost of production.
Replacing: €13,80 – €9 = €4,80.
The unit net margin after discount is €4,80. -
Overall margin reduction for 600 products: (Initial unit margin – Unit margin after discount) x Quantity.
Where Initial unit margin: €15 – €9 = €6.
Total reduction = (€6 – €4,80) x 600 = €720.
The discount generates a total margin reduction of €720.
-
Initial margin rate: ((€15 – €9) ÷ €15) x 100 = 40%.
Margin rate after discount: ((€13,80 – €9) ÷ €13,80) x 100 = 34,78%.
Strategic adaptation in terms of sales volume is necessary to make up for the loss in margin rate. -
Eco Santé must ensure that their discounts promote product trials and encourage customer loyalty while optimizing cost. Deliberate frequency and tightness of targeting creates a rich and loyal base of long-term customers.
Formulas Used:
| Title | Formulas |
|---|---|
| Price after discount | Original price x (1 – Discount percentage) |
| Unit net margin after discount | Price after discount – Production cost |
| Overall margin reduction | (Initial unit margin – Unit margin after discount) x Quantity |
| Margin rate | ((PV HT – PA HT) ÷ PV HT) x 100 |
Application: Gourmet Escape
States :
“Gourmet Evasion,” a gourmet food delivery company, is introducing discounts for its new and returning users to boost acquisition and retention. They should examine the impact of these strategies on key financial values such as selling price, profit margins, and overall consistency.
Work to do :
- Calculate the reduced price of a meal at €25 after a 20% discount.
- With a meal preparation cost of €15, determine the unit margin after applying the discount.
- Deduct the total amount saved by customers for 200 meals purchased in rebate.
- How does the profit rate evolve before and after the discount?
- Provide an opinion on how these discounts can be optimized in terms of satisfaction and loyalty.
Proposed correction:
-
Price after discount: Initial price x (1 – Discount percentage).
Replacing: €25 x (1 – 0,20) = €20.
The reduced price of the meal is €20 after discount. -
Unit margin after discount = Selling price after discount – Preparation cost.
Replacing: €20 – €15 = €5.
The unit margin after discount is €5. -
Total amount saved by customers: (Original price – Price after discount) x Quantity.
Savings = (€25 – €20) x 200 = €1.
Customers will have saved a total of €1.
-
Initial profit rate: ((€25 – €15) ÷ €15) x 100 = 66,67%.
Profit rate after discount: ((€20 – €15) ÷ €15) x 100 = 33,33%.
Well-planned discount offering can positively influence repeat purchase despite the initial reduction in the profit rate. -
To make these discounts sustainable, Gourmet Évasion could link them to customer reviews to create positive feedback and word-of-mouth phenomena. Offered temporarily, they can initiate interactions during times of low activity.
Formulas Used:
| Title | Formulas |
|---|---|
| Price after discount | Original price x (1 – Discount percentage) |
| Unit margin after discount | Sale price after discount – Preparation cost |
| Total amount saved | (Initial Price – Price after Discount) x Quantity |
| Profit rate | ((PV HT – PA HT) ÷ PA HT) x 100 |