Download PowerPoint Presentation: Session 3

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Products & Services
Price It Right
Presented by Sheryl Nolen, CEA 4-H
WebEx Houston4HCEO3 October 12, 2015
* Career & Entrepreneur Options (CEO)
* Learn about running a business
* Tapping into your talents
* Work hard and make money
* Grow your creative genius
* Presentation and communication skills
* Trade Show exhibit and contest
* A chance to dream BIG
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* What is marketing?
Process of planning, concepts of pricing,
promotion and distribution of ideas, goods
and services
Marketing focuses on identifying the
customer needs and preferences –using
information to shape the goods and
services to satisfy the customer
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Kids Biz Ideas episode 211: The Marketing Mix
http://bizkids.com/clip/vincent-price-on-price
* The Product can be
something you sell or a
service you provide
* Products are something
customers need or want
* Products are made for
sales or purchased for
re-sale
* 4 Ps of Marketing
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http://bizkids.com/clip/direct-ed-the-4-ps-of-marketing
The amount of profit depends on your costs, both variable and fixed,
selling price, and the number of items sold or services rendered
What are customers willing to pay?
What is the break-even point; are all
costs covered?
How much profit do you want to
make?
What is your competition charging?
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Reference: Ohio State Fact Sheet on Pricing.
http://ohioline.osu.edu/cd-fact/1326.html
* Fixed Cost occur each month
* Fixed Cost could be what it cost to make
the product or provide the service
* Variable Costs are additional costs paid
* Variable cost are not always the same or
not happening every month IE Labor or
mileage traveled& fuel costs
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Profit = Revenue - Expenses
Let's think of profit in terms of the money left over after you
pay the bills. If you sold $100.00 of goods and the expenses
(costs) of all the materials to make those goods and all other
costs you paid during the period that you sold the goods were
$75.00, then you would have earned a profit of $25.00.
Profit = $100.00 (sales revenue) - $75.00 (expenses) = $25.00
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http://teachingkidsbusiness.com/business
-basics-profit.htm
Before you get started decisions;
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a recipe for their lemonade,
a name for their
amount of money required to set up the business (a budget)
how to borrow the needed money
supplies they will need; water, glasses, ice, lemonade ingredients,
container to hold the lemonade
Where and how serving table to sell the lemonade a money box with some
change
marketing materials; signs, advertise
price they are going to sell the lemonade and serving size
sales pitch that they will say to customers as customers approach their
stand.
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http://teachingkidsbusin
ess.com/index.htm
Let’s see if they made a profit.
Product Costs
lemonade cost $7.00
Supplies plastic glasses and other costs $5.00
Advertising supplies signs and other expenses $3.00
Total costs are $7.00 + $5.00 + $3.00 = $15.00
Sales: 30 glasses at 0.75 cents per glass
Revenue: 30 x 0.75 = $22.50
What is the profit ?
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http://teachingkidsbusin
ess.com/index.htm
Formula A
Materials + labor (production time x
hourly wage) divided by number of
units = selling price per unit.
Example: $4.00 + $5.00 divided by 1
cage = $9.00 selling
Labor Rate : 1 Hour=$5.00
What is the Price Point?
You must determine material cost and
give yourself a labor rate. There should be
a value placed on your time. There is no
allowance for overhead costs, inflation or
profit.
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Formula B
Materials + overhead + labor
(production time x hourly wage)
divided by number of units = selling
price per unit.
Example: $4.00 + $5.00 + $2.50 divided by
1 cage = $11.50 per cage
Overhead costs have been added in this
formula.
Labor Rate : 1 Hour=$5.00
Overhead: $2.50
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Formula C
Materials + overhead + labor + profit
divided by 1 cage = selling price per
unit Example: $4.00 + $5.00 + $2.50
divided by 1 cage = $11.50
This is the most individualized approach
because a conscious decision is made
about the profit you want from your
business.
You decide on a satisfactory wage and the
amount of time you spend earning it.
Profit and your labor rate are not the
same.
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Determining a Service Price
• Operating or fixed costs and the variable
• Variable costs
Fixed (operating expenses) costs
Profit
Labor major business expense
You must figure out what your time per hour
is worth for each service job you do and
include it in your price.
• Service complicated or requiring special skills
• Charge less than min wage to establish
business
• Profit should be included in the price
• Charge per hour for your labor a
• Amount of overhead and variable expenses
• What is a fair and competitive amount of
profit.
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Consumer Psychology Toward Price
Whether they know it or not, most
consumers develop mental attitudes about
the price they are willing to pay for a
product or service.
• Importance of price in the decision to
purchase varies from product to
product and person to person.
There are numerous price strategies used
by businesses to take advantage of
customer pricing psychology.
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Multiple Unit Pricing
Simply put, this is a strategy where the
customer perceives quantity buying as
involving greater savings.
Several factors ought to be considered
when using multiple unit pricing.
• Has to be easy to understand. Eight for
79 cents is usually less effective than
simple multiples of two for 19 cents.
• Bargain concept of multiple pricing is
not usually effective over the $10
range. It is, however, very effective for
items within the $1 range.
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Odd Number Pricing
Odd number pricing refers to setting a
price just below the psychological breaks
in the dollar, such as a price is set at 49
cents or 99 cents rather than 50 cents or
$1. Prices may be set at 19 cents or 49
cents or $19.95. This gives the
psychological impression to the customer
that the price is not 20 cents or 50 cents
or $20, but less. Odd number pricing is
often avoided in prestige stores or with
higher priced items. An expensive dress
could be priced at $150, not $149.95.
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Prestige Pricing
Prestige pricing refers to high markups
and/or pricing above the market. Many
consumers are willing to pay more for a
product or service because it is felt the
product or service is of higher quality or
possesses brand or manufacturer prestige.
Usually above-market pricing can be done
only when the product is unique or
distinctive, or when the seller or
manufacturer has acquired prestige in the
field.
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* All natural organic local bath bombs/salts
* Alternate name Fortunate bath bombs
* Epsom salts, nourish body , stress relief
* Popular holiday gifts
* Eco friendly
* Like fortune cookies, put fortunes in the package
Mission Statement: Our company is about using
natural ingredients, often organic and super-local
with pure essential oils and no yucky chemicals,
dyes, or scents. We want to help you feel relaxed ,
satisfied and fortunate when yu use our products,
which are made by hand , just for you!
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* Product benefits and features
* Cost of production – materials & labor
* Cost of packaging
* Cost of marketing
* Overhead costs
* Unit cost
* Sale price
* Profit margin
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About Money / Retail Marketing Strategies
http://retail.about.com/od/marketingsalespromoti
on/a/product_pricing.htm
* http://bizkids.com/clip/profil
e-kennys-lobster-roaches
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Reference : http://bizkids.com/clip/profile-kennyslobster-roaches
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Complete a Marketing Plan
Describe the product
Identify Customer needs
Calculate Cost and Profit per unit
Describe marketing strategies (distribution and
promotion)
* Philanthropy efforts
* Calculate marketing cost
* Develop a Business Card and flyer
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