Entrepreneurship Chapter 5

1. Entrepreneurship Chapter 5 Market Your Business

2. Develop Marketing Plan Section 5-1 • 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.

3. What is Marketing? • Marketing: is all of the processes used to determine and satisfy the needs of customers and the company. Planning Pricing Promoting Distributing Selling • Why is it important? It’s the process needed to reach the TARGET MARKET.

4. Marketing Concept: • Uses the needs of customers as the primary focus of a product or service during the stages of: • Planning • Production • Distribution • Promotion

5. Marketing Concept • 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

6. Marketing Mix Marketing Mix • Helps meet customer needs and enables the business to earn a profit. • reaching target market through a blend of: • Product Chapter 5 • Price • Distribution Chapter 6 • Promotion

7. The Marketing Strategy • Marketing Strategy • a plan that identifies how business goals will be achieved by outlining: • product introduction or innovation • pricing • distribution • promotion • projected profitability • sales or market share

8. The Marketing Strategy • Marketing Goals Should: • consistent with overall goals for your business • be achievable with your available resources • reflect short, medium and long-term goals • written to follow SMART guidelines (CH1) • S - Specific • M - Measurable • A - Attainable • R - Realistic • T - Timely

9. 5.1 Short Term Goals • Achievements for the next year • Can be stated in terms of: • number of customers • level of sales • level of profits • Helps determine how to target your marketing

10. 5.1 Medium-Term Goals • Achievements for the next two to five years • Strategy determined largely by short term • Important to make sure your marketing strategy will help you achieve medium too. Long-Term Goals • Achievements for a 5, 10, or even 20 years. • Long-term goals can help define current marketing plans.

11. Checkpoint Questions • Why is goal setting important when developing a marketing strategy? • Establishing goals ensures that the marketing you do today fits in with the total vision you have for your business tomorrow.

12. 5.1 Write Your Marketing Plan • After goals & marketing strategy determined • A marketing plan will define: • your market • your customers and competitors • outline a strategy for attracting & keeping customers • identify & anticipated changes

13. Write Your Marketing Plan • Written Marketing Plan: • helps determine whether it is solid and consistent • may help obtain financing • Becomes a guiding document to operate your business. • Can always make adjustments to marketing • Marketing Plan becomes part of Business Plan

14. Investor will expect answers to the following questions: • What product will I offer? • Who are my prospective customers? • Is there a constant demand for this product? • How many competitors are providing the same product? • Can I create a demand for the product I want to offer? • Can I compete effectively in price, quality and delivery for my product?

15. 5.1 To Answer Those Questions • The marketing plan must include information on the following topics: • Product or Service • Target Market • Competition • Marketing Budget • Business Location • Pricing Strategy • Promotional Strategy • Distribution Strategy

16. Marketing plans should include performance standards that measure effectiveness. • Actual results should be compared to performance standards quarterly. • Am I meeting sales forecasts? • Is my promotional campaign reaching the target market? • Is my company doing everything it can to meet customers’ needs? • Is it easy for my customers to locate my product and is it competitively priced?

17. Checkpoint Question • Why is it important to put your marketing plan in writing? • Helps you determine whether it is solid • All parts are consistent • Guiding document to operate business • Becomes part of your business plan • May help obtain finances

18. The Marketing Mix - Product Section 5-2 • Goals: • Explain how the marketing concept affects decisions regarding the product mix. • Define and describe the importance of product features, branding, and positioning.

19. Marketing Concept & The Product • The Marketing Concept: • The belief that 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. • Consumers more educated • Competition increased (Global)

20. 5.1 Product Mix • Product Mix: the different products and services a business sells • Entrepreneurs may carry some products that are not profitable because they provide a convenience for customers. • Often a small % of the product selection makes up the majority of sales revenue.

21. Checkpoint Question • How does the marketing concept affect decisions made about the product mix? • When applying the marketing concept, you will select a mix of products that you feel will most appeal to your target customers.

22. Development of Features,Branding & Positioning • Consumers buy a product because it meets their buying needs. • But there is more to a product than many consumers may realize. Companies spend a lot of time developing: Features • Branding • Packaging Labeling • Positioning

23. Selecting Product Features • Features: product characteristics that will satisfy customer needs including: Color • Size • Quality • Hours Warranties • Delivery • Installation • The target market should be considered when selecting product features.

24. Branding, Packaging & Labeling • Branding: the name, symbol, or design used to identify your product • Package: the box, container, or wrapper in which the product is placed • Label: where information about the product is given on the package • The brand, package & label you choose for a product helps differentiate it from others. Makes your product stand out from the rest! 5.2

25. Position Your Products or Services • Different products/services within the same category serve different customer needs. • Examples: Honda & BMW • Both Automobiles (transportation) • Positioned very differently • Positioning: creating an image for the product in the customer’s mind 5.2

26. Position Your Products or Services • Businesses position a product with the customers in mind. • Positioning can focus on: • Features • Price • Quality • BMW – Desire high quality and status • Honda – Inexpensive family safe car

27. Checkpoint Question • Why are product features, branding and positioning important? • Product feature, branding and positioning: • make a product “stand out” from others • differentiate it in the market.

