Analyzing Marketing Investment and its Impact on Amazon's Gross Profit

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BUSN20019: PROFESSIONAL PROJECT
Impact of marketing investment on gross profit
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Contents
Introduction......................................................................................................................................3
Literature review..............................................................................................................................4
Research aims and research objectives............................................................................................6
Research questions...........................................................................................................................6
Research Plan...................................................................................................................................7
Conclusion.......................................................................................................................................9
References......................................................................................................................................10
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Introduction
Amazon is the multinational technology company of America which is based in Seattle,
Washington. The company is engaged in digital streaming, e-commerce, artificial intelligence,
and cloud computing. It is one of the four big companies of technology in the whole world. This
professional project report will aim at analyzing the impact of the investment made in the
marketing activities of the company on its gross profit. Amazon is chosen as the company for
this research project. The literature review will be made regarding this subject matter after going
through the articles of different authors. The preparation of the Gantt chart will also be done after
making the activity table for the whole project. The primary and secondary questions of research
will be established based on the research aims and objectives. The conclusion will be provided at
the end of the project.
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Literature review
Marketing Investment
According to Chouliaras, et. al. (2015), marketing are the activities that are undertaken by the
organization for promoting the buying or selling of goods and services. it includes selling,
product delivery, and advertising for consumers and other businesses. The amount invested in
the marketing activities of the organization is referred to as the marketing investment. The
companies need to focus on the amount that is required to be invested in marketing activities.
Various expenses are included in the marketing such as advertising, direct marketing, promotion,
selling and delivering of products (Chouliaras, et. al., 2015).
Gross profit
As per Shani, (2015), gross profit refers to the profit that is made by the company after deducting
the different costs which are associated with selling and marketing of the products, or it can be
said as the cost that is associated with the providing of services. The income statement of the
company represents the gross profits and it can be calculated by subtracting the COGS (cost of
goods sold) from revenue. It is significant for analyzing the financial performance and
profitability of the firm. It is important to measure as it indicates the management efficiency in
using the supplies and labor in the process of production. A reasonable profit can be made by the
company on sales through the higher margin of gross profits. The sales increase is accompanied
by COGS reduction (Shani, 2015).
Impact of marketing investment on the gross profit
According to Kohtamäki, et. al. (2012), gross profits are considered as the great indicator of the
company’s business and its health. The marketing expenses are shown usually in the income
statement of the organization. There will not be the direct effect of marketing on the gross
margin of the firm. Rather, it will impact on its net income. The focus of the marketing
department is mainly on the growth of revenue and has little impact on the cost of goods sold.
Marketing helps the business organization for revenue growth. It drives the increase in the
volume of sales for lowering the product’s margin. It can convert website traffic to leading sales.
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The customers can upsell towards the higher products' margin. The customers should be
communicated about the value of the product and the various benefits. Higher margin products
should be promoted over the items of low margin (Kohtamäki, et. al., 2012),
Gross margin is significant as it shows if the sales of the company are sufficient for covering its
cost. The cash flow is also impacted by the gross margin. After knowing the margin of the gross
profit that has been calculated by using the value of sales minus expenses of marketing and
COGS, revenue percentage can be known for which the expense is expected to pay. The funds
can be allotted to the recurring expense, new inventory, capital expenditures, taxes and debts
(Zhang, et. al., 2017).
Gross profit margins are the most important element that allows the company for its functioning.
More growth of the company can be seen by a higher percentage. If the percentage of the GP is
low then it can lead to the negative cash flow. The debt services are not included in the gross
profit so the particular attention is required to be made for deciding if the sales are being
achieved by borrowing for paying the marketing and advertising expenses. These expenses
should be paid out of the GP instead of debt. Otherwise, it will result in an increase in debt with
the rise in sales of the company (Singh & Dev, 2015).
The marketing investment made by the company affects its selling of product and services. as
though the marketing including promotion and advertising the brand of the firm get enhanced
and it build the strong base of customers which with the passage of time made the customer
loyalty that proves beneficial for the company and the company has fewer sales return and its
COGS is also improved through this which in turn positively affects the gross profit of firm. The
strategy of high pricing is accompanied by major campaigning of branding. Various factors
contribute to the GP of the firm. The profitability of the company is measured through the gross
profit. The production of the company will increase with an increase in demand by the marketing
done by the organization (Martin-Oliver, 2012).
