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Pricing and Sales Planning Chapter 9

This chapter delves into the essential concepts of pricing and sales planning within entrepreneurship. It explores the dynamics of supply and demand, highlighting how perceived prices influence consumer behavior and market equilibrium. Key concepts such as utility satisfaction, break-even points, fixed and variable costs, and pricing strategies are discussed. Entrepreneurs will learn about markup, markdown, and various pricing strategies, including short-term profits, market penetration, and loss leader pricing. Comprehending these elements is crucial for effective sales planning and ensuring profitability.

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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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