Comparative Profitability of Products
When the business has multiple products and multi-lines of activity, the problem that arises is as to which product will yield maximum profit. Contribution margin analysis technique is used in brand marketing and product management to help a company decide what product(s) to add to its product portfolio. The manager evaluates the effect on profits if a new product is added or an existing product is discontinued. Calculations take into account additional revenues, additional costs, effects on other products in the portfolio, and competitors' reactions.
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