Mgt Chapter 13-14

As business evolves from bare bones start up to a mature stage it passes through 5 stages;

1. Existence 2. survival 3. success 4. takeoff 5. maturity

What does internal oriented pricing strategies include

Cost plus pricing target return pricing

Variable costs

Costs that change in direct proportion to sales. Sales commisions, materials and labor tend to variable costs.

Fixed costs

Costs that do not change with the number of sales made. Rent, property taxes, and utilities are fixed.

Consumer Credit

Credit extended by retailers to the ultimate customers for the purchase of products or services. You have several choices carry the debt yourself you can rely on a financial institution such as a bank to loan money to your customers or you can accept credit cards.

A trained salesperson can tailor a presentation to the prospect around 3 aspects of the product:

1. Features: What the product is 2. Advantages: Why the product is better than alternatives 3. Benefits: What the product will do for the consumer

Advertising Objectives your object for advertising

1. Inform 2. Persuade 3. remind 4. change the perception : generally called institutional advertising

Collecting over due accounts. What choices do you have when the customer is not planning on paying

1. Letter service 2. attorney 3. small claims court 4. collection agency 5. writing if off

Podcast:

44 percent of americans consumers listen to them, and 26 percent do so regularly.

What does pricing involve?

Anchors, bumps charms

Break Even Formula (to calculate the the BEP in units)

BEP (units) = total fixed costs / unit price-Average variable costs pg: 341 300/13-7=50

Present examples of customers oriented and internal oriented pricing.

Customer oriented price strategies such as penetration pricing, skimming and psychological pricing, focus on the wants and needs of your target customers and the number of units of your product they will buy. Internal oriented pricing involves setting your prices according to the financial needs of your business, with less regard for customer reaction.

Efficiently and effectively

Effectiveness means achieving your stated goals. Example: having an helicopter fly across town to meetings is an effective way to travel. Efficiency: making the best use of your resources to accomplish your goals. Example: Managing your business an accomplishing your goals is good but if you buy a helicopter for your business that could bankrupt you. You have must balance effectiveness and efficiency to be competitive.

Measures of small business problem importance;

Chart: pg 371

Costs

Fall in to two categories: 1. Fixed costs 2. variable costs Total costs= Fixed costs+Variable costs

Online credit checks

For business credit requests, the Yahoo! web search site lists several merchant credit services that you can access. You can join the National Association of Credit Management a membership organization that researches and reports on many small firms that are often overlooked by larger credit agencies.

Delegation

Granting authority and responsibility for a specific task to another member of an organization empowerment a task effectively. A manager gives employees power of things he would need to make.

Price lining

Grouping product prices into range such as low-medium and high priced items. If your customers are price sensitive to comparison prices of competing items, you may choose to use price lining. Mens clothing store that has has 3 different ties at 34.99 24.99 and 44.99.

target return pricing

If you have accurate information on how many units will sell and what your fixed and variable costs will be. Target return price = Formula pg. 347

customer acquisition cost (CAC)

Is the most important in E-commerce how much you have to spend in order to acquire a new customer. Its related to (CPA) which is the amount you have to spend to convert a customer (make a sale) but refers to both existing and new customers.

Demand

Is the second economic factor that affects price.

Charm pricing

Means dropping just below a round number. People preffered round numbers 57% chose round whole number ending in zero.

Advertising Development

Most small business owners plan their own advertising programs. Its not a good idea to try to cram all the information into one space, its always good to leave blank space.

On what does Walmart focused?

On large national mid-tier large market share products.

Three components affect the price of a product.

Competition, customer demand, and costs.

Bumps

Give people an idea of quality grade. Price rang bumps tell us how to adjust our expectations.

Name the four P's

Product development, location, Price, Promotion

Marketing influencers

Over 88% of consumers trust online peer reviews more than traditional advertising. 30% of consumers were more likely to purchase a product from a non celebrity blogger and 40% of twitter.

Reference pricing

Psychological pricing strategy common in retailing goods for which consumers have an idea of what the price should be. The price can be change without affecting the value for example coca cola.

Break even analysis

a method of determining what sales volume must be reached before total revenue equals total costs, you can find the volume of sales you will need to cover your total costs.

Name the third and fourth component of Marketing

Price and Promotion

A la carte

Pricing by each individual post from an influencer. Currently as close as there is to an industry standard is one used by instagram with a formula of $100 for every 10,000 followers.

Internal oriented pricing strategies

Pricing strategies that are internal oriented are based on your business financial needs and costs rather than on the needs or wants of your target markets.

