Introduction to Business &
Marketing
INTRODUCTION TO
MARKETING
ASSIGNMENT
1. Read Chapter 13, Pages 214 – 227
2. Read Complete the Crossword Puzzle
Provided
3. On the Puzzle sheet, answer any one “Critical
Thinking” question from the text. Use
complete sentences. Summarize the question
in the first sentence.
OBJECTIVE
Be Able to Define Marketing
Define Marketing
• All of the business
activities involved with
moving goods &
services from producers
to consumers
OBJECTIVE
Be Able to Identify &
Describe the Marketing
Concept
The Goals of Marketing
• To satisfy the
wants & needs
of our customers
• To make Money !!
The Marketing Concept
“A Business Philosophy”
• If a business is to be successful make money - if must satisfy the
wants & needs of the consumer
OBJECTIVE
Be Able to Identify & Describe
the “Four P’s” of Marketing
The “Four P’s” of Marketing
• Product Planning
• Pricing
• Promotion
• Physical
Distribution
The “Four P’s” of Marketing
•
•
•
•
Product Planning
Pricing
Promotion
Physical
Distribution
Product Planning
• Any Business Activity
That Helps to Design a
New Product or Change
the Characteristics of an
Old Product
PRODUCT PLANNING
• Important Concept:
–FEATURES - Facts about
your product, physical
description (size, color,
material used, etc)
–BENEFITS - What the
product can do for you!!!
The “Four P’s” of Marketing
•
•
•
•
Product Planning
Pricing
Promotion
Physical
Distribution
Pricing
• Any Activity Used
to Assign a Value to
a Product or Service
The “Four P’s” of Marketing
•
•
•
•
Product Planning
Pricing
Promotion
Physical
Distribution
Promotion
• Any Activity Designed to
Let the Customers Know
About a Product or Service
–Personal Selling
–Advertising
–Publicity
–Public Relations
–Visual Merchandising
–Sales Promotion
The “Four P’s” of Marketing
•
•
•
•
Product Planning
Pricing
Promotion
Physical
Distribution
Physical Distribution
• Involves the Actual
Movement of
Merchandise as it
Moves From the
Producer to Consumer
OBJECTIVE
Be Able to Match the Seven Marketing
Activities With Their Definition or
Examples
Seven Marketing Functions
• Market
Information
Management
• Financing
• Pricing
•
•
•
•
Promotion
Distribution
Selling
Product/Service
Management
Distribution
The process of getting goods &
services to customers. This includes
purchasing, stock handling, inventory
control, & physical distribution
>(transportation & warehousing).
Financing
Financing is getting the money that is
necessary for setting up & running a
business. Finance also includes
protecting investments through risk
management.
Marketing Information
Management (MIS)
An effective MIS gathers and analyzes
information about customers, trends,
& competitor’s products.
Pricing
Determining the amounts a customer
will be charged for a good or service
so that a business can earn a profit
Product/Service Management
Obtaining, developing, maintaining, &
improving a product or product mix in
response to market opportunities
Promotion
Promotion is any effort to inform,
persuade, or remind potential customers
about a business’s products or services
Selling
Personally matching customers wants
& needs with products & services
available for sale.
(An important associated concept is “Relationship Marketing.”)
Seven Marketing Functions
• Market
Information
Management
• Financing
• Pricing
•
•
•
•
Promotion
Distribution
Selling
Product/Service
Management
OBJECTIVE
Be Able to Identify Each Member of
the “Primary Channel of
Distribution”
&
Describe Their Roles
The Primary Channel of
Distribution
Producer
Wholesaler
Retailer
Consumer
The Primary Channel of
Distribution
• Primarily Makes
Products to Sell
• But Also Must:
– Buy & Sell
– Finance
– Store & Transport
– Insure
– Etc. Etc. Etc.
Producer
The Primary Channel of
Distribution
• Breaks Down Bulk
Quantities Into Smaller Lots Wholesaler
• But Also Must:
– Buy & Sell
– Buy Real Estate
– Store
– Do Market Research
– Etc. Etc. Etc.
The Primary Channel of
Distribution
• Primarily Sells to the
Consumer
• But Also Must:
– Display
– Advertise
– Make a Profit
– Package Goods
– Provide Services
– Etc. Etc. Etc.
