Small Business Management Chapter 11

manufacturers' suggested retail price

a target price set by a manufacturer for a product or service intended to provide profit for each intermediary in the distribution channel

e-tailer

an electronic retailer; a store that exists only on the internet.

external reference price

an estimation of what a price should be based on advice, advertisements, or comparison shopping

Contract manufacturing

an existing firm with the correct manufacturing capabilities makes your product for you

Retailer

an intermediary business that sells to consumers or end users of a product (typically in single or samll quantities)

Accelerator

an organization that supports start-up technology businesses by providing inexpensive office space, a variety of support services, and resources; most accelerators are associated with universities

price gouging

charging an outrageously high price for something

Off-peak pricing

charging lower prices at certain times to encourage customers to come during slack periods

Three typical locations

clients location mutually accessible location firm's location

Bundling

combining two or more products in one unit and pricing it less than if the units were sold separately

Just-in-time inventory

Having just enough product on your shelves to meet the immediate purchases. This usually requires frequent shipment from your supplier.

Co-working space

a type of incubator lite offering low cost shared space and basic business services for a daily weekly or monthly rental fee rarely get any equity in the businesses using the space

Freight forwarders

Firms specializing in arranging international shipments-packaging, transportation, and paperwork

odd-even pricing

Setting a price that ends in the number 5, 7, or 9.

Internal reference price

a consumer's mental image of what a product's price should be

Sales promotion

a form of communication that encourages the customer to act immediately, such as coupons, sales, or contests

Wholesaler

a intermediary business which buys (typically in large quantiteis) and sells (typically in smaller quantities) to businesses rather than consumers

Direct mail

a method of selling in which catalogs, brochures, letters, videos, and other pieces of marketing materials are mailed directly to customers from which they can mail, call, or email an order direct faxing and direct emailing are more modern forms of direct mail

agent

a middleman business which represents a manufacturer's product or service to other business-to-business middleman firms

Sheltered workshop

a nonprofit organization or institution that provides business services by using workers who have disabilities or who are rehabilitated

Markup pricing

a price-setting method where an amount is added to the cost of a product to set the retail price and provide a profit

Letter of credit

A document issued by a bank that guarantees a buyer's payment for a specified period of time upon compliance with specified terms

documentary draft

A draft which can be exercised only when presented with specified shipping documents

Key factors for determining optimum price

- Demand for the product or service - Value delivered to the customer - Prices set by competing firms - Your business strategy and product placement

micro inventory

A set of goods or services that consists of only one or a few items

Indirect exporting

Exporting using intermediaries such as agents, export management companies, or export trading companies.

Direct sales

Methods of going directly to your customer in order to sell your product. Vending machines, door-to-door salespeople, leasing space at a craft fair, farmers markets, party sales, and most industrial sales are methods of direct selling

Channels

People and firms who connect producers of goods and services with customers

Periodic or random discounting

Sales conducted at either predictable or non-predictable intervals

manufacturer

The entity which produces a product or service to be sold

Guerilla marketing

The use of creative and relatively inexpensive ways to reach your customer. Examples include door-knob hangers, flyers under windshield wipers, T-shirts, balloons, and messages written on sidewalks.

Telemarketing

contact via telephone for the express purpose of selling a product or service can either be inbound (customer cals company) our outbound (company calls customer

Direct exporting

exporting using no intermediaries

Location

first choice for man entrepreneurs is their hometown

Building

has the advantage of having the perfect layout in the perfect location and the street appeal of a new building, but it is costly and slow

Leasing

in an option with considerably lower initial cash outlay often the only feasible choice lease expenses are deductible business expenses

Low customer contact business

manufacturing business commercial space miht be appropriate support businesses will be in or near the area business incubator

Distribution

process of getting your product to your customer

Inelastic product

product for which their are few substitutes and for which a change in price makes very little difference in quantity purchased

elastic products

product for which there are any number of are and for which a change in price makes a difference in quantity purchased

Mail order

sales made from ads in newspapers or magazinges with purchases made online or by phone as well as by mail

Direct marketing

selling your goods or services to consumers without intermediaries, typically to select customer groups and typically with tracking of the results

Client's location

services include such things as house or office cleaning, pet control, remodeling, dawn and gardening services, carpet cleaning, and similar services which must be performed at the client's house as the firm grows, it may outgrow its homebased headquarters

prestige or premium pricing

setting a price above that of the competition so as to indicate a higher quality or that a product is a status symbol

Skimming

setting a price at the highest level the market will bear, usually because there is no competition at the time

partitioned pricing

setting the price for a base item and then charging extra for each additional component

Captive Pricing

setting the price for an item relatively low and then charging much higher prices for the expendables it uses

buying

something already in existence shortens the time and may be somewhat cheaper

Pricing strategy wrap-up

temporary reduction in price won't tarnish your product image consumers also feel smart about buying something at a better price they will feel they got a great deal

Markup

the amount an entrepreneur adds to costs to provide a profit

Margin

the amount of profit, usually stated as a percentage of the total price

Law of supply and demand

the economic theory that describes how the demand for products or services and the supply of them affect each other

Optimum price

the highest price that will produce your desired level of sales in your intended market

Price lining

the practice of setting (usually) three price points: good quality, better quality, best quality

Multichannel marketing

the use of several different channels to reach your customers, for example, a website, direct mail, and traditional retailing

High customr contact business

three critical site selection considerations: traffic, customer ease, competiton presence of traffic generators in the area parking is also an issue

Mutually accessible location

too much specialized equipment to be readily trasportd a need for at least some client involvement barbershops, dentist offices, video rental stores, home-based

Fulfillment center

A company that will warehouse your products and fill your customers' orders for you.

Born international

A new firm that opens a Web site immediately, thus being exposed to customers from around the world.

Direct response advertising

Placing an advertisement in a magazine or newspaper, on television or radio, or in any other media. The ad contains an order blank with a phone number and e-mail or regular mail address with the intent of having the customer place an immediate order

Multiple or bonus pack

combining more than one unit of the same product and pricing it lower than if each unit were sold separately

Elasticity

from economics, the idea that the market's demand for a product or service is sensitive to chanes in its price

Importing

similar to exporting but buyers and sellers are reversed travel abroad - look for products that are selling well in the country you're visiting trade mission and domestic and international trade shows are also good sources