Margin Creep

AAA

DEFINITION of 'Margin Creep'

Margin creep refers to the behavior of a company that chooses to focus only on the high-end, high-margin products, even if customers show an inclination towards more value-oriented products and/or services. A product's margin is the difference between the cost of the good or service and the retail price; the greater the difference, the higher the margin.

INVESTOPEDIA EXPLAINS 'Margin Creep'

While any products or services that are successfully marketed and sold may result in a solid margin, other potential sales will be lost if value-minded consumers are price-sensitive. The tendency for margin creep within a company can have long-term implications on its sustainability.

RELATED TERMS
  1. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  2. Gross Profit Margin

    A financial metric used to assess a firm's financial health by ...
  3. Gross Margin

    A company's total sales revenue minus its cost of goods sold, ...
  4. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
  5. Contribution Margin

    A cost accounting concept that allows a company to determine ...
  6. Investment Income Ratio

    The ratio of an insurance company’s net investment income to ...
Related Articles
  1. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  2. Fundamental Analysis

    Equity Multiplier

    The equity multiplier is a straightforward ratio used to measure a company’s financial leverage. The ratio is calculated by dividing total assets by total equity.
  3. Fundamental Analysis

    What is the average profit margin for a company in the oil & gas drilling sector?

    Understanding the profit margin is an integral aspect of analyzing whether an oil & gas drilling company is a worthwhile investment.
  4. Options & Futures

    What is the average profit margin for a company in the forest products sector?

    Profit margin is a measurement of profitability that investors can use to determine the suitability of an investment in the forest products sector.
  5. Budgeting

    The Momentum, And Methods, Behind Walmart's Model

    Walmart's success stems from low costs, which are possible through specific supply and distribution strategies, and are passed to consumers as low prices.
  6. Bonds & Fixed Income

    What is the difference between debt to income and debt to assets?

    Understand the differences between the debt-to-income ratio and the debt to assets ratio as they apply to personal and corporate finance respectively.
  7. Fundamental Analysis

    How useful is ROCE as an indicator of a company's performance?

    Understand the meaning, significance and usefulness of return on capital employed as a measure of a company's financial performance
  8. Fundamental Analysis

    What is the difference between ROCE and ROI?

    Understand the difference between return on capital employed and return on investment and how analysts use these performance measures to evaluate companies.
  9. Fundamental Analysis

    What is the difference between ROCE and ROA?

    Understand the difference between the profitability ratios of return on capital employed and return on assets, and learn the significance of each.
  10. Fundamental Analysis

    What is the difference between ROCE and ROE?

    Discover how investors and analysts utilize the return on equity and return on capital employed ratios to gauge financial performance.

You May Also Like

Hot Definitions
  1. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  2. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  3. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  4. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  5. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
  6. Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The ...
Trading Center