Transcript 2 Lesson 22.1 Product Goals

Chapter 22 Pricing and Promotion
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©2008 Thomson/South-Western
Chapter 22
Pricing and Promotion
Lesson 22.1 Product
Goals
 Explain how products, product lines, and
product assortments are developed.
 Discuss how product selection, packaging,
and branding improve product sales and
customer satisfaction.
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Planning a Business Purchase
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What to purchase — influenced by
competition and business’s financial strength
When to purchase — types of products,
types and location of suppliers, style, price
From whom to purchase — number and
reputation of suppliers
How much to purchase — customer demand,
inventory
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Business Buying Processes
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New task purchase — purchasing a product,
inventory item, or supply for the first time
Modified rebuy — purchasing a new or
modified product from established suppliers
Straight rebuy — low-risk purchase decisions
that can be made without modifications
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Lesson 22.2 Pricing and Costs
Goals
 Distinguish between various types of
discounts and price components.
 Describe factors involved in establishing
product prices and common pricing
strategies.
 Discuss ways that companies try to control
costs that can lead to higher prices.
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Payment Terms and Discounts
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List price — initial price that the seller posts
on a product
Payment terms — credit terms
Discounts
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Trade discount
Quantity discount
Seasonal discount
Cash discount
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Components of Price
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Selling price
Cost of goods sold
Operating expenses
Margin or gross profit
Net profit
Markup
Markdown
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COMPONENTS OF
SELLING PRICE
$1.00 Selling Price
$.60
Cost of Goods Sold
$.35
Operating Expenses
$.05
Net Profit
$.40 Margin or Gross Profit
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Pricing Strategies
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Pricing to meet competition
Pricing to earn a specific profit
Profit based on consumer demand
Pricing to sell more products
Pricing to provide customer services
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Controlling Costs
Factors that can affect costs:
 Markdowns
 Damaged or stolen merchandise
 Returned merchandise
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Chapter 22
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Lesson 22.3 Promotion
Goals
 Discuss the purpose of promotion in meeting
business and consumer needs.
 Discuss how businesses use advertising to promote
their products.
 Explain the parts of the selling process and how
each is used to help customers make buying
decisions that meet their needs.
 Describe the different types of sales promotions.
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Consumer Decision-making Process
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Problem recognition
Information search
Alternative evaluation
Purchase
Post-purchase evaluation
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Major Purposes of Advertising
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To inform and educate
consumers
To introduce a product or
business
To announce improvement
or product change
To reinforce features and
benefits
To increase frequency of
use
To increase variety of uses
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To convince people to enter
a store
To develop a list of
prospects
To make a brand, trademark,
or slogan familiar
To improve the image of a
company or product
To gain support for ideas or
causes
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Types of Advertising Media
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Publication advertising
Mass media advertising
Outdoor advertising
Direct advertising
Display advertising
Internet advertising
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Planning and Managing Advertising
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Advertising budget
Timing of advertising
Advertising evaluation
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Truth in Advertising and Selling
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False advertising
Full disclosure
Substantiation
Penalties for violations:
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Case-and-desist order
Corrective advertising
Fines
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Personal Selling
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Studying the wants of customers (buying
motives)
Presenting and demonstrating the product
Answering customer questions
Closing the sale
Follow-up
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Sales Promotions
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Sales promotions — any promotional
activities other than advertising and personal
selling intended to motivate customers to buy
Self-service merchandising — customers
select the products they want to purchase,
take them to the checkout counter, and pay
for them, without much help from
salespeople
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Pricing and Promotion