MARKETING TERM of the WEEK: Stretchy Metrics Edition

Price elasticity is generally expected to be most closely related to which of these metrics:

1. Profit after Tax
2. Contribution margin as a percentage of selling price
3. Return on Investment, OR
4. Brand loyalty

ANSWER

2) Contribution margin as a percentage of sales is generally close to the difference between selling price and marginal costs as a percentage of sales. Lower price elasticities give marketers more opportunity and incentive to price higher. [Thanks to Professor Paul Farris for this week’s question!]

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Marketing Term of the Week ©2023 Universal Marketing Dictionary