Pricing and Sales Planning Chapter 9

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Pricing and Sales PlanningChapter 9

• Entrepreneurship
• Ron Runyan, Instructor
• Kelsey-Jenney College

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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

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Utility Satisfaction

• Utility using ones 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

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Determining Price

• 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

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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

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Markups / Markdowns

• Markup the amount added to the cost to create a
  selling price
• Cost MU SP
• MU Cost -- MU Rate
• 6 cost -- 60 10
• 60reciprocal of 40
• 10SP x 40MU 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

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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

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Sales Plan

• FAB Features, Advantages, Benefits
• Sales approach
• Sales presentation
• Sales close