Transcript Chapter 5 - Hoxie Public Schools

Chapter 5
Market Your Business
5.1 Develop the Marketing Plan
5.2 The Marketing Mix─Product
5.3 The Marketing Mix─Price
Entrepreneurship: Ideas in Action
© Cengage Learning/South-Western
Ideas in Action
Turning Creative Fun Into Dollars
 The Schmelzer family turned a novel idea
for decorating Crocs into a simple in-home
business.
 After growing their business through
website based orders, the Schmelzers
utilized manufacturing capacity in China to
accommodate growth.
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 Six months after placing the first
manufacturing order in China, the
Schmelzers sold their business for $10
million.
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Lesson 5.1
Developing the Marketing
Plan
Goals
 Explain the importance of marketing a
business.
 Discuss how to develop a marketing
strategy for a business.
 Describe what information is included in
a marketing plan.
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Terms
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marketing
marketing concept
marketing mix
marketing strategy
marketing plan
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What is Marketing?
 marketing
 all of the processes used to determine and
satisfy the needs of customers and the
company
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planning
pricing
promoting
distributing
selling
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 marketing concept
 Uses the needs of customers as the primary
focus of a product or service during the
stages of:
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planning
production
distribution
promotion
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 A successful marketing concept will:
 Identify what will satisfy the customers’
needs and wants
 Develop and market products or services
that customers consider better than other
choices
 Operate profitably
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 marketing mix
 reaching the target market through a
blend of:
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product
price
distribution
promotion
Entrepreneurship: Ideas in Action
© Cengage Learning/South-Western
Why is marketing important to a
business?
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Entrepreneurship: Ideas in Action
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The Marketing Strategy
 marketing strategy
 a plan that identifies how business goals
will be achieved by outlining:
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product introduction or innovation
pricing
distribution
promotion
projected profitability
sales or market share
Entrepreneurship: Ideas in Action
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 marketing goals should:
 be achievable with your available resources
 reflect short, medium and long-term goals
 be written following the SMART guidelines
from Chapter 1
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Short-Term Goals
 Achievements for the next year are the
focus of short-term goals.
 number of customers
 level of sales
 level of profits
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Medium-Term Goals
 Achievements for the next two to five
years are the focus of medium-term
goals.
 Make sure your marketing strategy
facilitates achievement of medium-term
goals.
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Long-Term Goals
 Achievements for a 5, 10, or 20 year
time horizon are the focus of long-term
goals.
 Long-term goals can help define current
marketing plans.
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Why is goal setting important when
developing a marketing strategy?
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Write Your Marketing Plan
 A marketing plan will define:
 your market
 your customers and competitors
 a strategy for attracting and keeping
customers
 anticipated changes
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 The marketing plan should include the
following information:
1.
2.
3.
4.
5.
6.
7.
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Product or Service
Target Market
Competition
Marketing Budget
Business Location
Pricing Strategy
Promotional Strategy
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 Marketing plans should include
performance standards that are
quantifiable.
 Actual results should be compared to
performance standards quarterly.
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Why is it important to put your
marketing plan in writing?
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Lesson 5.2
The Marketing Mix─Product
Goals
 Explain how the marketing concept
affects decisions regarding the product
mix.
 Define and describe the importance of
product features, branding, and
positioning.
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Terms
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product mix
features
branding
positioning
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The Marketing Concept and the
Product
 The wants and needs of customers are
the most important consideration when
developing any product or marketing
effort.
 The U.S. market is consumer-driven.
 Reasons – consumers have become more
educated, competition has increased.
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Product Mix
 product mix
 the different products and services a business
sells
 Entrepreneurs may carry some products
that are not profitable because the
products provide a convenience for
customers.
 A small percentage of product selection
makes up the majority of sales revenue
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How does the marketing concept
affect decisions made about the
product mix?
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Development of Features,
Branding, and Positioning
 There is more to a product than
consumers may realize.
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features
branding
packaging
labeling
positioning
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Selecting Product Features
 features
 product characteristics that will satisfy
customer needs
 Examples include color, size, quality,
hours, warranties, delivery, and
installation.
 The target market should be considered
when selecting product features.
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Branding, Packaging, and
Labeling
 branding
 the name, symbol, or design used to
identify your product
 package
 the box, container, or wrapper in which the
product is placed
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 label
 where information about the product is given
on the package
 The brand, package, and label that you
choose for a product help differentiate it
from others on the market.
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Position Your Products or
Services
 Different products and services within
the same category serve different
customer needs.
 positioning
 creating an image for the product in the
customer’s mind
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Why are product features, branding,
and positioning important?
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Entrepreneurship: Ideas in Action
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Lesson 5.3
The Marketing Mix─Price
Goals
 Identify pricing objectives for a business.
