Transcript Insert text cover

PowerPoint
Presentations for
Small Business Management:
Launching and Growing New Ventures,
Fifth Canadian Edition
Adapted by
Cheryl Dowell
Algonquin College
CHAPTER 7
Promotional and Pricing
Strategies
7-2
LOOKING AHEAD
After studying this chapter, you should be able to:
1.
Describe the communication process and the factors determining a promotional
mix.
2.
Identify advertising options for a small business.
3.
Discuss the use of sales promotion tools and describe personal selling activities.
4.
Discuss methods of determining the appropriate level of promotional
expenditure.
5.
Discuss the role of cost and demand factors in setting a price.
6.
Apply break-even analysis and markup pricing.
7.
Identify specific pricing strategies and create a price quality grid.
Copyright © 2013 by Nelson Education Limited
7-3
THE COMMUNICATION PROCESS
IN PROMOTION
target
customers
product’s
characteristics
geographic
nature
budget
Promotional
Mix
create
awareness
LO 1
cost effective
Copyright © 2013 by Nelson Education Limited
7-4
THE COMMUNICATION PROCESS
LO 1
Copyright © 2013 by Nelson Education Limited
7-5
ADVERTISING PRACTICES
FOR SMALL FIRMS
Product
Advertising
Institutional
Advertising
LO 2
• make potential customers
aware of a particular product
or service and their need for it
• conveys information about
the business itself
Copyright © 2013 by Nelson Education Limited
7-6
FORMS OF ADVERTISING MEDIA
PAID
HIJACKED
OWNED
SOLD
LO 2
EARNED
Copyright © 2013 by Nelson Education Limited
7-7
KEY SHIFTS IN MARKETING
LO 2
Copyright © 2013 by Nelson Education Limited
7-8
ONLINE MARKETING STRATEGIES
PAID KEYWORD ADS
• Pay- per- clicks (PPC)
NATURAL RANKINGS
• Search engine optimization (SEO)
ONLINE NEWSLETTERS
ONLINE PRESS RELEASES
SOCIAL MEDIA MARKETING
• Facebook, Twitter, YouTube
LO 2
Copyright © 2013 by Nelson Education Limited
7-9
SALES PROMOTION
FOR SMALL FIRMS
LO 3
Copyright © 2013 by Nelson Education Limited
7-10
TRADE SHOW CHECKLIST
Plan ahead
Create a presence on the show floor
Create moving billboards
Make the booth interactive
Qualify leads immediately
Recruit customers
LO 3
Copyright © 2013 by Nelson Education Limited
7-11
MARKETING vs. SELLING
LO 3
Copyright © 2013 by Nelson Education Limited
7-12
SALES PRESENTATION
OBJECTIONS
•
•
•
•
•
•
Price
Product
Timing
Source
Service
Need
LO 3
SUGGESTIONS
•
•
•
•
•
Direct denial
Indirect denial
Boomerang Technique
Compensation method
Pass-up method
Copyright © 2013 by Nelson Education Limited
7-13
SALES PRESENTATION
• Adapting the sales approach to the customers’
needs:
– Avoid “canned” sales talk
– Speak the customer’s “language”
– Answer every objection explicitly and adequately
– Be enthusiastic, friendly, and persistent
– Be personally supportive of the customer
LO 3
Copyright © 2013 by Nelson Education Limited
7-14
COMPENSATING SALESPEOPLE
• Nonfinancial Rewards
– Personal recognition of employees by the firm
• Financial Rewards
– Commissions
• Compensation paid as percentage of sales productivity.
– Straight Salary
– Combination of Commissions/Salary
• Balance of two compensation forms is adjusted to
provide an increasing proportion of commission as
salesperson gains experience
LO 3
Copyright © 2013 by Nelson Education Limited
7-15
PROMOTIONAL BUDGET STEPS
LO 4
Copyright © 2013 by Nelson Education Limited
7-16
CREATING A PRICING STRATEGY
Situation A
• Quantity Sold × Price per Unit = Gross Revenue
250,000 × $3.00 = $750,000
Situation B
• Quantity Sold × Price per Unit = Gross Revenue
250,000 × $2.80 = $700,000
LO 5
Copyright © 2013 by Nelson Education Limited
7-17
CREATING A PRICING STRATEGY
LO 5
Copyright © 2013 by Nelson Education Limited
7-18
COST STRUCTURE OF
A HYPOTHETICAL FIRM
LO 5
Copyright © 2013 by Nelson Education Limited
7-19
APPLYING A PRICING SYSTEM
LO 6
Copyright © 2013 by Nelson Education Limited
7-20
BREAK-EVEN GRAPH ADJUSTED FOR
ESTIMATED DEMAND
LO 6
Copyright © 2013 by Nelson Education Limited
7-21
MARKUP PRICING
• Cost plus pricing system that adds a markup
percentage
– Must cover:
• Operating expenses
• Subsequent price reductions
• Desired profit
Markup
 100  Markup as a percentage of selling price
Selling Price
Markup
 100  Markup as a percentage of cost
Cost
LO 6
Copyright © 2013 by Nelson Education Limited
7-22
SELECTING A PRICING STRATEGY
Penetration
Pricing
Setting lower than normal prices to hasten market
acceptance of a product or service or to increase market
share
Skimming Pricing
Setting very high prices for a limited period before reducing
them to more competitive levels
Follow-theLeader
Using a particular competitor as a model in setting prices
Variable Pricing
Setting more than one price for a good or service in order to
offer price concessions to certain customers
Flexible Pricing
Offer different prices to reflect differences in customer
LO 7
Copyright © 2013 by Nelson Education Limited
7-23
SELECTING A PRICING STRATEGY
Bundling
Offering several products for one combined price
Odd-Even
Make the price appear to be lower. Ending in 0.99
Unit Pricing
Comparison where a product may be sold in different
sizes
Price Lining
Setting a range of several distinct merchandise levels
Loss Leader
Products offered at or slightly below cost to attract
people
What the
market
will bear
Charging as high a price as possible before resistance
LO 7
Copyright © 2013 by Nelson Education Limited
7-24
SELECTING A PRICING STRATEGY
• Pricing and Competitive Advantage
– Customers demand and pay more for a product or
service that they perceive as important
• Prestige Pricing
– Setting a high price to convey an image of high
quality or uniqueness (competitive advantage)
– Markets with low levels of product knowledge are
candidates for prestige pricing
LO 7
Copyright © 2013 by Nelson Education Limited
7-25