Chapter 39
Marketing Cost Per Unit

Each unit sold has a marketing cost associated with it that reflects the tactics used to promote the product in the market and knowing that cost is a primary responsibility of marketers who wants to lead their business and deliver results.

The marketing cost per unit (MCPU) calculation is simple:

Where

MCPU = marketing cost per unit

Emt = total marketing expense in time period t

Ut = total units sold in time period t

In 2016 Lenovo shipped 55.5 million PCs globally. The total market size was estimated at 260 million units, thereby giving Lenovo a 21.3% market share.ii

Lenovo said it would spend $726 million on marketing in 2016.2 Using these figures, we can calculate Lenovo’s MCPU as follows:

Lenovo spent $13.08 per unit to market its PCs.

The MCPU should decline as a product matures. As more consumers buy a company’s product, distribution expands, word of mouth builds up the reputation, and the product becomes more familiar as a consequence. However, if the MCPU increases, then that may be a warning signal that consumers are losing interest or competitors are offering more attractive products at better prices. Marketers need to investigate the increasing costs per unit to determine the appropriate response. In Lenovo’s situation the global PC market has been in decline for several years. In 2010 total global PC shipments were 351 million units and Lenovo shipped 34 million units for a market share of 9.7%. Its MCPU in 2010 was $2.94. While its market share has increased substantially, the overall market is declining, hence the increase in MCPU to sell PCs.

Sources for MCPU data will be tracked in regular sales reports and also aggregated in period financial statements (i.e., quarterly, annually, etc.).

iPat LaPointe, The Most Effective Metrics for a Marketing Dashboard (in Some Not-So-Obvious Forms), January 3, 2006. MarketingProfs. Retrieved May 4, 2017 from http://www.marketingprofs.com/6/lapointe2.asp

ii2016/17 Annual Report Lenovo Group Limited, p. 34. Retrieved July 15, 2017 from http://static.lenovo.com/ww/lenovo/pdf/report/E_099220170605a.pdf