Retailer
The Primary Channel of
Distribution
• Most Importantly, Buys
Our Products & Services
• But Also:
– Provides Market
Research Information
– Uses Our Products &
Services Up & Buys
Again
Consumer
The Primary Channel of
Distribution
Chemicals
Sugar
Producer
Milk
Cocoa
The Primary Channel of
Distribution
Producer
Wholesaler
Retailer
Consumer
OBJECTIVE
Be able to describe, in an essay,
how marketing activities benefit
our society
How Marketing Activities
Benefit Our Society
• Raises the Standard of Living
• Adds Value to What We Buy
– Form Utility
– Place Utility
– Time Utility
– Possession Utility
– Information Utility
How Marketing Activities
Benefit Our Society
• Makes Shopping More
Convenient
• Keeps Prices Reasonable
• Helps Society to Keep Up
With Change
• Provides Public Service
Activities
Marketing Trivia
• 1/4 to 1/3 of all Jobs are Marketing Related
• $ .50 of Every Dollar Goes to Cover the
Cost of Marketing Activities
• Marketing Creates Jobs Which Allows
Consumers to Have More Money to Spend
on Items That Will Improve Their Standard
of Living
PRODUCT PLANNING
PROCESS
OBJECTIVE
Be able to outline the product
planning process and identify the
associated terms
FEATURE/BENEFIT
ANALYSIS
FEATURES
Facts About the Product
Size, Color, Materials, Warranties,
Construction Methods, Manufacturer, Etc.
Benefits = Buying Motives
Buying Motives:
– What a product does
for you
– The reasons why
people buy products
or services
BENEFITS
•
•
•
•
•
•
•
Will it make you rich?
Will it make you successful?
Will it make you happy?
Will it relax you?
Will it make you healthier?
Will it make you attractive?
Etc. etc. etc.
BUYING MOTIVES
Activity
• If you were to design a new
car, what buying motives
would you appeal to?
– Safety?
– Excitement?
– Cost Savings?
– Comfort?
– Other
BUYING MOTIVES
Activity
• What “features” would you
have on your new car?
– Safety
– Excitement
– Cost Savings
– Comfort
– Other?
BUYING MOTIVES
Assignment With a Partner
• If you were to design a new
____, what buying motives
would you appeal to?
– ______________?
– ______________?
– ______________?
– ______________?
BUYING MOTIVES
Assignment With a Partner
• What “features” will you
have on your new _____?
– ____________
– ____________
– ____________
– ____________
– ____________
Other Important
Marketing Concepts
• Market Segmentation
• Demographics
– Family Life Cycle
– Trends in Demographics
• Target Marketing
OBJECTIVE
Be Able to Define Market
Segmentation
OBJECTIVE
Be Able to Define
Target Marketing
OBJECTIVE
Be Able to Define
Demographics
Common Demographics
•
•
•
•
•
•
•
Age
Sex
Occupation
Religion
Interests
Income
Family Size
•
•
•
•
•
•
•
Geographic Location
Attitudes
Educational Background
Race
Ethnic Background
Wealth
Etc.
DEMOGRAPHIC
TRENDS
???
???
???
???
???
DEMOGRAPHIC
TRENDS
•
•
•
•
•
Age
Incomes
Geographic Location
Family Size
???
Family Life Cycle
• Stages
– Early Childhood
– Teen
– Young Adult/Single
– Married w/out Children “Dinks”
– Married w/ Children
– Maturity
– Empty Nest
– Sole Survivor
Product Planning Process
1.) Select general type of
product
2.) Specify the product mix
3.) Develop packaging &
labeling
4.) Identify features &
benefits
1.) Select General Type of Product
(OUTLINE)
I.) Consumer Goods
A.) Types
B.) How to Market
II.) Consumer Services
A.) Types
B.) How to Market
Select General Type of Product
OUTLINE
III.) Industrial Goods
A.) Types
B.) How to Market
IV.) Industrial Services
A.) Types
B.) How to Market
1.) Select General Type of Product
OUTLINE
I.) Consumer Goods - Products
used for personal, family, or
household purposes
A.) Convenience - _________________
B.) Shopping
- _________________
C.) Specialty
- _________________
Select General Type of Product
OUTLINE
I.) Consumer Goods
A.) Convenience Goods - Inexpensive
products purchased regularly, little effort
spent on decision. Many grocery items
fall into this group. Customer will
substitute.
