Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
CHAPTER PRICING AND PROMOTION 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. The Business Buying Decision What to purchase Keeping the right kind of products in stock Quality vs. Price Factors: competition and financial ability of business When to purchase Factors: location of supplier, style and price trends Available when needed The Business Buying Decision From whom to purchase Choose the right supplier Cost, service, reputation Having one main supplier provides better deals but always have a few alternatives that you also use Most businesses concentrate their buying among a few suppliers How much to purchase Sufficient to meet customer demand Too much results in capital not being available Payment Terms and Discounts Payment terms - 2/10 net/30 2% discount if paid in 10 days or pay net (full) in 30 days Discounts - are reductions from the LIST price (not selling price) of the product to encourage customers to buy. Trade - a price reduction that manufacturers give to their channel partners, such as wholesalers or retailers, in exchange for additional services. Quantity - a price reduction offered to customers that buy in quantities larger than a specified minimum Payment Terms and Discounts Seasonal - a price reduction offered for ordering or taking delivery of products in advance of the normal buying period. Cash - a price reduction given for paying by a certain date w/ cash (usually stated as a percentage of the purchase price). COMPONENTS OF PRICE Selling price Cost of goods sold Operating expenses Margin or gross profit Net profit Markup Markdown COMPONENTS OF PRICE Selling price- the actual price customers pay for the product. Determined by subtracting any discounts from list price. CGS + operating expenses + net profit = selling price Cost of goods sold- (CGS) the cost to produce the product (cost of materials/ operations/personnel); for whole/retail sellers its the price they pay their supplier to buy the product PLUS the cost of transporting it to their location for resale. Operating expenses- the costs of operating a business. Doesn’t include costs involved in actual production or purchase of merchandise. Margin or gross profit- the difference between the selling price and the cost of goods sold. Net Profit- the difference between the selling price and all costs and expenses of the business. Net profit= selling price - CGS - operating expenses Markup- the amount added to the cost of goods sold to determine the selling price. Markdown- any amount by which the original selling price is reduced before the item is sold. Companies use markdowns when their inventory is not selling at a satisfactory rate. COMPONENTS OF SELLING PRICE $1.00 Selling Price $.60 Cost of Goods Sold $.35 Operating Expenses $.05 Net Profit $.40 Margin or Gross Profit PRICING STRATEGIES 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 Controlling Costs Markdowns these happen because companies have purchased products that customers do not want or have gone out of style they can be controlled by careful purchasing, proper product handling, and marketing practices Controlling Costs Damaged or stolen merchandise these situations have a serious affect on profits to reduce damaged or stolen merchandise, companies can employ security guards, install surveillance cameras, and train employees to handle merchandise carefully Controlling Costs Returned merchandise adds to expenses in 2 ways: if the business can resell the merchandise, it will have to be sold at a reduced price also many expenses are involved in handling and reselling the returned merchandise, which increase operating expenses Review Facts 1-10 Discussion Ideas 3,5,6,7, Analyze Info 1,2 MY BUSINESS Product based businesses Create a policy regarding any discounts you plan to offer. Create a guideline as to how you will deal with selling old products (markdowns, etc.) Create and finalize a "return" policy for your business. Service businesses If you are or not selling an item, create and finalize a process that a customer will take when they are not satisfied with your service. Use the internet to look up examples of return policies. Create a policy regarding any discounts you plan to offer.