Marketing Return on Sales (MROS)

MROS measures the effectiveness of marketing by calculating the net marketing contribution as a percentage of revenue (or sales).

Formula: MROS = [(Revenue – Cost of Revenue – Marketing Expenses) / Revenue] * 100

For Amazon: Revenue = $513,983,000.00 Cost of Revenue = $446,343,000.00 Marketing Expenses = $42,238,000.00

MROS for Amazon = [($513,983,000.00 – $446,343,000.00 – $42,238,000.00) / $513,983,000.00] * 100

For Netflix: Revenue = $31,615,550.00 Cost of Revenue = $2,530,502.00 Marketing Expenses = $19,168,285.00

MROS for Netflix = [($31,615,550.00 – $2,530,502.00 – $19,168,285.00) / $31,615,550.00] * 100

Marketing Return on Investment (MROI): MROI measures the effectiveness of marketing by calculating the net marketing contribution as a percentage of marketing expenses.

Formula: MROI = [(Revenue – Cost of Revenue – Marketing Expenses) / Marketing Expenses] * 100

For Amazon: MROI for Amazon = [($513,983,000.00 – $446,343,000.00 – $42,238,000.00) / $42,238,000.00] * 100

For Netflix: MROI for Netflix = [($31,615,550.00 – $2,530,502.00 – $19,168,285.00) / $19,168,285.00] * 100

To compare the two companies’ marketing efficiency, you can now calculate these values using the given data. Higher MROS and MROI percentages indicate more efficient marketing spending. After calculating, you can compare the results to determine which company seems to have spent their marketing dollars more efficiently.

Now, moving on to Question 31:

Product/Market Expansion Grid (Ansoff’s Matrix)

Ansoff’s Matrix, also known as the Product/Market Expansion Grid, is a strategic tool used by businesses to explore growth opportunities. It consists of four quadrants that represent different strategies for growth based on two dimensions: products (existing or new) and markets (existing or new). The four quadrants are:

Market Penetration: This strategy involves selling existing products or services in existing markets. It focuses on increasing market share through tactics such as price optimization, marketing campaigns, and customer retention. An example could be a coffee shop offering loyalty programs to retain existing customers.

Market Development: In this strategy, a company seeks to introduce existing products or services to new markets. For instance, a smartphone manufacturer expanding into emerging markets like India or Africa.

Product Development: Companies pursuing this strategy create new products or services for their existing customer base. An example would be a software company releasing an upgraded version of its existing software to cater to its current users’ evolving needs.

Diversification: This strategy involves both creating new products or services and entering new markets. An example might be an electronics manufacturer diversifying by entering the healthcare industry with new medical devices.

These four quadrants help businesses evaluate their growth options and make informed strategic decisions based on their goals and resources.

For each quadrant, here are real or hypothetical business situations that exemplify the strategies:

Market Penetration: A fast-food chain offering special promotions and discounts to its existing customer base to increase the frequency of visits.

Market Development: An e-commerce company expanding its operations from the domestic market to international markets, catering to customers in different countries.

Product Development: An automobile manufacturer introducing a new hybrid car model to target its existing customer base seeking more environmentally friendly options.

Diversification: A technology conglomerate entering the renewable energy sector by developing and marketing innovative wind turbines and solar panels.

These examples illustrate how companies can use Ansoff’s Matrix to guide their growth strategies based on the combination of products and markets they choose to focus on.