Advertising

Print media Broadcast media outdoor media

Advertising costs by different types of businesses

pg 353

Name some traits of leader

1 Defining the vision 2. Communication ability ( the most important attribute) 3. Self Confidence and dependability 4. adaptability 5. commitment ( today loyalty in more precarious in today's climate of economic uncertainty, is very important that leaders are seen as caring of the business and employees) 6. Creative Ability (good leadership as seen as creative) 7. Ability to follow though 8. ability to take action pg. 374-375

What are the four major tools available when developing your promotional mix?

1. Advertising 2.Personal selling 3.public relations 4. sales promotions The weight you choose to give this tools will depend on: 1. Your market 2. your message 3. the best medium that will communicate that message to your market.

Three factors that influence the price elasticity of demand for a product?

1. Availability of product substitutes ( the more products available that can substitute the product the more elasticity exists) 2. The necessity of the product ( Necessary and luxury goods both tend to be price inelastic) 3. The share of the purchase to the consumers total budget. (Salt and toothpicks are inelastic since they represent such a small percentage compared to your overall budget.)

Pricing strategies fall into what two categories

1. Customer oriented 2. internal oriented

The five stages of business growth

1. Existence: In the first stage, the owners run the business alone. Some people keep their business as solo size, called Soloprenerus. 2. Survival: Has a viable idea, Now she needs to hire employees. When the business grows to the point where employees operate in several departments the entrepreneur must become a professional manager or hire a manager. 3.Success: The owner accepts a degree of disengagement as a level of supervision is added to employees to lead departments or divisions. He must start delegating. 4. Takeoff: The business has grown to include multiple departments managed by numerous supervisors. By this stage, the owner must become a professional manager or hire a manager. The key problems in this stage are how to grow rapidly and how to finance that growth. 5. Resource maturity: the company has arrived. The greatest concern is to consolidate and control the finances generated by rapid growth and to professionalize the organization. By this time the business and the owner are separate entities both financially and operationally.

Negotiation ends with one or four options:

1. Lose-lose 2. Win- lose 3. Win-win 4. No deal

Advertising

1. Online 2. Newspaper 3. All television, including cable, syndicated and spot 4. Direct Mail: Digital mail still works retargeting response rates average .7 percent. A direct postcard will generate a 4.25 to 5 percent rate. 31% of marketers increased their use of direct mail. 5. Radio 6. Magazine 7. Outdoor 8. Miscellaneous: known as unmeasured media advertising, includes things like catalogs, ads on bus stop benches and signage in sports fields. More information pg 352

Types of Consumer Credit

1. Open charge accounts (customers take possession and then you bill them) 2. Installment account (big purchases like card) 3.Line of credit (certain amount to borrow you don't have to apply every time you need the credit) 4. Credit Cards (you can maintain your own receivables in order) 5.

Mention the 7 steps personal selling involves:

1. Pre-approach 2. Approach 3. Questioning 4. Demonstration 5. Handling objections 6 Closing the deal 7. Suggestion selling and follow up pg: 356-357

What differentiates your product from the competition?

1. Price 2. Added value 3. Convenience 4. Trust 5. Community member All these differentiates your business from others. Your Customers buy benefits. PG. 335

What are the roles a manager takes?

1. Resource allocator role: Decides how resources are be used. 2. Monitor role: Determines if quality control standards have been met. 3. Leader role: Determines the direction of the company. 4. Entrepreneur role: Keeps fresh new ideas and innovations flowing into the company. 5. Negotiator role: Continuously goes to bat for the resources needed for the success of the company.

How to tell if your advertising works

1. Response tracking 2.Split ads 3. in store opinions 4. telephone surveys 5. statement questionnaires

While exiting your business you have 3 broad choices:

1. Sell 2. merge 3. close

3 exit choices:

1. Sell to a financial buyer 2. Sell at a strategic buyer 3. Sell to a key employee or group of key employees 4. Sell to all employees via an employee stock ownership plan (ESOP) 5. Take the company public 6. Undertake a planned liquidation pg 373

Extending your credit to your Customers

1. Trade Credit 2. Consumer Credit 3. Online Credit checks

A study conducted by the National federation of independent business (NFIB),

2831 small business owners shared their insights about their most significant problem during the previous year. 75 potential business problems. 1 for a critical problem to 7 for not a problem.

How can you catch your audience attention while advertising

5. testimonials 6. Humor 7. sensual or sexual mesages 8. Comparative message 9. Slice of life messages 10. fantasy messages. pg, 353

Odd Pricing

Psychological pricing strategy in which goods are priced at say $9.99 rather than $10.00 in the belief that the price will seem lower than it really is. Some products may benefit from even pricing for example a diamond ring at $18,000

Prestige Pricing

Psychological pricing strategy used with goods whose quality is difficult to determine by inspection or for products about which consumers have little solid information. People often equate quality with pricing. Prestige is goo with products that are hard to inspect or has few information about the product. Jewelry, perfume, beer, and smoke detectors, or the services of law firms can all be prestige priced.

