Margin Creep

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.

BREAKING DOWN '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. Contribution Margin

    A cost accounting concept that allows a company to determine ...
  2. Margin

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

    A company's total sales revenue minus its cost of goods sold, ...
  4. Gross Profit Margin

    A financial metric used to assess a firm's financial health by ...
  5. Cost Of Goods Sold - COGS

    Cost of goods sold (COGS) are the direct costs attributable to ...
  6. Nonrenewable Resource

    A resource of economic value that cannot be readily replaced ...
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. Economics

    Understanding the American Dream

    The American dream is the belief that anyone, regardless of where they’re born or into what class, can attain their own version of success.
  3. Investing Basics

    What's an Elephant?

    In the financial world, an elephant is a large institution that influences the markets and prices in big ways whenever it makes high-volume trades.
  4. Stock Analysis

    Dish Network's 3 Key Financial Ratios (DISH)

    Understand why some key financial ratios for Dish Network are universally worse than its peers' and the industry average and how Dish may change all that.
  5. Stock Analysis

    Costco's 4 Key Financial Ratios (COST)

    Understand why low profitability ratios are good for Costco's business, have not hurt shareholder returns and, as a result, remain a boon to its stock.
  6. Economics

    Warren Buffett's Probability Analysis Advantage

    The principle of elementary probability lies at the core of Warren Buffett’s investing philosophy.
  7. Term

    What's Cockroach Theory?

    A cockroach theory suggests that one piece of bad news indicates more bad news will follow.
  8. Term

    What's a Dog and Pony Show?

    A dog and pony show is a presentation that markets new securities as an initial public offering, or securities on a secondary basis.
  9. Term

    What Is Capitulation?

    Capitulation occurs when investors sell equity positions as quickly as possible.
  10. Stock Analysis

    Priceline Group's 3 Key Financial Ratios

    Understand how the online travel agent market has evolved and how Priceline's financial ratios prove that it has successfully adapted to these changes.
RELATED FAQS
  1. How do I calculate the inventory turnover ratio?

    Managing inventory levels is important for most businesses and this is especially true for retailers and any company that ... Read Full Answer >>
  2. Why do ETFs have fees?

    An exchange-traded fund (ETF), like any other company, has operating costs that it incurs as a result of conducting business. ... Read Full Answer >>
  3. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  4. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  5. How can I find net margin by looking a company's financial statements?

    In finance and accounting, financial statements represent the fundamental means of analyzing a company's financial position, ... Read Full Answer >>
  6. How do investors interpret the same store sales ratio when analyzing food and beverage ...

    When an investor interprets the same-store sales ratio in analyzing food and beverage stocks, he looks at the monthly same-store ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center