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CHAPTER
PRICING AND
PROMOTION
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23
OBJECTIVES
Discuss how businesses and consumers make their buying
decisions.
Describe factors involved in establishing product prices and
common pricing strategies.
Discuss ways that companies try to control costs that can
lead to higher prices.
Discuss the purpose of promotion in meeting business and
consumer needs.
Identify the common promotional methods.
Explain the parts of the selling process and how each is
used to help customers make effective buying decisions.
Identify important laws and regulations that apply to
advertising and promotion.
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THE BUSINESS
BUYING DECISION
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What to purchase
When to purchase
From whom to purchase
How much to purchase
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PAYMENT TERMS
AND DISCOUNTS
 Payment terms
 Discounts
 Trade discount
 Quantity discount
 Seasonal discount
 Cash discount
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COMPONENTS
OF PRICE
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Selling price
Cost of goods sold
Operating expenses
Margin or gross profit
Net profit
Markup
Markdown
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COMPONENTS OF
SELLING PRICE
$1.00 Selling Price
$.60
Cost of Goods Sold
$.35
Operating Expenses
$.05
Net Profit
$.40 Margin or Gross Profit
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PRICING
STRATEGIES
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Pricing to meet competition
Pricing to earn a specific profit
Pricing based on consumer demand
Pricing to sell more products
Pricing to provide customer services
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CONTROLLING
COSTS
 Markdowns
 Damaged or stolen merchandise
 Returned merchandise
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PROMOTION AS MARKETING
COMMUNICATION
Consumer Decision-Making Process
 Problem recognition
 Information search
 Alternative evaluation
 Purchase
 Post-purchase evaluation
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ADVERTISING
PURPOSES
To inform and educate.
 To introduce product or
business.
 To announce
improvement or
product change.
 To reinforce features
and benefits.
 To increase frequency
of use.
 To increase variety of
uses.
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To convince people to
enter a store.
 To develop a list of
prospects.
 To make a brand,
trademark, or slogan
familiar.
 To improve the image of a
company of product.
 To gain support for ideas or
causes.
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MEDIA
CHOICES
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Publication
Mass media
Outdoor
Direct
Display
Internet
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PLANNING AND
MANAGING ADVERTISING
 The advertising budget
 Timing of advertising
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PERSONAL
SELLING
 Studying the wants of customers
 Presenting and demonstrating the
product
 Answering customer questions
 Closing the sale
 Follow-up
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SALES
PROMOTIONS
Sales promotions — any promotional
activities other than advertising and
personal selling intended to motivate
customers to buy
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TRUTH IN ADVERTISING
AND SELLING
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False advertising
Full disclosure
Substantiation
Cease and desist order
Corrective advertising
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