1.) Types of Convenience Goods:
Staples - Basic food items used often
`
(ex. Bread)
Impulse - Unplanned purchases
(ex. Candy)
Emergency - Items purchased
because of immediate need
(ex. Batteries)
Select General Type of Product
OUTLINE
2.) Keys to Selling Convenience Goods:
a.) have convenient locations
b.) have extended hours
c.) layout is conducive to self-service
d.) have a wide variety of merchandise
e.) heavy use of print/broadcast media
& displays
Think Seven Eleven!!!
LOCATION!
HOURS!
7/11
ADVERTISING!
Help
Wanted
SELF-SERVICE!
VARIETY!
1.) Select General Type of Product
OUTLINE
I.) Consumer Goods - Products used for
personal, family, or household purposes
A.) Convenience - _______________
B.) Shopping - _________________
C.) Specialty - _________________
1.) Select General Type of Product
OUTLINE
I.) Consumer Goods
B.) Shopping Goods - Purchases made by
a consumer after a great deal of searching
& comparison (ex. furniture)
1.) Types of Shopping Goods:
a.) higher priced merchandise
b.) risky purchases (if something isn’t
just right)
c.) the consumer has time to make a
decision
1.) Select General Type of Product
OUTLINE
2.) Keys to selling shopping goods:
a.) quality design, development, &
manufacturing
b.) knowledgeable/well trained
salespeople
c.) extensive brand advertising
1.) Select General Type of Product
OUTLINE
2.) Keys to selling shopping goods (cont.):
d.) warranties/services after purchase are
important
e.) special promotions & “POP” displays
are helpful
1.) Select General Type of Product
OUTLINE
I.) Consumer Goods - Products used for
personal, family, or household purposes
A.) Convenience - _______________
B.) Shopping - _________________
C.) Specialty - _________________
1.) Select General Type of Product
OUTLINE
I.) Consumer Goods
C.) Specialty Goods - goods purchased by
customers who desire a particular product
and/or brand and will accept no substitutes.
(ex.Cadilac, Rolex, Levi Jeans, Skippy peanut
butter)
1.) Select General Type of Product
OUTLINE
I.) Consumer Goods
C.) Specialty Goods
1.) Keys to Selling Specialty Goods:
a.) Keeping Product Available
(Product is Pre-sold)
1.) Select General Type of Product
OUTLINE
II.) Consumer Services - Things done for
people to help them in their daily lives:
A.) Rented Goods Services - _____________
B.) Owned Goods Services - _____________
C.) Non Goods Services - _____________
1.) Select General Type of Product
OUTLINE
II.) Consumer Services
A.) Rented Goods Services - provides a product
that the customer rents & uses. (ex. cars, videos)
B.) Owned Goods Service - one that alters or
improves on a good owned by the customer (car
wash, shoe shine)
C.) Non Goods Service - provides personal &
professional services to customers for a fee. (tax
prep., bridal)
1.) Select General Type of Product
OUTLINE
II.) Consumer Services
A.), B.), & C.) Rented, Owned, & Non-goods
Services
1.) Keys to selling:
a.) high quality standards
b.) flexible pricing
c.) effective personal selling
d.) promotion through word-of-mouth testimonial
e.) “Image is everything” encourages repeat sales
1.) Select General Type of Product
OUTLINE
III.) Industrial Goods - items purchased for
the production of other goods
A.) Installations & Accessory Equipment
B.) Raw Materials, Components, & Fabricated
Parts
C.) Industrial Supplies
1.) Select General Type of Product
OUTLINE
III.) Industrial Goods
A.) Installations & Accessory Equipment Items that are part of the production process,
not the product. (Examples include drill
presses, computers, etc.)
1.) Select General Type of Product
OUTLINE
III.) Industrial Goods
B.) Raw Materials, Components, &
Fabricated Parts:
Items consumed in the production
process or items used in the new
product(ex. Include oil, flour, etc.)
