ENTR 4113 Final CH 11
Deductible business expenses:
leasing expenses
Build
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
Types of exporting:
-direct -indirect -freight forwarders
Types of direct marketing:
-direct mail -telemarketing -direct response advertising -guerilla marketing -multichannel marketing
Types of direct distribution:
-fulfillment center -retailers or e-tailers
Site selection 3 main categories:
-home-based business -high customer contact business -low customer contact business
Price Elasticity:
-inelastic -elastic
Direct mail and its variants
-micro inventory -just-in-time inventory
Price lowering techniques:
-periodic or random discounting -off-peaking pricing -bundling -multiple or bonus pack
High customer contact business
-presence of traffic generators in the area -parking is also an issue
Distribution
-process of getting your product to your customers -"Where are my customers?" -"Where should I be?"
Importing
-similar to exporting, but buyers and sellers are reversed
Pricing strategies:
-skimming -prestige or premium pricing -odd-even pricing -partitioned pricing -captive pricing -price lining
3 critical site selection considerations in high customer contact business:
-traffic -customer ease -competition
Types of non-direct distribution:
-wholesaler -agent
Captive pricing
Setting the price for an item relatively low and then charging much higher prices for the expendables it uses
External reference price
an estimation of what a price should be based on advice, advertisements, or comparison shopping
International strategies: born international
A new firm that opens a Web site immediately, thus being exposed to customers from around the world
Sheltered workshop
A nonprofit organization or institution that provides business services by using workerswho have disabilities or who are rehabilitated
Bundling
Combining two or more products in one unit and pricing it less than if the units were sold separately.
Freight forwarders
Firms specializing in arranging international shipments— packaging, transportation, and paperwork
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
Odd-even pricing
Setting a price that ends in the number 5, 7, or 9
Types of manufacturing:
-contract manufacturing -sheltered workshop
Fulfillment center
A company that will warehouse your products and fill your customers' orders for you
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
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
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
Price gouging
Charging an outrageously high price for something
Elasticity
From economics, the idea that the market's demand for a product or service is sensitive to changes in its price
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
Markup
The amount an entrepreneur adds to costs to provide a profit
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 Web site, direct mail, and traditional retailing
Internal reference price
a consumer's mental image of what a product's price should be
Leasing
often the only feasible choice
Location: What is the first choice for many entrepreneurs?
their hometown
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 e-mail an order. -Direct faxing and direct e-mailing are more modern forms of direct mail
3 typical locations:
-At the client's location -At a mutually accessible location -At your firm's location
Telemarketing
-Contact via telephone for the express purpose of selling a product or service. -Can either be inbound (customer calls company) or outbound (company calls customer)
The fundamentals of pricing: Contextual Factors
-Decide what is the optimum price -Examine existing market prices for similar products and services -Consider your business costs -Your Company Objectives -Marketing Strategy -Channels of Distribution -Competition -Legal and Regulatory Issues
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
Just-in-time inventory
-Having just enough product on your shelves to meet the immediate purchases. -Usually requires frequent shipment from your supplier
Lease
is an option with a considerably lower initial cash outlay -often the only feasible choice
Elastic product
product for which there are any number of substitutes and for which a change in price makes a difference in quantity purchased
Buy
something already in existence shortens the time and may be somewhat cheaper
Optimum price
the highest price that would produce your desired level of sales (or revenues) in your target market
Manufacturer
The entity which produces a product or service to be sold
Micro inventory
A set of goods or service that consists of only one or a few items
Pricing Psychology: How customers perceive prices
-Internal reference price -External reference price
Who do many entrepreneurs choose their hometown for location?
-Local banker knows you, more likely to loan money -You understand market's needs and wants -Friends and family are usually first customers
Low customer contact business
-Manufacturing business -Commercial space might be appropriate -Support businesses will be near
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
Direct response advertising
-Placing an advertisement in a magazine or newspaper, on television or radio, or in any other media. -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
Client's location
-Services -EX: house or office cleaning, pest control, remodeling, lawn 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 home-based headquarters
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
Guerilla marketing
-The use of creative and relatively inexpensive ways to reach your customer. -Ex: door-knob hangers, flyers under windshield wipers, T-shirts, balloons, and messages written on sidewalks
The fundamentals of pricing: Value
-The value delivered to the customer is second in order of importance to the pricing decision -In addition to demand and value provided, you must consider the prices set by your competition
Mutually accessible location
-Too much specialized equipment to be readily transported -A need for at least some client involvement -EX: Barbershops, dentist offices, video rental stores restaurants
Sources of importing:
-Travel abroad -Trade mission -Domestic and international trade shows
Leasing: Operating issues
-hidden charges -use of premises -noncompeting -hours of operation -rent default -moves and remodels
Typical payment methods:
-letter of credit -documentary draft
Exporting strategy involves answering these 3 questions:
1. Are we ready? 2. Where should we go? 3. Whom do we contact over there?
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 quantities) and sells (typically in smaller quantities) to businesses rather than consumers
Agent
A middleman business which represents a manufacturer's product or service to other business-to-business middleman firms
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.
Contract manufacturing
An existing firm with the correct manufacturing capabilities makes your product for you
Retailer
An intermediary business thatsells to consumers or end usersof a product (typically in single orsmall quantities)
Off-peaking pricing
Charging lower prices at certain times to encourage customers to come during slack periods
Multiple or bonus pack
Combining more than one unit of the same product and pricing it lower than if each unit were sold separately
Indirect exporting
Exporting using intermediaries such as agents, export management companies, or export trading companies
Direct exporting
Exporting using no intermediaries
Mail order
Sales made from ads in newspapers or magazines, 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
Partitioned pricing
Setting the price for a base item and then charging extra for each additional component
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 thesupply of them affect each other.
Accelerator
goal of an accelerator is to accelerate a start-up from its early stages to being ready to pitch for investment --most take an equity stake in companies they help
Inelastic product
product for which there are few substitutes and for which a change in price makes very little difference in quantity purchased