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