1.) Select General Type of Product
OUTLINE
III.) Industrial Goods
C.) Industrial Supplies - Items that
support/facilitate the use of a business’s
equipment. (ex. Include computer paper,
paint, cleaning products).
1.) Keys to Selling
a.) Hire & train a knowledgeable
workforce
b.) Emphasize product’s durability &
dependability
c.) Plan for customer follow-up &
maintenance
1.) Select General Type of Product
OUTLINE
III.) Industrial Services - Things done for business’s
to help them keep their business running smoothly
A.) Maintenance & Repair - general cleaning,
repair, painting, & decorating
B.) Business Advisory - includes management
consulting, engineering, legal, or accounting
assistance.
1.) Select General Type of Product
OUTLINE
III.) Industrial Services 1.) Keys to Selling(Same as Consumer Services)
a.) high quality standards
b.) flexible pricing
c.) effective personal selling
d.) promotion through testimonial
e.) “Image is everything” encourages
repeat sales
2.) Specify the Product Mix
OUTLINE
I.) Product Mix Terms
A.) Product Items & Lines
B.) Product Width & Depth
II.) Product Mix Strategies
A.) Types of Strategies
1.) Expand/Modify Product Current Lines/Items
2.) Developing New Products
III.) Product Life Cycle
A.) Managing a Product Throughout its Stages
2.) Specify the Product Mix
OUTLINE
I.) Product Mix - All the different products that a
company makes. All Ford Products, for example,
or all items manufactured by Harley/Davidson
A.) Product Items & Lines
B.) Product Width & Depth
2.) Specify the Product Mix
OUTLINE
I.) Product Mix
A.) Product Items & Lines
1.) Product Lines are groups of closely related
products.
For example, all cars produced by Ford
2.) A Product Item is a specific brand, model, or
size of a product. The Ford Mustang for
example
B.) Product Width & Depth
2.) Specify the Product Mix
OUTLINE
I.) Product Mix
A.) Product Items & Lines
B.) Product Width & Depth
1.) Product Width refers to the number of
different product lines a store carries or
manufacturer produces. Ford offers several
different product lines - trucks, cars, vans,
buses, military vehicles, construction
equipment, etc.
2.) Specify the Product Mix
OUTLINE
I.) Product Mix
A.) Product Items & Lines
B.) Product Width & Depth
1.) Product Width
2.) Product Depth refers to the number of
product items offered within each product
line. Ford Mustang, for example, offers
convertibles, LX models, standard vs.
automatic transmissions, & different size
engines.
2.) Specify the Product Mix
OUTLINE
II.) Product Mix Strategies - deciding which products
a company will carry or make.
A.) Expand or Modify Existing Product Lines or
Items
B.) Develop New Products
2.) Specify the Product Mix
OUTLINE
II.) Product Mix Strategies - deciding which products
a company will carry or make.
A.) Expand or Modify Existing Product Lines or
Items: Ford could, for example, add-solar
powered Mustangs to their product items
2.) Specify the Product Mix
OUTLINE
II.) Product Mix Stategies
A.) Expand or Modify Existing Product Lines or Items
B.) Develop New Products - means coming out
with totally new products to increase market
share. Could you, for example, imagine Ford
motor boats or blaze orange Valley tees?
(Any Current examples?!)
2.) Specify the Product Mix
OUTLINE
II.) Product Mix Strategies
B.) Develop New Products
1.) Product Development Process
a.) Generating ideas
b.) Screening ideas
c.) Developing the product
d.) Testing the product
e.) Introducing the Product
f.) Evaluating customer acceptance
2.) Specify the Product Mix
OUTLINE
II.) B.) Develop New Products
1.) Product Development Process:
a.) Generating Ideas - Use a variety of sources customers, employees, competition, suppliers.
b.) Screening Ideas - consider size of the market,
profit potential, & level of risk
c.) Developing the Product - develop prototypes,
marketing strategies, & plans for packaging,
labeling, branding, & distribution
2.) Specify the Product Mix
OUTLINE
d.) Testing the Product - tested in labs & w/
customers. Test marketing is done in specific
geographic areas
e.) Introducing the Product - The cost to introduce is very high & the chance for success
low. Conduct a promotional campaign &
train salespeople.
f.) Evaluate Customer Acceptance - Conduct
market & sales research. Do a customer
opinion survey.
