Test 2 Management

If a haberdasher purchases a tie for $12 and plans to sell it for $18, the dollar markup would be: Dollar markup = Retail Price - Cost of the merchandise

$6

What is the value of outdoor and transit advertising to the small business?

A variation of out-of-home advertising is transit advertising, which includes advertising signs on the inside and outside of the public transportation vehicles such as trains, buses, and subways throughout the country's urban areas. The medium is likely to grow as more cities look to public transit systems to relieve traffic congestion. Transit ads offer a number of advantages: Wide coverage; Low cost; Flexibility. Transit ads also have several disadvantages: Generality; Limited appeal; Brief message.

Businesses faced with rapidly rising raw materials costs should consider the following strategies:

All of the above Emphasize the value your company provides to customers. Communicate with customers and focus on improving efficiency everywhere in the company. Anticipate rising materials costs and try to lock in prices early.

Which of the following is a fair definition of price?

Both A and B Answers: Price is a measure of what a customer is required to give up to obtain a good or service. In purely economic terms, price is the monetary value of a good or service.

________ is grouping together several products or services, or both, into a package that offers customers extra value at a special price.

Bundling

________ pricing is when the base product is not functional without the appropriate accessory

Captive-product

Why would a small business owner use direct mail in his/her advertising strategy? Why wouldn't he/she?

Direct mail has long been a popular method of direct marketing and includes tools such as letters, postcards, catalogues, discount coupons, brochures, and CDs that are mailed to homes or businesses. Direct mail offers some distinct advantages to entrepreneurs: * Flexibility * Reader attention * Rapid feedback * Measurable results and testable strategies * Effectiveness Direct-mail ads also suffer from several disadvantages: * Inaccurate mailing lists * Clutter * High relative costs * High throwaway rate

How can the entrepreneur use cooperative and shared advertising to effectively advertise his/her business and products while holding down promotional costs?

In cooperative advertising, a manufacturing company shares the cost of advertising with a retailer if the retailer features its products in those ads. Both the manufacturer and the retailer get more advertising per dollar by sharing expenses. Cooperative advertising not only helps small businesses stretch their advertising budgets, but it also offers another source of savings: the free advertising packages that many manufacturers supply to retailers. These packages usually include photographs and illustrations of the product as well as professionally prepared ads to use in different media. In shared advertising, a group of similar businesses forms a syndicate to produce generic ads that allow the individual businesses to dub in local information. The technique is especially useful for small businesses that sell relatively standardized products or services such as legal assistance, autos, and furniture. Because the small firms in the syndicate pool their funds, the result usually is higher-quality ads and significantly lower production costs.

________ is a technique in which a small firm marks down the price of a popular item below its normal price in an effort to increase customer traffic and to boost sales of other items.

Leader pricing

Your small firm is considering using print media, specifically, newspapers for an advertising campaign. Explain the advantages and disadvantages of this medium

Newspapers provide several advantages to small business advertisers: * Selected geographical coverage * Flexibility * Timeliness * Communication potential * Low costs * Prompt responses * Growing popularity of free newspapers Newspaper advertisements also have disadvantages: * Wasted readership * Reproduction limitations * Lack of prominence * Declining readership * Short ad life

________ is a technique which greatly simplifies the pricing function by setting the same price for items with similar characteristics.

Price lining

How can a small business owner use publicity to the benefit of his/her business?

Publicity is any commercial news covered by the media that boosts sales but for which the small business does not pay. "[Publicity] is telling your story to the people you want to reach namely the news media, potential customers, and community leaders," says the head of a public relations firm. "It is not haphazard...It requires regular and steady attention." Publicity has power because it is from an unbiased source.

________ pricing policy is used to introduce a relatively low-priced good into a market where no "elite segment" exists.

Skimming

Why would the small business owner use trade shows in his/her advertising strategy?

Trade shows provide manufacturers and distributors with a unique opportunity to advertise to a pre-selected audience of potential customers who are inclined to buy. Thousands of trade shows take place each year, and carefully evaluating and selecting the right shows can produce profitable results for a business owner. Trade show success does not depend on how much an exhibitor spends; instead, success is a function of planning, preparation, and follow-up. Advantages: a natural market, pre-selected audience, new customer market, cost advantage. Disadvantages are: increasing costs, wasted effort.

________ include(s) the unit cost of a manufacturer's product under an absorption costing system.

Variable costs

What questions does the small business owner need to answer in the developing of an advertising strategy?

What is the primary purpose of your ad? What USP can you offer customers? What other key benefits support your USP? At whom are we aiming the ad? What response do you want from your target audience? What image do you want to convey in your ads?

When a computer manufacturer offers its computer with software pre-installed, a printer, and Internet service, as all part of one price, the manufacturer is using a:

bundling strategy.

Absorption costing:

clouds the true relationship of price, volume, and costs.

When small manufacturing companies face rapidly increasing raw material costs, they can adopt a number of strategies including:

emphasize the value their company provides customers.

A common "me-too" pricing policy by which the small business owner establishes his/her prices by monitoring competitor's prices and then matching them is called:

follow-the-leader pricing.

The problem with using ________ is that it clouds the true relationships among price, volume, and costs by including fixed expenses in unit cost.

full-absorption costing

The basic objective of a penetration pricing policy is to:

gain quick access into a market to realize high sales volume quickly.

In most cases, a ________ pricing strategy is used to introduce relatively low priced goods into the market where no elite segment and little opportunity for differentiation exist.

penetration

A ________ strategy works well when a company has a mature product, loyal customers, a reputation for quality, and few competitors.

skimming

Geographical pricing includes numerous techniques, such as:

uniform delivered pricing.

When a small business is faced with price competition from a much larger competitor, it should consider:

using non-price competition by offering value added service.

Even in the short run, a small business must set the price of a product at least equal to the ________ costs (per unit), or it must shut down.

variable