Bell Ringer • Advertising a great price and then not having the merchandise available for consumers to purchase is part of which practice?
Bell Ringer Answer • Bait and Switch.
Pre-ACT Make-UpGo to the theatre AFTER morning announcements. • Chris Buckner • Brandon Fox • Lawrence Junior • Zachary McMillen • Chris Warner • Morgan Wooden
Agenda • Bell Ringer / Attendance – 5 minutes • Law of Supply and Demand Activity – 10 minutes • Chapter 9.2 Lecture and Notes – 25 minutes • Math in Business Activity – 30 minutes
Table of Contents Topic Page # Digital Media Trends 4 Chapter 8.1 Vocabulary and Notes 5 Recreational Sports 6 Chapter 8.2 Vocabulary and Notes 7 Chapter 8 Assessment 8 Chapter 8.3 and 8.4 Vocabulary 9 Virtual Business – Lesson 1 Questions 10 Virtual Business – Lesson 1 Vocabulary 11 Supply and Demand 12 Chapter 9.1 Vocabulary and Notes 13 Marketing Math 14 Chapter 9.2 Vocabulary and Notes 15
Math in Business Chapter 9.2 Vocabulary Equilibrium Point is at ______________supply/demand amount and __________ price. Operating Expenses Markup Price Lines Loss-Leader Pricing 15 12
Learning Targets • I can discuss pricing strategies used by businesses to increase sales. • I can list five steps for determining price.
Pricing Considerations • Price – The amount that customers pay for products and services. • Pricing – The process of establishing and communicating the value of goods and services to customers.
When determining the price to be charged, you must take into consideration the cost of the merchandise operating expenses, and the desired amount of profit.
Pricing Consideration • Operating Expenses all of the costs associated with running your business. • Utilities, salaries, taxes. • Markup the amount that is added to the cost of an item for sale to cover operating expenses and allow for a profit.
Pricing Policies • One-Price Policy – all customers pay the same price for a product. • Flexible Pricing Policy – customers negotiate prices within a range. • Geographic Pricing – allows pricing variations based upon geographic location, • Distribution costs, local competition, local taxes.
Pricing Policies • Price Lines distinct categories of merchandise based upon price, quality, and features. • Ralph Lauren has Polo as its high-end price line and Chaps as the next best alternative at a lower price.
Pricing Strategies • Psychological Pricing – creating an illusion for customers. • Example: • Odd-even pricing • A DVD that is $29.98 is seen as being considerably less expensive than a $30 DVD.
Pricing Strategies • Prestige Pricing – when retailers charge higher-than-average prices for merchandise and target customers seeking status and high quality.
Pricing Strategies • Volume Pricing – stores like Wal-Mart receive merchandise at a lower cost from its suppliers, so they are able to pass those savings along to the customer.
Pricing Strategies • Promotions – to get more customers in the sale, retailers may use promotions. • Loss-leader pricing the willingness to take a loss on the reduced prices of selected items in order to create more customer traffic.
Pricing Strategies • Quantity Discounts – customers receive a financial benefit for buying a larger quantity.
Pricing Strategies • Trade-In Allowances – customers may be given an allowance for old merchandise when making a new purchase.
5 Steps to Determining the Price • Establish Price Objectives • Percentage of profit you want to earn. • Determine the cost of the product or service. • Retail price must cover the total cost and allow for a profit. • Estimate the consumer demand. • Study the competition. • Decide on a pricing strategy.
Marketing Math Problems 1. A computer software retailer used a markup rate of 40%. Find the selling price of a computer game that cost the retailer $25. 2. A golf shop pays its wholesaler $40 for a certain club, and then sells it to a golfer for$75. What is the markup rate? 3. A shoe store uses a 40% markup on cost. Find the cost of a pair of shoes that sells for$63.
Marketing Math Answers 1. The markup is 40% of the $25 cost, so the markup is: (0.40)(25) = 10 Then the selling price, being the cost plus markup, is: 25 + 10 = 35 The item sold for $35. 2. 75 – 40 = 35 Find the relative markup over the original price, or the markup rate: ($35) is (some percent) of ($40), or 35 = (x)(40)...so the relative markup over the original price is: 35 ÷ 40 = x = 0.875 Since x stands for a percentage, I need to remember to convert this decimal value to the corresponding percentage. The markup rate is 87.5%. 3. I will let "x" be the cost. Then the markup, being 40% of the cost, is0.40x. And the selling price of $63 is the sum of the cost and markup, so: 63 = x + 0.40x63 = 1x + 0.40x63 = 1.40x63 ÷ 1.40 = x= 45 The shoes cost the store $45.