2.) Specify the Product Mix
OUTLINE
II.) Product Mix Strategies
B.) Develop New Products
(ACTIVITY)
1.) Form Four Groups
2.) Group A Generates Five Product Ideas
3.) Group B Narrows the Choices to Two
4.) Group C Designs or Draws Both Products
5.) Group D Picks the Winning Product
2.) Specify the Product Mix
OUTLINE
III.) Managing a Product in its Product Life Cycle
A.) Defined - Just as the economy moves
through stages, so do product sales. At
different stages, try different marketing
strategies.
B.) Stages:
1.) Introduction
2.) Growth
3.) Maturity
4.) Decline
Product Life Cycle
Sales
Introduction
Profits
Growth
Maturity Decline
2.) Specify the Product Mix
OUTLINE
III.) Managing a Product Throughout its Product Life Cycle
A.) Defined
B.) Stages:
1.) Introduction - The product is new
a.) Goal is to draw customer’s attention &
to increase product awareness
b.) Techniques include heavy promotion ads, publicity, displays, sales
promotion, etc.
2.) Specify the Product Mix
III.) Managing a Product Throughout its Product Life Cycle
B.) Stages:
2.) Growth
a.) The product begins to enjoy success; sales
& profits go up. Target Market is aware
of product.
b.) Techniques used to market during this
stage include ads that focus on customer
satisfaction, meeting the competition,
expand or modify the product line
2.) Specify the Product Mix
OUTLINE
III.) Managing a Product Throughout its Product Life Cycle
B.) Stages:
3.) Maturity
a.) Sales level off/slow down, competition
is heavy, & the market might be
saturated.
b.) Ads focus on beating the competition,
think about dropping or improving the
item
2.) Specify the Product Mix
OUTLINE
III.) Managing a Product Throughout its Product Life Cycle
B.) Stages:
4.) Decline
a.) Sales are falling, profits are low or
nonexistent
b.) Management must decide to drop or to:
- sell, discount, or license the product
- find a new use for the product
- regionalize the product
- modernize or alter the product
Product Life Cycle
Sales
Introduction
Profits
Growth
Maturity Decline
3.) Develop Packaging & Labeling
OUTLINE
I.) Branding
A.) Defined
B.) Types of Brands
C.) Branding Strategies
II.) Packaging
A.) Functions of Packaging
III.) Labeling
A.) Types
3.) Develop Packaging & Labeling
OUTLINE
I.) Branding
A.) Defined - A name, design, or symbol
that identifies the products of a company. For
example, Coke products, Levi Jeans, Nike, etc.
1.) Related Terms include:
3.) Develop Packaging & Labeling
OUTLINE
1.) Related Terms include:
a.) Brand Name - words that can be spoken
b.) Brand Mark - a symbol, font, design, or color
c.) Trade Name - words that identify the
company
d.) Trade Character - brand mark given human
form
e.) Trademark - a brand name, mark, character
or combination of these protected by law
3.) Develop Packaging & Labeling
Provide an example for each:
a.) Brand Name - Levi’s, Nike, Tylenol, etc.
b.) Brand Mark - P. O. Eagle, Disney’s Castle, etc.
c.) Trade Name - Kellogg's, Chevrolet, Xerox, etc.
d.) Trade Character - Pillsbury Dough Boy, Bird’s
Eye’s Jolly Green Giant, etc.
e.) Trademark - Frito Lay’s Doritos, Kellogg's Rice
Krispies Treats, Nike’s Swoosh,
VISA, etc.
3.) Develop Packaging & Labeling
ACTIVITY
Provide an example for each:
a.) Brand Name b.) Brand Mark c.) Trade Name d.) Trade Character e.) Trademark -
3.) Develop Packaging & Labeling
I.) Branding
A.) Defined
OUTLINE
B.) Types of Brands:
1.) National - called “manufacturer
brands,” are owned by manufacturers.
