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Pricing and Sales Planning Chapter 9

Pricing and Sales Planning Chapter 9. Entrepreneurship Ron Runyan, Instructor Kelsey-Jenney College. Supply and Demand. Economics-- the study of how the resources of a society are allocated Supply and Demand is a relationship

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Pricing and Sales Planning Chapter 9

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  1. Pricing and Sales PlanningChapter 9 Entrepreneurship Ron Runyan, Instructor Kelsey-Jenney College

  2. Supply and Demand • Economics-- the study of how the resources of a society are allocated • Supply and Demand is a relationship • If the price is perceived as being too high, the demand will be low-- surplus • If the price is below the perceived value, the demand will be high-- shortage

  3. Utility Satisfaction • Utility– using one’s money (utility) for the product or service that will bring the greatest need satisfaction • Price– low enough to encourage high demand; high enough to ensure profit • Acceptable price point ultimately comes from the buyer – utility satisfaction

  4. A customer relations tool– fair price A business tool– ensure a profit Break-even point Fixed costs Rent, utilities Variable costs Materials, salaries Fixed costs- does not vary even with changes in production or sales Variable costs- fluctuates with changes in production or sales Determining Price

  5. Price of Product or Service • Total cost of product sold • Direct expenses of manuf, overhead • Contribution to long-tem stability-enough profits to generate retained earnings • Reward for efforts and risk • Customer perception of price- fair • Total pricing concept

  6. Markup– the amount added to the cost to create a selling price Cost + MU = SP MU = Cost -:- MU Rate $6 cost -:- 60% =$10 60%=reciprocal of 40% $10SP x 40%MU = $4 $10SP - $4MU = $6Cost MU based on SP or Cost Markdown– the difference between original selling price and the price actually sold Damaged merch Old merchandise Broken Assortments Special promotion Competition Space – new merch Markups / Markdowns

  7. Pricing Strategies • Short-term profit strategy – fads • Market penetration strategy – lowest price possible • Loss Leader pricing strategy – less than cost to increase more customers • Status Quo pricing strategy – some prices established and fixed until market changes and price change necessary

  8. Sales Plan • FAB – Features, Advantages, Benefits • Sales approach– • Sales presentation— • Sales close—

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