© 2012 Cengage Learning. All Rights Reserved. SLIDE MARKETING (part 2) Price and Distribute Products Goal 1Discuss how the selling price of a product is calculated. Goal 2Differentiate between a direct and an indirect channel of distribution.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 2 Price- the money a customer must pay for a product or service (6 FACTORS IN PRICING A PRODUCT) ●Supply and demand ●Uniqueness ●Age ●Season ●Complexity ●Convenience

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 3 VALUE AND PRICE ●Buyers usually want to pay the lowest price possible. ●Sellers want to charge the highest price possible.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 4 PRICE A PRODUCT ●Selling price – Price paid by customer ●Product costs- cost of a business to make or purchase the product ●Operating expenses- all of the expenses operating the business in order to sell product. ●Profit- the amount of money available to the business after all costs and expenses (Revenue minus Costs) Selling price = Product costs + Operating expenses +Profit

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 5 Gross Margin- the difference between the selling price and the production costs. Gross Margin = Selling price + Product costs

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 6 MARK-UP VS MARK-DOWN MARK-UP ●The amount added to the cost of a product to set the selling price ●Markup on cost ●Markup on selling price MARK-DOWN ●A reduction from the original selling price ●Reasons for markdowns: ●Low demand, End of season, Flaws

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 7 DISTRIBUTION ●Distribution- How the product is delivered to the consumer. ●Channels of Distribution: The route a product goes through to make its final stop at the target customer Example: Manufacturer by truck to wholesale by truck to retail to customer Channel Members- all of the businesses involved in getting the final product to the customer

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 8 ●Direct channel of distribution, products move directly from the producer to the consumer. Example: Ordering a computer online from Dell ●In an indirect channel, others may participate in the movement of products from the producer to the consumer, such as transportation services and retailers. Example: Allen Outlet Mall Store Nike has products delivered by truck from warehouse in Oklahoma What is the difference between Direct & Indirect Distribution

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 Wholesalers VS Retailers Wholesaler- Intermediaries between manufacturers and retailers. Items in bulk Example: Furniture Warehouses, Sam’s Club Retailer- Direct contact with the customer Example: Allen Outlet Mall Stores SLIDE 9

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 Distribution Channels- the more channels the higher the cost SLIDE 10

© 2012 Cengage Learning. All Rights Reserved. SLIDE Plan Promotion Goal 1Justify the importance of communication in marketing. Goal 2Identify and describe the common types of promotion.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 12 Advertising: Planned Promotion ●Promotion- any form of communication to inform, persuade or remind customers about a product or service. ●Effective Communication- the exchange of information so that there is common understanding by everyone. ●Personal Selling- Direct, individualized promotion face-to-face with potential customer.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 13 ADVERTISING- (3 Types) Paid promotion of a product, service, or company 1) PRINT- printed form of advertising Ex: Magazine, Newspaper, Mail Flyer Cheap but effective in specific areas 2) BROADCAST- Advertising through light, sound, or motion Ex: TV or Radio Expensive but very effective 3) CYBER- Online Advertising Ex: Pop-up Ads Cost depends on the web site

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 14 COMPONENTS OF EFFECTIVE COMMUNICATION

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 15 Checkpoint ●How does identifying a target market improve promotion communications? ●Communication can be developed and directed more specifically if a target market is identified.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 16 TYPES OF PROMOTION ●Merchandising- promotional activities designed to generate sales in the retail setting. ●VISUAL MECHANDISING- Signage ●DISPLAY- A display of products usually placed near the front door/window

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 SLIDE 17 Checkpoint ●Describe the advantages and disadvantages of the major types of promotion. ●Personalized promotion allows the provider to meet customers and identify customer needs. ●It is, however, the most expensive type of promotion. ●Mass promotion reaches a larger target market and is much less expensive. ●It does not, however, provide for individualized service, and sales (results) are often not immediate.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 10 ONLINE RESEARCH ●Superbowl Ads- Watch and analyze superbowl Ads. ●In 2014 the average price per 30 second ad was around 4 million dollars each. SLIDE 18