28. The Marketing Mix - Price Section 5-3 • 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.

29. Set Pricing Objectives • Price • Actual amount a customer pays for a product • Needs to be LOW enough that customers buy from you and not from your competitors • Needs to be HIGH enough so your revenues will exceed your expenses

30. Price Strategy • Objectives for a pricing program should be established prior to selecting a pricing strategy. • Objectives might include: • maximize sales • discourage competition • establish an image • increase profits • attract customers

31. 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 • Example – Smoothie Stand • Invest $5000, want a 15% ROI (5000x.15=750) • You need to price your product to earn $750

32. 5.3 Market Share • Market Share:a business’s percentage of the total sales generated by all companies in the same market • Must know total market for a product in order for market share to be determined. Amount of Sales ÷ Total Market Size = Market Share $192,500 ÷ $1,750,000 = 11%

33. 5.3 Market Share • Your market share will depend on the level of competition in your market. • If you create a market for an entirely new product, your market share will be 100% • Multiple ways to increase market share including: • lowering prices • advertising and promotion – attract more customers • networking with potential customers • networking: establish informal ties w/ people who can help the business grow – attend trade shows meetings

34. Checkpoint Question • Why is it important to determine pricing objectives before pricing goods and services? • You must decide if you want to: • maximize sales • increase profits • discourage competition • attract customers • establish an image • Your price must help you meet the determined objectives.

35. Determine a Price for a Product • Once pricing objectives have been determined  Determine your Price • There is usually more than one price that can be charged for a product. • Pricing may be based on: • Demand • Cost • Amount of Competition

36. 5.3 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.

37. 5.3 Cost-Based Pricing • Cost-Based Pricing:determined by using the wholesale cost of an item as the basis for the price charged • Markup Prices • Markdown Prices

38. Cost-Based Pricing • Markup Price: determined by adding a % amount to the wholesale cost of an item Markup Amt = Wholesale cost × Percentage markup Retail Price = Wholesale cost + Markup amount • Markdown Price: determined by subtracting a percentage amount from the retail price Markdown Amt = Retail price × Percentage markdown Markdown Price = Retail Price - Markdown amount

39. 5.3 Competition-Based Pricing • Competition-Based Pricing: pricing that is determined by considering what competitors charge for the same product • What does your competitor charge? • Charge the same price? • Charge slightly more? • Charge slightly less?

40. Checkpoint Question • List three methods for determining the price to charge for a product. • Three methods: • Demand-Based Pricing • Cost-Based Pricing • Competition-Based Pricing

41. Price a Service • To set a price for a service, you must consider the following: • cost of items used in providing the service • amount of time required to produce the service

42. 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

43. Time-Based Pricing Examples • Plumber • charges $100/hr • completes a job in an 1 ½ hours • $100 x 1.5 = $150 • Hair dresser • Cost of a hair highlight included the hair stylist’s time and the price of materials

44. Bundling • Bundled Pricing • when all services are combined under one charge

45. Checkpoint Question • Which pricing method would be the best for a housepainter to use to price services? • And Why? • Would probably use time-based pricing • But might charge separately for paint & materials. • Competition-based pricing may also be used.

46. Pricing Techniques • Pricing can make or break a business. • Pricing techniques may change over time. • Introductory Pricing • Psychological Pricing • Discount Pricing

47. #1 ~ Introductory Pricing • At product introduction, sale will be low, marketing costs high and earn little, if any, profit • Price Skimming: • used for products that are new and unique • high price charged to cover product development costs • Competition with similar product will lower cost • Penetration Pricing: • low intro price charged to build a strong customer base • low price also discourages competition

48. 5.3 Psychological Pricing Psychological Pricing: certain prices have an impact on how customers perceive a product • used most commonly in retail Techniques used include the following: • Prestige Pricing • a high price to create a feeling of superiority (status) • Odd/Even Pricing • prices ending in odd numbers are perceived to be bargains

49. 5.3 Techniques Continued… 3. Price Lining • Offering different prices for a specific category of products based on specific features and qualities 4.Promotional Pricing • temporarily offering lower prices to increase sales (limited-time sales) 5.Multiple-Unit Pricing • pricing items in multiples (10 for $10) • consumers buy more if they perceive a bargain

50. Discount Pricing Discount Pricing: offers customers a reduced price • encourages purchases Techniques used include the following: • Cash Discounts • encourages early payment of invoices • 2/10, net 30 ~ 2% discount if paid within 10 days, full due in 30 • Quantity Discounts (volume discounts) • offers lower prices based on the purchase of a large quantity • 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