 Calculate the price for products using various
methods.
 Discuss factors to consider when pricing
services.
 List and describe various pricing techniques.
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© Cengage Learning/South-Western
Terms


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return on investment
market share
demand-based pricing
cost-based pricing
competition-based pricing
psychological pricing
discount pricing
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Entrepreneurship: Ideas in Action
© Cengage Learning/South-Western
Set Pricing Objectives
 price
 the amount a customer pays for a product
or service
 needs to be low enough that customers
buy from you
 needs to be high enough so revenues
exceed expenses
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 Objectives for a pricing program should
be established prior to selecting a
pricing strategy.
 Objectives might include:
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maximize sales
discourage competition
establish an image
increase profits
attract customers
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Return on Investment
 investment
 the costs of making and marketing a
product
 return on investment (ROI)
 amount earned as a result of the
investment
 usually expressed as a percentage
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Market Share
 market share
 a business’s percentage of the total sales
generated by all companies in the same
market
 The total market for a product must be
known in order for market share to be
determined.
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 Market Share =
Amount of Sales ÷ Total Market Size
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 There are multiple ways to increase
market share including:
 lowering prices
 advertising and promotion
 networking with potential customers
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Why is it important to determine
pricing objectives before pricing
goods and services?
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Determine a Price for a
Product
 There is usually more than one price
that can be charged for a product.
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Demand-Based Pricing
 demand-based pricing
 pricing that is determined by how much
customers are willing to pay for a product or
service
 Survey customers to determine what they
would be willing to pay for a product.
 The highest price identified is the maximum
price that can be charged.
Chapter 5
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Cost-Based Pricing
 cost-based pricing
 determined by using the wholesale cost of
an item as the basis for the price charged
 markup price
 determined by adding a percentage
amount to the wholesale cost of an item
Chapter 5
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 Markup amount =
Wholesale cost × Percentage markup
 Retail Price =
Wholesale cost + Markup amount
Chapter 5
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 markdown price
 determined by subtracting a percentage
amount from the retail price
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 Markdown amount =
Retail price × Percentage markdown
 Markdown Price =
Retail Price - Markdown amount
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Competition-Based Pricing
 competition-based pricing
 pricing that is determined by considering
what competitors charge for the same
good or service
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List three methods for determining
the price to charge for a product.
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Price a Service
 To set a price for a service, consider
the following:
 the cost of items used in providing the
service
 the amount of time required to produce the
service
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Time-Based Pricing
 The amount of time it takes to complete
a service will be the basis for
determining the price of the service.
 Providers must decide whether the cost
of materials will be:
 included in the price
 listed as a separate charge
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Bundling
 bundled pricing
 when all services are combined under one
charge
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Which method would be the best for
a housepainter to use to price
services? Why?
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Pricing Techniques
 Pricing can make or break a business.
 Pricing techniques may change over
time.
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Introductory Pricing
 price skimming
 used for products that are new and unique
 a high price is charged to cover product
development costs
 penetration pricing
 a low introductory price is charged to build
a strong customer base
 discourages competition
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Psychological Pricing
 psychological pricing
 certain prices have an impact on how
customers perceive a product
 used most commonly in retail
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 Techniques used in psychological
pricing include the following:
 prestige pricing
 a high price to create a feeling of superiority
 odd/even pricing
 prices ending in odd numbers are perceived to be
bargains
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 price lining
 for a specific category of products
 offering different prices
 based on specific features and qualities
 promotional pricing
 temporarily offering lower prices to increase sales
 multiple-unit pricing
 pricing items in multiples
 consumers buy more units if they perceive a
bargain
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Discount Pricing
 discount pricing
 offers customers a reduced price
 encourages purchases
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 Techniques used in discount pricing
include the following:
 cash discounts
 encourages early payment of invoices
 quantity discounts (volume discounts)
 offers lower prices based on the purchase of a
large quantity
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 trade discount
 when a manufacturer offers a discount to
wholesaler or buyer in the same trade
 seasonal discounts
 used to sell seasonal merchandise out of season
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Name two techniques used in
psychological pricing and provide
an example of each.
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PERFORMANCE INDICATORS
EVALUATED
 Demonstrate knowledge and understanding
of management and international business
concepts.
 Communicate research in a clear and
concise manner, both orally and in writing.
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 Demonstrate teamwork skills needed to
function in a global marketing environment.
 Demonstrate successful price selection
methods.
 Demonstrate effective persuasive and
informative communication and
presentation skills.
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THINK CRITICALLY
1. Why is the packaging so important for freshcut flowers?
2. Why is it important for the product to clear
customs?
3. Why must Flower Power understand customs
(cultural traditions) in other countries?
4. Why are the packaging costs important in this
case?
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