CH.11 Small business pricing, distribution, location
skimming
Setting a price at the highest level the market will bear, usually because there is no competition at the time (e.g. any inelastic product like gasoline
referral discount
A discount given to a customer who refers a friend to the business
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 that can be exercised only when presented with specified shipping documents
sales promotion
A form of communication that encourages the customer to act immediately, such as coupons, sales, or contests
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 in, call in, or email an order. Direct faxing and direct emailing are more modern forms of direct mail.
born international
A new firm that opens a website immediately, thus being exposed to customers from around the world
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
random discounting
A sale run on a schedule that is unpredictable to the customer Price discrimination Senior citizens' discounts
manufacturer's 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
co-working space
A type of "incubator lite" offering low-cost shared space and basic business services (Wi-Fi, desks, coffee, conference room, copier, etc.) for a daily, weekly, or monthly rental fee. Unlike incubators, co-working spaces rarely get any equity in the businesses using the space
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 information external to a consumer, such as advice, advertisements, or comparison shopping
contract manufacturing
An existing firm with the correct manufacturing capabilities makes your product for you
wholesaler
An intermediary business that buys (typically in large quantities) and sells (typically in smaller quantities) to businesses rather than consumers
agent
An intermediary business that represents a manufacturer's product or service to other business-to-business intermediary firms
retailer
An intermediary business that sells to consumers or end users of a product (typically in single or small quantities)
Accelerator
An organization that supports start-ups, typically of a particular type (e.g., Internet, biotech, fashion, sports, women-owned firms, etc.) with a financial investment, free or inexpensive office space, mentoring, a variety of free or low-cost support services, and other resources. The goal of an accelerator is to accelerate a start-up from its early stages to being ready to pitch for investment. Most accelerators take an equity stake in the companies they help
bundling
Combining two or more products in one unit and pricing it less than if the units were sold separately (e.g. an oil change is $49 and tire rotation is $69, but if you do them both, it will cost only $99)
traffic generators
Other businesses that bring customers (generate traffic) to the area
prestige pricing
Setting a price above that of the competition to indicate your product is a status symbol (e.g. Pricing of luxury cars, the best perfumes)
partitioned pricing
Setting the price for a base item and then charging extra for each additional component (e.g. The computer is only $699, but the printer is another $100 and cables are $30 and the modem is ...)
price lining
The practice of setting (usually) three price points: good quality, better quality, best quality (e.g. Marriott hotels are high priced, but the Marriott Courtyards are moderately priced)
guerrilla marketing
The use of creative and relatively inexpensive ways to reach your customer. Examples include doorknob hangers, flyers under windshield wipers, T-shirts, balloons, and messages written on sidewalks
internal reference price
A consumer's mental image of what a product's price should be based on experience and the consumer's estimate of what the comparative value might be
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 (e.g. Happy hours or late-night specials at restaurants)
multiple or bonus pack
Combining more than one unit of the same product and pricing it lower than if each unit were sold separately
telemarketing
Contact via telephone for the express purpose of selling a product or service. Telemarketing can either be inbound (customer calls company) or outbound (company calls customer)
channels
People and firms who connect producers of goods and services with customers
indirect exporting
Exporting using intermediaries such as agents, export management companies, or export trading companies
direct exporting
Exporting using no intermediaries
freight forwarders
Firms specializing in arranging international shipments—packaging, transportation, and paperwork
elasticity
From economics, the idea that the market's demand for a product or service is sensitive to changes in its price
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, farmer's markets, party sales, and most industrial sales are methods of direct selling
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 email or regular mail address with the intent of having the customer place an immediate order
elastic product
Product for which there are any number of substitutes and for which a change in price makes a difference in quantity purchased
inelastic product
Product for which there are few substitutes and for which a change in price makes very little difference in quantity purchased
periodic discounting
Sales conducted at predictable intervals, such as before major holidays (e.g. Holiday sale, back-to-school sale)
mail order
Sales made from ads in newspapers or magazines, with purchases taken 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
premium pricing
Setting a price above that of the competition to indicate a higher quality
captive pricing
Setting the price for an item relatively low and then charging much higher prices for the expendables it uses (e.g. Low-price ink-jet printers, but high-priced replacement ink cartridges
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
manufacturer
The entity that produces a product or service to be sold
Optimum Price
The highest price that will produce your desired level of sales in your intended market
just-in-time (JIT) inventory
The practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer
Micro-inventory
The purchase of inventory only after a sale is made; very typical with Internet firms
Distribution
process of getting your product to the customer
Direct marketing
relatively inexpensive and provides control over where your product goes, consumer information, product use, and pricing