If the firm will make high production then it will have a low cost of production which will
positively impact GP and there will be a high margin and the company will generate high
revenues. If the COGS of the company will be high then it will have a low gross margin. Indirect
costs are not included in the COGS such as advertising and shipping cost. If the COGS exceed its
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total sales, gross profit will be negatively affected. Due to this the gross profit margin will also
be affected negatively. Sales are the other component of the GP. If the sales of the company
exceed its cost by the large amount then it will tend to have a high gross profit margin while
there will be negative profit or low GP margin in case of low sales. The factors that can increase
the sales such as higher confidence of the customer, lower taxes and effective campaigns of
marketing can result in a higher margin of GP (Huhtala, et. al., 2014).
Conclusion of the literature review
Therefore, it can be said that there is a great influence on the gross profit of the company by its
marketing activities and investment. Pricing strategies help in determining the gross margins.
Based on the competitive marketing pricing the pricing of a product is made. For driving the
sales, pricing will be done similar to the competition and will accept the margin of standard
while also attempting for the market of the product. In some cases, it pays the price which is
lower than the market, while accepting the low margins. This can result in increased sales due to
the decreased margins (Zhang, et. al., 2017).
Research aims and research objectives
“To analyze the impact of investment in marketing on gross profits”
Research objectives
Based on the research aims, the research objectives are established including the following-
 To measure the impact of marketing investment
 To analyze the relationship between marketing and gross profit
 To conduct the literature review on the two variables
Research questions
The research questions will be established based on the research objectives and its aims.
Primary question
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 Does marketing investment impacts on the company’s gross profits?
Secondary question
 Does any relationship exist between gross profit and investment in marketing?
 Does there is the existence of a correlation between these two variables?
Research Plan
Collection of data and data analysis
Research methods are those which are used for the collection of data in different forms. The two
types of methods are primary and secondary. But the use of each one would depend on what
information is to be received for the project. The questions which are decided help in seeing
what the method is that should be used for data collection (Palinkas et. Al. 2015).
The research method that is going to be used for this work is that being the secondary method.
This method involves data to be collected from various applications like articles, journals,
internet journals and many more.
Firsthand information is not attained as the information has already been collected by someone
and would need only to be analyzed effectively. This method is used for data collected as
annual reports for Amazon need to be seen that will help in providing the data. The data can be
collected from http://ww.annualreprots.com/Company/amazoncom-inc (page- 27- marketing and
gross profit) as it will help in gaining information about the gross profit.
Project Feasibility
This is defined to know what will be the barriers that will stand in the way of making an idea into
an operational function. To analyze the feasibility of the project it would be seen that s time
frame would be developed in which it will be seen whether the work will be done from August to
mid of September. There would be different plans that would be mentioned in the time frame so
that the issues can be dealt with in an effective manner (Badasyan Norayr 2018).
Activities Start Data End Date Duration
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Project Proposal 02/08/2019 07/08/2019 6 Days
Conceptual
framework
08/08/2019 12/08/2019 5 Days
Literature review 13/08/2019 17/08/2019 5 Days
Research plan 18/08/2019 22/08/2019 5 days
Research aims 23/08/2019 30/08/2019 8 Days
Data collection 31/09/2019 06/09/2019 7 Days
Analysis of data 07/09/2019 13/09/2019 7 Days
Report submission 13/09/2019 17/09/2019 5 Days
Gantt chart
The Gantt chart describes the activities conducted in the research proposal according to the
timeline. All the established activities are determined and identified in the timeline according to
the start date and end date of the particular proposal.
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Conclusion
The marketing and its analysis are important for the establishment of the objectives specified in
the research proposal. With the high revenue needed for the objective of the work, it is important
for the needs of the focused firms in the promotions established according to customer loyalty.
This also makes the objective fulfillment with the strong customer and company relationship
which can be achieved to gather the official website information of the company and the article
taken for the analysis of the critical literature review for the objective of the research proposal.
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References
 Badasyan Norayr. (2018). Project feasibility analysis economic model for private
investments in the renewable energy sector. Built Environment Project and Asset
Management, 8(2), 215-230.
https://www-emerald-com.ezproxy.cqu.edu.au/insight/content/doi/10.1108/BEPAM-08-
2017-0057/full/html
 Chouliaras, Gazepis, & Kargidis. (2015). Marketing's Contribution to the Profitability of
Greek Enterprises During the Economic Crisis. Procedia Economics and Finance, 19(C),
217-225. DOI: 10.1016/S2212-5671(15)00023-4
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 Shani, D. (2015). Sport marketing and nonprofit marketing - perfect together. 12(2), 93.
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