Chapter 22 Pricing and Promotion 1 Chapter 22 Pricing and Promotion ©2008 Thomson/South-Western

Chapter 22 Pricing and Promotion 2 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.

Chapter 22 Pricing and Promotion 3 Planning a Business Purchase 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

Chapter 22 Pricing and Promotion 4 Business Buying Processes 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

Chapter 22 Pricing and Promotion 5 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.

Chapter 22 Pricing and Promotion 6 Payment Terms and Discounts List price — initial price that the seller posts on a product Payment terms — credit terms Discounts – Trade discount – Quantity discount – Seasonal discount – Cash discount

Chapter 22 Pricing and Promotion 7 Components of Price Selling price Cost of goods sold Operating expenses Margin or gross profit Net profit Markup Markdown

Chapter 22 Pricing and Promotion 8 COMPONENTS OF SELLING PRICE $.05 Net Profit $.35 Operating Expenses $1.00 Selling Price $.40 Margin or Gross Profit $.60 Cost of Goods Sold

Chapter 22 Pricing and Promotion 9 Pricing Strategies 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

Chapter 22 Pricing and Promotion 10 Controlling Costs Factors that can affect costs: Markdowns Damaged or stolen merchandise Returned merchandise

Chapter 22 Pricing and Promotion 11 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.

Chapter 22 Pricing and Promotion 12 Consumer Decision-making Process 1. Problem recognition 2. Information search 3. Alternative evaluation 4. Purchase 5. Post-purchase evaluation

Chapter 22 Pricing and Promotion 13 Major Purposes of Advertising 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 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

Chapter 22 Pricing and Promotion 14 Types of Advertising Media Publication advertising Mass media advertising Outdoor advertising Direct advertising Display advertising Internet advertising

Chapter 22 Pricing and Promotion 15 Planning and Managing Advertising Advertising budget Timing of advertising Advertising evaluation

Chapter 22 Pricing and Promotion 16 Truth in Advertising and Selling False advertising Full disclosure Substantiation Penalties for violations: – Case-and-desist order – Corrective advertising – Fines

Chapter 22 Pricing and Promotion 17 Personal Selling Studying the wants of customers (buying motives) Presenting and demonstrating the product Answering customer questions Closing the sale Follow-up

Chapter 22 Pricing and Promotion 18 Sales Promotions 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