Marketing expenses

The R.O.I. analysis fails to take into account any startup expenses or to consider how long it will take the plant to reach full capacity. It ignores the fact that research and development costs, marketing expenses, and engineering expenses, are all made at different points of time. It considers only the mature plant. 

In addition to the manufacturing costs, other general expenses are involved in any company s operations. These general expenses may be classified as (1) administrative expenses, (2) distribution and marketing expenses, (3) research and development expenses, (4) financing expenses, and (5) gross-earnings expenses. 

Distribution and marketing expenses are costs incurred in the process of selling and distributing the various products. These costs include expenditures for materials handling, containers, shipping, sales offices, salesmen, technical sales service, and advertising. 

The benefits of consolidation can include superior capacity utilization, the sharing of best practice process improvements, the elimination of overlaps in the distribution system, and the use of geographically closer plants for sourcing. Research and development and sales and marketing expenses can also be cut back by eliminating duplications in operations. Some non-traditional players (e.g., financial investors) have been able to slash their sales, general and administration costs by as much as 40 percent on the back of consolidation moves. 

Distribution and marketing expenses sales offices, salesperson wages and expenses, shipping, advertising, marketing, and technical sales... 

OTA assumed 22,5 percent of pharmaceutical companies total sales are devoted to marketing. These expenditures vary over the life of a product, however, and can be expected to be high in the early years of marketing and relatively low after a product loses patent protection. Caves, Whinston and Hurwitz reported on originator brand promotion expenses in the year of patent expiration for a sample of 21 drugs that lost patent protection between 1982 and 1987. Promotion comprised 6.5 percent of total sales in the year of expiration (73). OTA therefore assumed marketing expenses would be 6.5 percent of sales in the years subsequent to patent expiration. 

OTA assumed marketing expenses in the first year after product approval would be equal to total worldwide sales in the second year, they would be equal to 50 percent of worldwide sales (159). In the 3rd to 9th year (when patents expire), OTA assumed marketing costs would be equal to the percent that equates total marketing costs over the product life cycle to 22.5 percent of total sales over the life cycle. This calculated percent was 40.6. 

Three generic companies whose annual financial statements were examined by OTA incurred R D costs of 5 to 6 percent of sales in 1990. In addition, marketing expenses by one firm (that reported such expenses separately) amounted to 6.5 percent of sales, (36) the same as that estimated for originator firms in the year of patent expiration (73). 

Operating costs excluding depreciation and interest Marketing expenses Production and distribution losses... 

A different but somewhat similar contract works for Model D. We need a contract that would allocate some inventory-related risk to the retailer, while at the same time allocating some marketing expenses to the wholesaler. One such contract would be for the retailer to compensate the wholesaler for each unit of the inventory carried over while the wholesaler subsidizes a portion of... 

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