2.) Private - owned by wholesalers &
retailers
3.) Generic - “no frills” products that don’t
carry a brand name
3.) Develop Packaging & Labeling
I.) Branding
A.) Defined
B.) Types of Brands:
OUTLINE
C.) Brand Strategies:
1.) Brand Extension - Improving an existing
brand name (ex adding flavors to Fig Newtons)
2.) Brand Licensing - allowing another company
to use your to use its name, marks, &
characters for a fee. (ex. Caterpillar lets over 700
companies use its name)
3.) Develop Packaging & Labeling
I.) Branding
A.) Defined
B.) Types of Brands:
OUTLINE
C.) Brand Strategies: (cont.)
3.) Co-branding - Two companies combining to
form another product. (Ex. The “GM Card) is
a Master Card offered by General Motors
4.) Mixed Brands - Offering a combination of
national, private, & generic products (ex. Any
grocery store)
3.) Develop Packaging & Labeling
OUTLINE
II.) Packaging
A.) Functions of Packaging
1.) Promoting & Selling the Product a.) Displays the brand name
b.) Attractive, colorful & artistic
c.) Makes it easy to use
2.) Defining Product Identify
a.) Unique packages sell the product
(Leggs)
3.) Develop Packaging & Labeling
OUTLINE
II.) Packaging
A.) Functions of Packaging (cont.)
3.) Providing Information
a.) Directions
b.) Ingredients
c.) Nutritional Value
d.) Hazards
e.) Prices
f.) Inventory Control
3.) Develop Packaging & Labeling
OUTLINE
II.) Packaging
A.) Functions of Packaging (cont.)
4.) Meeting Customer Needs
a.) Various Sizes (Family Size/Singles)
b.) Practical Needs (Microwaveable)
5.) Ensuring Safe Use
a.) Plastic vs. glass
b.) Tamper-proof lids
c.) Child-proof containers
3.) Develop Packaging & Labeling
OUTLINE
II.) Packaging
A.) Functions of Packaging (cont.)
6.) Protecting the product from:
a.) breaking during shipping
b.) from spoilage
c.) excessive costs (rectangles save money)
B.) Types:
a.) cardboard, glass, metal, plastic,
wood, wraps, etc.
3.) Develop Packaging & Labeling
OUTLINE
III.) Labeling - a information tag, wrapper,
seal, or imprinted message
4.) Identify Features & Benefits
OUTLINE
I.) Extended Product Features
A.) Types:
1.) Warranties & Guarantees
2.) Others
II.) Consumer Laws & Agencies
A.) Federal & State
B.) Consumer Rights & Responsibilities
III.) Credit
A.) Types
4.) Identify Features & Benefits
OUTLINE
I.) Extended Product Features
A.) Types:
1.) Warranties & Guarantees Defined:
a.) Warranty - a promise that a product
will meet certain standards or it
will be fixed.
b.) Guarantee - is a warranty that offers a
“money back” clause “if not completely
satisfied.”
4.) Identify Features & Benefits
OUTLINE
I.) Extended Product Features
A.) Types:
1.) Warranties & Guarantees Defined:
a.) Express Warranty - stated in writing
or spoken
i.) Full - Repaired or replaced
ii.) Limited - certain provisions are
excluded
4.) Identify Features & Benefits
OUTLINE
I.) Extended Product Features
A.) Types:
1.) Warranties & Guarantees Defined:
a.) Express Warranty
b.) Implied - not clearly indicated,
offers assurance that the product
will work the way it is supposed to
work
4.) Identify Features & Benefits
OUTLINE
I.) Extended Product Features
A.) Types:
1.) Warranties & Guarantees Defined:
a.) Express Warranty
b.) Implied
c.) Disclaimers - limits company liability.
For example, to the cost of the product,
not the damage done by the product
4.) Identify Features & Benefits
OUTLINE
I.) Extended Product Features
A.) Types:
2.) Others:
a.) delivery
b.) installation
c.) service after the sale
d.) directions & training
e.) billing
f.) credit
4.) Identify Features & Benefits
OUTLINE
I.) Extended Product Features
A.) Types:
2.) Others:
f.) credit:
i.) Bank Credit Cards
ii.) Retail Credit Cards
iii.) Debit Cards
iv.) Secured Loans
v.) Unsecured Loans
4.) Identify Features & Benefits
OUTLINE
II.) Consumer Laws & Agencies
A.) Federal & State
1.) Federal:
a.) Magnuson - Moss Consumer Product
Warranty Act of 1975 - Sets minimum
standards for warranties.
b.) Consumer Product Safety Act of 1972 Monitors the safety of products
c.) Etc.