Who else can produce ads for you:

Radio, Television, newspapers and magazines

Trade Credit

Refers to sales terms that one business extends to another for purchasing goods. Credit is extended for 30, 60, 90 days to pay for them, but if you dont pay your trade credit your business is placed on COD cash on delivery basis.

Decoy effect

A pricing technique that makes a specific product appear more desirable by adding a product and price that is slightly less attractive. For example at the movies if you only have a small size for 3.99 and a large size for 9.99 people will buy the small size but if you add the medium size for 8.99 people will buy the large size because the large size is only .99 cents more.

Describe the advertising personal selling, public relations and sales promotions tools that a small business owner uses to compile a promotional mix.

A promotional mix is the combination of advertising personal selling, sales promotions, and public relations that best communicate the message of a small business to its customers.

When Walmart enter an area this happens.

Research shows that prices drop anywhere from 1 to 3% when Walmart enters an area and sales can drop from 5 to 13%, depending on the business. However eating establishments and home furnishings stores actually increased by 2 to 3 percent when walmart came to town. The stores most negatively impacted by walmart were mass-merchandising stores.

Publicity

An aspect of public relations consisting of any message about your company communicated through the mass media that you do not pay for.

Sales promotions

Any activity that stimulates sales and is not strictly advertising or personal selling is called a sales promotion. Special in-store displays, free samples, contests trade show booths and distribution of coupons, premiums and rebates are examples of sales promotions. These method does not replace your advertising or personal selling efforts.

Break even Formula (to calculate the BEP in Dollars)

BEP (units) = Total fixed costs/ 1- average variable costs / unit price pg: 341

Explain what breakeven analysis is and why it its important for pricing in a small business.

Breakeven analysis ensures that your prices are set above total costs, allowing you to make a profit. It is also useful in estimating the needed demand for a product at different price levels. Finally breakeven analysis shows how many units need to be sold to generate a target dollar return.

Negotiation

Can be defined as the negotiation and communication between two or more people come together to seek mutual agreement about an issue.

Tried no to fall in to these traps when your business is not going well.

Capacity trap: accepting a lower price than usual Cost of capital: you invest for example in trucks and warehouses to make more money Opportunity costs: low margins sales tend to crowd out high margin sales. Don't erode your margins your clients will find out and then demand the price.

Profit Margin

Selling price=Cost+Markup Markup=Selling price - Cost Cost=Selling price - Markup Pg: 347

Price skimming

Setting the price of a new product higher than expected to recover development costs. You can obtain 2 things: 1. Maximize short-or long-run profit 2. Recover product development costs quickly Raising prices high when you thinks customers are insensitive. Skimming is not a long range pricing.

Psychological pricing

Setting the price of a product in a way that will alter its perception by customers. Aims the customers reactions to prices of products. Such strategies include prestige pricing, odd pricing, and reference pricing. 4 Pricing objectives: 1. stabilize market prices 2. Establish your company's position in the market 3. Build an image for your business or product 4. Develop a reputation for being fair with suppliers and customers.

Explain Factors affecting small businesses getting paid.

Small businesses extend credit to their customers to realize sales that would not have been made without credit an to increase the volume and frequency of sales to existing customers. Credit is extended through open charge accounts installments accounts lines of credit and acceptance of credit cards.

Media Agencies

Specialize in the buying and selling media for clients. A media buyer can help coordinate your media mix to reach the market. Example: suppose you have a new line of blue jeans for urban girls between 13-17 years old, a media agency can tell you in which magazine, radio or television to advertise.

Break even formula (to target return)

Target return= total fixed + desired profit / unit price - average variable cost Pg: 342

Mark up

The amount added to the cost of a product in setting the final price. It can be based on selling price or on cost.

exit strategy some tips as you planned.

The arrival of a time that every business must end. How do you plan to finish or will you keep continuing with your business till the end. Some tips to exit: 1. Recognize when it is time to exit. 2. Watch out for your employees 3. Make sure you have the right people in place as you leave. 4. Follow your instincts. pg. 372

Identify the three main considerations in setting a price for a product.

The economic factors that have the largest influence on pricing are the prices charged by competitors, the amount of customer demand for your product and the cost incurred in producing purchasing and selling your products.

Cost plus pricing

The most common form of pricing is adding a specified percentage, fixed fee, or mark up.

