• Cost
of goods, including direct material, direct labor and overhead. COGS can be
specified per unit sold,
as a percentage of revenue, or as
a fixed cost (such as capital costs) |
| • Royalties paid on revenue and units sold, and royalties
unrelated to sales (such as progress payments) |
| • Product development expenses, including staff and IT expenses |
| • Customer support staff time and expenses, based on call length
and number of calls |
| • Marketing expenses, including staff and marketing programs. |
| |
| The model for customer support expense is more detailed than the
other expense models. |
| • Service calls are segmented by call length to improve
allocation of staff time to products and problem areas. |
• Service calls are segmented by topic (such as installation,
maintenance, tutorial), so the model can diagnose
in what areas product weaknesses
are driving up support costs and decreasing customer satisfaction. |
| |
| The model includes operating metrics besides contribution
margin. |
| • Gross margin and gross margin % |
| • Marketing program expense per marketing manager |
| • Support hours per support person |
| • Support calls per unit sold and support call hours per unit
sold |
| • Contribution margin and contribution margin % |
| |
| The Advanced version includes an optional worksheet for each
product that summarizes the results for that product. |
| |
| The model includes Excel charts that provide graphical views of
key variables. These charts are part of the model, and they are included by
default in exported Excel workbooks. You can add more charts, import them,
and the new charts will be included in exported Excel workbooks. |
| |
| This model is based on a real case study in which Product C had
low profitability. While other costs for Product C were in line with its
revenues, the profit problem was due to the fact that Product C incurred more
than its share of rather difficult customer support issues, especially
installation problems. |
| |
| Without this sort of profitability analysis -- allocating costs
of engineering, customer support and product marketing -- the magnitude of the problem was not
clear in a company with dozens of products. |