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. Contribution Margin

    A cost accounting concept that allows a company to determine ...
  5. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
  6. Operating Cost

    Expenses associated with administering a business on a day to ...
RELATED FAQS
  1. How is the economic order quantity model used in inventory management?

    The economic order quantity model is used in inventory management by calculating the number of units a company should add ... Read Full Answer >>
  2. How does the use of International Financial Reporting Standards (IFRS) affect key ...

    While much has been achieved since 2002 in convergence between international financial reporting standards (IFRS) and U.S. ... Read Full Answer >>
  3. How is overhead distributed through total absorption costing?

    Through total absorption costing, overhead is distributed into indirect costs incurred from the manufacturing and production ... Read Full Answer >>
  4. What are the differences between absorption costing and variable costing?

    Absorption costing includes all costs, including fixed costs, in figuring the cost of production, while variable costing ... Read Full Answer >>
  5. What is the relationship between degree of operating leverage and profits?

    The degree of operating leverage directly reflects a company's cost structure, and cost structure is a significant variable ... Read Full Answer >>
  6. How are C-suite officers measured on performance?

    Evaluation of C-suite officers, especially the chief executive officer (CEO), is an important element of fundamental analysis. ... Read Full Answer >>
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

    Calculating Net Interest Margin

    Net interest margin is a metric used to measure the effectiveness of a company’s investment decisions, particularly financial institutions.
  3. Fundamental Analysis

    Key Financial Ratios for Pharma Stock Investing

    Analysts simplify the business of investing in pharma by studying key financial ratios and metrics. Know these metrics before you buy or sell pharma.
  4. Economics

    What are Pork-Barrel Politics?

    Pork-barrel politics is a form of patronage whereby politicians favor their constituents in exchange for benefits such as campaign donations and votes.
  5. Trading Strategies

    Trading Risks And Rewards In Your Favor

    Measure reward and risk targets before taking a trade, and let those numbers guide your open position.
  6. Economics

    Explaining the EBITDA Margin

    EBITDA margin can provide an investor with a cleaner view of a company's core profitability.
  7. Investing

    Wizards Of Odd: A Trip To Tech Land

    I spent a couple of days in Silicon Valley, and here are some key lessons I learned after meeting with a number of tech CEOs and venture capitalist.
  8. Investing

    What Tech Companies Seeking Funding Must Overcome

    Tech companies face a unique set of challenges, including a need for timely responses to changes in technology and difficulty recruiting the right talent.
  9. Economics

    Vietnam -- New Asian Hot Spot For Tech Investment

    Vietnam now has a rapidly expanding tech sector that's attracting investors from around the globe due to low business costs and highly skilled workers.
  10. Taxes

    Business Taxes: Not Paying More Than You Have To

    If you're a small business owner, note these potential tax deductibles so that you don't pay taxes that could have been extra revenue in your account.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center