Demand curve

The number of units of a product that people would be willing to purchase at different price levels. Demonstrates this relationship between price and quantity demanded, and since the relationship is inverse the demand curve has a downward slope.

Price Elasticity of demand

The percentage change in quantity demanded for a product in response to a 1 percent change in price.

Breakevenpoint (BEP)

The point at which total costs equal total revenue and the business neither makes nor loses money. In sales volume is the point at which your total revenue equals total costs. In other words how much of your product do you have to cover all of your costs. A t breakeven you are not making profit.

Leadership

The process of directing and influencing he actions of members withing a group.

Management

The process of planning organizing leading and controlling resources to achieve the goals of an organization.

Personal Selling

The two-way flow of communication between a buyer and a seller that is designed to influence the buyer's purchase decision. Personal Selling identifies 3 things: 1.Customers needs 2. Match those needs with your products 3. your product

Art and Graphic Design Services

They can help you finalize your design for your ads.

customer oriented

They direct the activities of the company toward satisfying customers. They focus on target markets and factors that affect the demand for products. Such strategies include penetration, skimming, and psychological pricing. With an inelastic product skimming strategy can be used because there are not enough substitutes, higher prices. Elastic products that are more sensitive, penetration may be more effective.

Micro-influencers

They have fewer than 30,000 followers and drive 60% more target market engagement. A micro-influencer they are seven times more effective than celebrity influencers. About 84 percent of micro-influencer charge less than $250 for one branded Instagram post.

What Managers do?

Today is the same as it was in 1916 when they first articulated by Henri Fayol, there is more to describing what managers do. First rather than being reflective systematic planners, managers tend to work at an unrelenting pace on a wide variety of activities that are brief and have little continuity. The front line managers in Mintzbergs study averaged 583 activities per 8 hour day one activity every 48 seconds. Half of their activities lasted less than nine minutes and only 10% took longer than an hour. Second: Managers spend a lot of time negotiating talking to people dealing with the external environment. Third: Managers depend more on their judgement than technological.

Credit is broken into 2 basic categories:

Trade credit and consumer credit

Valuation

What the company is worth. 3 ways to value your business 1. Market approach (what others have paid comparable approach) 2. Asset base approach (essentially the cost to re create the operating assets of the business) 3. income approach (how much a buyer could make from the business)

Inelastic Demand

When demand for a product is inelastic as with prescription drugs a change in price will have little effect on the quantity demanded. but if milk drops or raises their prices people will still buy milk, depends on how people see the product.

What type of communication does PR involve:

a variety of communication formats, including company publications such as newsletter, annual reports, and bulletins; public speaking, lobbying and the mass media. Business cards are still a good way to promote your business, when your know how to use them.

trait approach to leadership

a view of leadership that identifies specific qualities or characteristics of effective leaders

advertising agencies

companies that specialize in the creation of ads for placement in media that accept payment for exhibiting those ads. A small agency can understand better a small business than a big agency.

Price elasticity or Elastic Demand

is an important factor to take into consideration when discussing pricing. It determines the impact a change of price will have on the quantity of the product you will sell. Example: if sodas drop prices, more people will buy. When demand for a product is elastic, as with computer software a decrease in price will cause an increase in demand.

Trades shows

major events attended by buyers who choose to be exposed to products and services offered by potential suppliers in an industry. They are prime real estate for meeting new vendors, suppliers, customers, partners and media contacts.

Four Functions of Management

planning, organizing, leading, controlling These four functions are interrelated in that their achievement occurs as part of a progressive cycle. Planning: begins the process, as the manager determines what to do. Organizing: involves assembling the resources (financial, human and material) needed to accomplish the plan. Leading: is the process of getting the most output possible from those resources. Controlling: is comparing what was initially planned with what was actually accomplished. If a deviation happens on what was plan an accomplish the plan has to start all over again. The functions of managing a business are continuos and interrelated.

Penetration Pricing

setting the price of a new product lower than expected to gain fast market share. With this strategy we can obtain 3 things: 1.Increase sales 2. Increase traffic in your store 3. Discourage competitors from entering your market.

Promotional Mix

the combination of promotional tools—including advertising, public relations, personal selling, sales promotion, and social media—used to reach the target market and fulfill the organization's overall goals

Public Relations (PR)

the marketing function that evaluates public attitudes, identifies areas within the organization the public may be interested in and executes a program of action to earn public understanding and acceptance. Involves promotional activities designed to build and sustain goodwill between a business and its customers, employees, suppliers, investors, government agencies.

Anchoring

the tendency, in making judgments, to rely on the first piece of information encountered or information that comes most quickly to mind. Pricing involves anchors, bumps and charms.