4.) Identify Features & Benefits
OUTLINE
II.) Consumer Laws & Agencies
A.) Federal & State
1.) Federal:
2.) State:
a.) Lemon Laws - protects buyers from
chronically defective merchandise
b.) Arbitration Programs - Encourages
the use of third parties to resolve
differences
PRODUCT
PRICING
$
OBJECTIVE
Be Able to Define Money & Price
Money & Price
• Money
–A Measuring
Device. It
Measures Value
• Price
–A Specific
Measurement
of Value
OBJECTIVE
Be able to define
Retail Price, Cost, & Markup
Pricing Terms
• Retail Price - The amount of money a
customer pays for a product/service
• Cost - The amount of money a business
pays for a product/service
• Markup - The amount of money added to
cost to cover a business’ expenses
& desired net profit
What is Markup???
• Any Business Expense (Besides the Cost of Goods):
Utilities (Heat, Elec., Phone)
Salaries
Promotions
Taxes
Industrial Services (Cleaning)
• Any Desired Net Profit.
Donations
Employee Benefits
Rent
Fixtures (Furniture)
Etc., Etc., Etc. !!!
Abbreviating Pricing Terms
Retail Price =
RP
Cost
=
C
Markup
=
M
Abbreviating Pricing Terms
Dollars
Retail Price =
RP$
Cost
=
C$
Markup
=
M$
Abbreviating Pricing Terms
Percentages
Retail Price =
RP%
Cost
=
C%
Markup
=
M%
Pricing Terms
Formulas
Retail Price = Cost + Markup
Pricing Terms
Formulas in Dollars
Retail Price = Cost + Markup
RP$
=
C$ +
M$
Pricing Terms
Formulas in Dollars
Retail Price = Cost + Markup
RP$
= C$ + M$
$ ???
= $6.00 + $4.00
Pricing Terms
Formulas in Dollars
Retail Price = Cost + Markup
RP$
= C$ + M$
$10.00
= $6.00 + $4.00
Pricing Terms
Formulas in Percentages
Retail Price = Cost + Markup
RP% = C% + M%
Pricing Terms
Formulas in Percentages
Retail Price % ???
What the Heck is Retail Price %
Pricing Terms
Formulas in Percentages
Retail Price %
=
100%
ALWAYS!!!
Pricing Terms
Formulas in Percentages
Retail Price % = Cost% + Markup%
Pricing Terms
Formulas in Percentages
Retail Price % = C% + M%
RP% = C% + M%
Pricing Terms
Formulas in Percentages
Retail Price % = C% + M%
RP% = C% + M%
100% = C% + M%
Because RP% is
Always 100%
Pricing Terms
Formulas in Percentages
(Example)
RP% = C% + M%
100% = 60% + M%
Because RP% is
Always 100%
Representing the
Cost of Goods
Pricing Terms
Formulas in Percentages
(Example)
100% = 60% + M%
What Must M% Be?
Pricing Terms
Formulas in Percentages
(Example)
100% = 60% + M%
What Must M% Be?
M% = 40%
Pricing Terms
Formulas
(Examples)
RP$ = C$ + M$
RP% = C% + M%
$____ = $45.00 + $30.00 100% = 30% + ____
$____ = $22.00 + $68.00 100% = 80% + ____
$75.00 = $____ + $10.00 100% = ___% + 75%
$10.00 = $____ + $ 4.00 100% = ___% + 50%
Pricing Terms
Formulas
(Examples)
RP$ = C$ + M$
RP% = C% + M%
$75.00 = $45.00 + $30.00 100% = 30% + 70%
$90.00 = $22.00 + $68.00 100% = 80% + 20%
$75.00 = $65.00 + $10.00 100% = 25% + 75%
$10.00 = $ 6.00 + $ 4.00
100% = 50% + 50%
Pricing Terms
Formulas
But What if you Have Apples & Oranges???
Dollars & Percentages
Pricing Terms
Formulas
Dollars & Percentages
RP$
RP%
C$
C%
M$
M%
= $25.00
= 100%
= ?
= ?
= ?
= 40%
WHAT ARE PERCENTAGES?
Fractions!!!
