Retailing Management Cheat Sheet
■ Retail Pricing Formulas
Concept Formula Notes
Markup ($) Retail Price – Cost Difference between retail and cost
Markup % (on retail) (Retail Price – Cost) ÷ Retail Price Often tested
Retail Price (from markup %) Cost ÷ (1 – Markup %) Example: 30/(1 – 0.6) = 75
Keystoning Retail Price = 2 × Cost Shortcut (50% markup)
Initial Markup ($) Planned Retail – Cost Price set at the start
Maintained Markup ($) Net Sales – COGS Actual realized markup
Initial Markup % (Planned Net Sales + Reductions – COGS) ÷ (Planned Net Sales + Reductions) Adjusts for reductions
Gross Margin ($) Net Sales – COGS – Reductions Accounts for markdowns, shrinkage
Markdown ($) Initial Retail – Actual Selling Price Dollar reduction
Markdown % (Markdown ÷ Initial Retail) × 100 % reduction in price
Break-even Quantity (Q*) Fixed Costs ÷ (Price – Variable Cost per unit) Used in pricing decisions
Price Elasticity of Demand (%∆ Quantity Demanded) ÷ (%∆ Price) >1 elastic, <1 inelastic
■ Retail Communication Mix Formulas
Concept Formula Notes
Marginal Analysis Rule Increase promo budget until Incremental Revenue ≥ Incremental Cost Promotion allocation
Return on Advertising (ROA) Net Sales from Campaign ÷ Advertising Expense Measures ad efficiency
Cost per Thousand (CPM) (Advertising Cost ÷ Audience Size) × 1,000 Media planning metric
Reach (%) (# Exposed ÷ Target Market) × 100 % of target exposed
Frequency (avg.) Total Exposures ÷ Audience Reached Average exposures per person
Gross Rating Points (GRP) Reach (%) × Frequency Overall advertising impact
Sales Promotion Lift (Sales with Promo – Sales without Promo) ÷ Sales without Promo × 100 Promo effectiveness
Customer Acquisition Cost (CAC) Total Promotion Spend ÷ # of New Customers Loyalty/CRM campaigns
