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Unit 4.03 Price and Distribute Products. Unit 4 – marketing. Key terms. Price Distribution Channel of D istribution Channel M embers Retailer. Value and price. Buyers usually want to pay the lowest price possible Sellers want to charge the highest price possible - PowerPoint PPT Presentation
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Business in the Global Economy
Unit 4 marketingUnit 4.03Price and Distribute ProductsPrice
Distribution
Channel of Distribution
Channel Members
Retailer
Key termsBuyers usually want to pay the lowest price possible
Sellers want to charge the highest price possible
Car buying 59% hate experience
Value and price
Supply and DemandLimited supply Higher priceHigh demand Higher priceChristmas toys
Pricing factors
UniquenessIf product has few close competitors because it is unique Higher priceExample: Hammacher Schlemmer
Pricing factors
The 20 Animated Triceratops$350,000AgeWhen new product first introduced Higher price Example:iPhone
Pricing factors
SeasonPrices higher just before new seasonPrices lower after season endsExample:Holiday salesWinter bootsAir conditioners
Pricing factors
ComplexityHighly complex and technical products have higher prices than simple productsMore features and options higher prices
Pros:New and innovative
Pricing factorsConsMore difficult to understandMore fragile than counterpartsMore breakage/recalls
The money a customer must pay for a product or service
Selling Price price paid by the customer for the product
Product Costs costs to the manufacturer to make the product or price paid by businesses to buy the product
Operating expenses all expenses of operating the business that are associated with the producti.e. salaries, storage and display equipment, facilities, utilities, taxes
Profit amount of money available after all costs and expenses have been paid
Price a productSelling Price FormulaProduct costs + Operating expenses + Profit = Selling pricedifference between the selling price and the product costs
Amount of money on hand to pay operating expenses and profit
Example:REI buys a canoe from the supplier for $200It costs REI $50 (prorated) to run the store (staff, insurance, electricity, etc.)REI makes a profit of $125 on each canoeHow much is canoe sold for?What is gross margin?
Gross marginGross Margin = Selling price + Product costsAmount added to the cost of a product to set the selling price
Markup = expected gross marginStated as a percentage of the cost or selling pricei.e. if a product costs $15 and has a 100% markup, the selling price is $30
MarkupMarkup FormulasMarkup on CostProduct costs x Percent markup = markup on costMarkup on Selling PriceGross margin Selling price = Percent markup on selling priceA reduction from the original selling price
A pricing mistake
Reduces the amount of money the business has to cover operating expenses and profits
If customer demand is not as high as projected
If selling season is ending
If there is a flaw in the product
markdownThe locations and methods used to make a product or service available to the target marketdistribution
Channel of Distribution the route a product follows and the businesses involved in moving a product from the producer to the final consumer
Why important?Then exchange bushel of apples for a yard of fabricNow businesses specialize with mass production around worldNeed for distributionSantas WorkshopThe businesses that take part in a channel of distribution
Direct Channel of Distribution products move from the producer straight to the consumer
Indirect Channel of Distribution one or more other businesses between the producer and consumerWholesalers intermediaries between manufacturers and retailersRetailers the final business organization for consumer products Channel members