Question

Use the information provided below to calculate the Net Marketing Contribution (NMC) for Apple and Microsoft. (Hint:

Net Marketing Contribution (NMC) = net sales - cost of goods sold - marketing expenses

(Because Gross Profit = net sales - cost of goods sold, just subtract marketing expenses from gross profit for NMC)

What is the NMC for Apple? (7.5pts)

What is the NMC for Microsoft? (7.5pts)

Which company has the best NMC? (5pts) What does the NMC measure? (5pts)

In 2014, Apple reported profits of more than $50 billion on sales of $182 billion. For that same period, Microsoft posted a profit of almost $30 billion on sales of $88 billion. So Apple is a better marketer, right? Sales and profits provide information to compare the profitability of these two competitors, but between these numbers is information regarding the efficiency of marketing efforts in creating those sales and profits. Appendix 2, Marketing by the Numbers, discusses other marketing profitability measures beyond the return on marketing investment (marketing ROI) measure described in this chapter. Review the Appendix to answer the questions using the following information from the two companies’ incomes statements (all numbers are in thousands):

	Apple	Microsoft
Sales	$182,795,000	$86,833,000
Gross Profit	$ 70,537,000	$59,899,000
Marketing Expenses	$    8,994,750	$15,474,000
Net Income (Profit)	$ 52,503,000	$27,759,000

Answer 1

Gross Profit Less-Marketing expense Net Marketing Contribution (NMC) (Amount in 000's) Apple Microsoft $ 70,537,000 $ 59,899,000 $ (8,994,750) $ (15,474,000) $ 61,542,250 $ 44,425,000 The NMC for Apple is $ 61,542,250,000. The NMC for Microsoft is $ 44,425,000,000. Apple has the best NMC compared to Microsoft. NMC helps in measuring how efficient the marketing efforts has resulted in net contribution for the company.