Chances are you have played a quiz-game hosted on Facebook or similar social network site. More specifically, the one that matches you to a celebrity or movie character of resemblance. By answering a few questions a participant can determine if they are more like Piper Chapman or Crazy Eyes (Orange Is The New Black). The following is a scale I created using the gross margins of publicly traded companies. Which gross margin are you or your business?
Jones Soda Co. (OTCMKTS: JSDA) - Jones Soda's gross margin for 2014 was 22%. Once trendy, you now struggle to be chic and adopted. Your competition is strong and your performance is reaching minimal benchmarks. However, you remain original and keep artistic integrity.
Skullcandy (NASDAQ: SKUL) - Skullcandy's gross margin for 2014 was 45%. Ties to your social community, the muse-consumer groups, are strong and out of competitor's reach. Under new leadership goals, momentum has grown and the future looks bright. Where your size and wallet can't take you, you arrive via alternative means (guerrilla marketing) and make your presence known.
Virgin America (NASDAQ: VA) - Virgin America's gross margin for 2014 was was 54%. You have trickle-down brand power from broader association and business celebrity (Sir Richard Branson). Additionally, assets are new and the trim is sexy. Your focus has been on a premium service and growing identity in a larger brand-ecosystem.
Glu Mobile (NASDAQ: GLUU) - Glu Mobile's gross margin for 2014 was 62%. You are a savvy gamer and programmer. What would traditionally pigeonhole you as a geek has not ostracized you from the in-crowd (Kim Kardashian, Katy Perry). The other clicks appreciate your skills too: the jocks and the tac/gun-nut crew. You are even attracting business partners from abroad.
Pfizer, Inc. (NYSE: PFE) - Pfizer's gross margin for 2014 was 81%. You maintain a specialty that people get worked up and excited for in all the right places. Your products bring frequent repeat customers and are covered by health insurance. The prized inventory could practically pass as a form of currency.
More On Gross Margin
All kidding aside, gross margin is not a simple metric that can always be applied for value assessment and investing. It doesn't consider other types of expenses. Gross profit consists of the full (gross) revenue collected minus the specific expenditures defined as: Cost Of Goods Sold (COGS). This leaves out other general expenses, which for some companies can be very great. The margin is then expressed as a ratio of gross profit to gross revenue.
A more final deduction to show profitability is: Earnings Before Interest & Taxes (EBIT). This value factors out COGS as well as additional expenses except for interest and taxes. Whereas a company might present healthy in the gross margin metric, the same may not be said when further expenses are subtracted. The operating margin consists of EBIT in ratio to gross revenue, which better expresses the company's profits.
According to the operating margin, Skullcandy moves from 4th to 3rd in the aforementioned group. This is mainly due to Glu Mobile's extra Research and Development (R&D) expense. If I were to play the match game I'd think Skullcandy would be a close comparison. I'm middle of the pack in some metrics and advancing among my niche groups.
Stunts and Guerrilla Marketing
Briefly mentioned in Skullcandy's synopsis, was guerrilla marketing. In a rough summary, guerrilla marketing is showing brand and products in "uninvited" areas. Perhaps uninvited has too negative a connotation. A surprise guest could work as substitution. If the company logo is not on the X Games' race track barriers, the company logo could show up via free product disbursement. This creates a presence at the event, but also someone is bound to see the logo as the camera pans the campus.
If you are not a key sponsor for a prized event, try making your own. Guerrilla marketing can include logo placement during an original event and viral video. The Skullcandy, "Drop In" video, featuring Robbie Maddison is a perfect example. Enjoy!