Chapter 11: Small Business Pricing, Distribution, and Location
direct sales
methods of going directly to your customer in order to sell your product. vending machines, door-to-door salespeople, leasing space a ta craft fair, farmer's markets, party sales, and most industrial sales are examples.
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
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)
indirect exporting
exporting using intermediaries such as agents, export management companies, or export trading companies
guerrilla marketing
the use of creative and relatively inexpensive ways to reach your customer. Examples include doorknob hangers, flyers under windshield wipes, T-shirts, balloons, and messages written on sidewalks
multichannel marketing
the use of several different channels to reach your customers; for example, a website, direct mail, and traditional retailing
fulfillment center
a company that will warehouse your products and fill your customers' orders for you
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
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
born internationals
a new firm that opens a website immediately, thus being exposed to customers from around the world
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
markup
the amount an entrepreneur adds to cost 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 inventory
the practice of purchasing and accepting delivery of inventory only after it has been sold to the final customer
direct mail
a method of selling in which catalogues, 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
direct exporting
exporting using no intermediaries
channels
people and firms who connect producers of goods and services with customers
price lining
the practice of setting (usually) three price points: good quality, better quality, best quality
microinventory
the purchase of inventory only after a sale is made; very typical with internet firms
questions for Exporting:
are we ready? where should we go? whom do we contact over there?
random discounting
a sale run on a schedule that is unpredictable to the customer
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
wholesaler
an intermediary business that buys (typically in large quantities) and sells (typically in smaller quantities) to businesses rather than consumer
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)
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
multiple or bonus pack
combining more than one unit of the same product and pricing it lower than if each unit were sold separately
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
elasticity
from economics, the idea that the market's demand for a product or service is sensitive to changes in its price
direct response advertising
placing an advertisement in a magazine or newspaper, on television or radio, or in any other media. The ad contains and order blank with a phone number and email 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
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
prestige pricing
setting a price above that of the competition to indicate your 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. (numbers that are multiples of 10 are psychological hurdle for customers)
partitioned pricing
setting the price for a base item and then charging extra for each additional component
captive pricing
setting the price for an item relatively low and then charging much higher prices for the expendables it uses