What is 1/2 of 100%?
What is 1/4 of 100%?
What is 3/4 of 100%
WHAT ARE PERCENTAGES?
Fractions!!!
What is 1/2 of 100%?
What is 1/4 of 100%?
What is 3/4 of 100%
50%
25%
75%
How Do You Calculate
PERCENTAGES?
Multiply!!
What is 50% of $10.00? $5.00
What is 25% of $10.00? $2.50
What is 75% of $10.00? $7.50
Pricing Terms
Formulas
Dollars & Percentages
RP$
RP%
C$
C%
M$
M%
= $25.00
= 100%
= ?
= ?
= ?
= 40%
How Much is Markup $???
M $ = M% X RP$
How Much is Markup $???
M$ = 40% X $25.00
Pricing Terms
Formulas
Dollars & Percentages
RP$ = $25.00
RP% = 100%
C$ = ?
C% = ?
M$ = $10.00
M% = 40%
Pricing Terms
Formulas
Dollars & Percentages
RP$ = $25.00
RP% = 100%
C$ = $15.00
C% = ?
M$ = $10.00
M% = 40%
Pricing Terms
Formulas
Dollars & Percentages
RP$ = $25.00
RP% = 100%
C$ = $15.00
C% = 60%
M$ = $10.00
M% = 40%
OBJECTIVE
Be Able to Identify the
Factors That Determine
Retail Price
PRODUCT PRICING
FACTORS
• Supply & Demand
$
• Consumer Perception
of Value
• # of Channel Members
PRODUCT PRICING
FACTORS
• Competition
$
• Costs & Expenses
PRODUCT PRICING
FACTORS
• Government Regulation:
* Price Fixing
$
* Price Discrimination
* Minimum Price Laws
* Unit Pricing
* Price Advertising
OBJECTIVE
Be Able to Describe the Goals
of Pricing for a Business
The Goals of Pricing
• Get a Share of
the Market
• Beat/Meet the
Competition
• Get a Return on
Your Investment
OBJECTIVE
Be Able to Describe How You
Can Achieve Your Goals
“PRICING STRATEGIES”
“PRICING STRATEGIES”
• “Cost Plus Method”:
– Add all of your costs,
expenses, (FIXED & VARIABLE)
& desired net profit
– Estimate Your Sales
– Divide
“PRICING STRATEGIES”
• Cost Plus Method:
(Example)
– Costs, expenses, & desired net
profit = $100,000
– You estimate your sales to be
one item this year
– Determine your Retail Price
by dividing $100,000 by 1
“PRICING STRATEGIES”
• “Cost Plus Method”:
– Costs, expenses, & desired net
profit = $100,000
– You estimate your sales to be
24,025 items this year
– Determine your Retail Price by
dividing $100,000 by 24,025
items
RECOMMENDED
RETAIL PRICE!!!
$ 4.16
RECOMMENDED
RETAIL PRICE!!!
$ 4.16
At $ 4.16 per item sold, assuming
every item sells, you will cover your
costs, expenses, & desired net profit
“PRICING STRATEGIES”
• Demand Oriented:
– Determine what the
customers will pay &
charge that amount
“PRICING STRATEGIES”
• Competition Oriented:
– Determine what the
competition is charging
and that is your price!
– (Make sure you control your
costs & expenses though)
Other Strategies
Odd Cent Pricing
Prestige Pricing
Price Lining
Promotional Pricing
PROMOTION
Objective
• Be able to define the term
promotion and provide
examples of each of its six tools
PROMOTION
•
Any activity
designed to let
the target
market know
more about
your product
including why
they should buy
PROMOTION
• Advertising
• Sales Promotion
• Visual Merchandising
– Display Building
• Public Relations
• Publicity
• Personal Selling
Physical Distribution
OBJECTIVE
Be Able to Identify Each Member of
the “Primary Channel of
Distribution”
&
Describe Their Roles
(DONE!!!)
The Primary Channel of
Distribution
Producer
Wholesaler
Retailer
Consumer
Physical Distribution
• Objective:
–Be able to define Physical
Distribution and identify the
advantages & disadvantages of
the various transport methods
available
Physical Distribution
• Boat
• Truck
• Plane
• Pipeline
• Train