1. “MARKETING MARGIN”

2. Introduction
• Margin - the difference between two values or
sums of money.
• Marketing - involves a company's attempt to
inform potential buyers of its product or
service, drawing attention to it in such a way that
an audience will be willing to purchase it.
• A marketing margin applies to a company that
buys a product with the intent to resell it.

3. • Marketing margins are costs of
equipment, transport, labor, capital, risk,
and management
• In long run, marketing margins for
competitive markets should be
equivalent to the cost of marketing

4. Definition
• When companies buy a product to act as a
distributor or retailer, it must sell the product at a
higher price than that at which they purchased it.
• In such situations, the marketing margin of a
product is the difference between what a
company pays for the product and what it
charges for the product.

5. • Example : price paid by customers for a
finished product (cheese) with the
payment received by farmers for
equivalent quantities of the raw
material of product(milk).

7. Differentiation of Marketing Margin
and Profit Margin
• Marketing margin is similar to profit margin in
that it shows:
- The relationship between the amount a
company pays for a product
- The amount its customers pay.
• BUT,
- Marketing margin is the difference between cost
to the seller and the cost to the consumer.
- Profit margin is the % of the final sale price that
comes as profit for the seller.

8. Marketing margin
• Margin is calculated by subtracting the net
farm value equivalent of food sold at retail
of the farm product from the retail price.
• Product price – raw material
• Example :
• Product price (cheese) = RM 8.60
• Raw material (milk) = RM 2.60
• Marketing margin =RM 6.00

9. Uses
• Companies use marketing margin as a way of
figuring profitability.
• High marketing margin reflects a high level of
profitability.
• It also reflects a high level of business
stability, as it shows the business has the ability
to pay for unexpected liabilities.
• High marketing margin shows a business has the
ability to respond to new competitors in the

10. Limitations
• Marketing margin is limited in its ability to
account for the effects of future business
growth.
• Comparison between the price of raw material
and the product is limited.
• Time intensive and sensitive for respondents
• Margins may fluctuate