Professional Documents
Culture Documents
177 Toend
177 Toend
List price Less: discounts Quantity Seasonal Cash Temporary sales Less: allowances Trade-ins Damaged goods Less: Rebate and coupon value Plus: Taxes
Product: Physical good Service Assurance of quality Repair facilities Packaging Credit Warranty Place of delivery or when available
equals
equals
Base Currency
Exchange Rates for Various Currencies against the per U.S. Number of Units Base Currency U.S. Dollar* 1985 1987 1989 1991Time 1993 1995 1997 1998 Dollar Over
0.77 27.20 2.94 0.61 25.76 1.80 0.62 25.72 1.88 0.57 25.53 1.66 0.67 25.33 1.65 0.67 24.92 1.43 0.61 31.07 1.73 0.60 39.20 1.78 Thai Bhat
British Pound
German Mark
Japanese Yen 238.47 144.60 138.07 134.59 111.08 French Franc Australian Dollar Canadian Dollar 8.98 1.43 1.37 6.01 1.43 1.33 6.38 1.26 1.18 5.65 1.32 1.15 5.67 1.47 1.29
94.11 121.09 136.20 4.99 1.35 1.37 5.83 1.34 1.38 6.13 1.63 1.41
* Units shown are the average for each year 1985-1997. For 1998, units shown are for June 16, 1998.
Discount Policies
DISCOUNTS are reductions from list price that are given by a seller to a buyer who either gives up some marketing function or provides the function himself Quantity discounts
Cumulative quantity discounts encourage repeat purchases and relationships
Zone Pricing: an average freight charge to all buyers within specific geographic areas
Robinson-Patman Act
Regulates price discriminationselling the same products to different buyers at different prices
if it injures competition
Markups
Dollar amount added to the cost of the products to get the selling price Markup percent is the percentage of selling price that is added to the cost to get the selling price
percent of selling price unless otherwise noted
Selling price $24.00 Cost $21.60 10% markup on selling price $2.40
Markup % on cost: = 10% / (100% - 10%) = 1/9 Dollar Markup: = 1/9 x $21.60 = $2.40
Markup % on cost: = 20% / (100% - 20%) = 1/4 Dollar Markup: = x $24.00 = $6.00
Markup % on cost: = 40% / (100% - 40%) = 2/3 Dollar Markup: = 2/3 x $30.00 = $20.00
Average-Cost Pricing
Adds a "reasonable" markup to the average cost of a product Simplifies pricing Quite common, especially among middlemen Usually based on estimates or past records
actual average cost depends on quantity
A. Calculation of Planned Profit B. Calculation of Actual Profit if If 40,000 Items Are Sold Only 20,000 Units Are Sold Calculation of Costs: Calculation of Costs:
Fixed Overhead Expenses Labor and Materials ($.80 a unit) Total Costs Planned Profit Total Costs and planned profit $30,000 32,000 $62,000 18,000 $80,000 Fixed Overhead Expenses Labor and Materials ($.80 a unit) Total Costs $30,000 16,000 $46,000
Result:
Planned profit of $18,000 is earned if 40,000 items are sold at $2.00 each
Result:
Planned profit of $18,000 is not earned. Instead, $6,000 loss results if 20,000 items are sold at $2.00 each.
Break-Even Analysis
Used to evaluate whether the firm will be able to cover costs (break even) at a particular price
Indicates the break-even pointsales (units or dollars) needed to break even Can be modified to incorporate a target
(1) Quantity Q
0 1 2 3 4 5 6 7 8 9 10
$0 140 260 351 420 460 474 462 424 378 310
$200 296 316 331 344 355 368 383 423 507 710
$96 20 15 13 11 13 15 40 84 203
(1)
Quantity Q
AC
0 1 2 3 4 5 6 7 8 9 10
$200 200 200 200 200 200 200 ______ ______ ______ ______
$0 $0 $0 $200 Infinity 200 96 96 296 $296 $96 100 116 58 316 _______ 20 ______ _______ ______ 331 110.33 _______ 50 _______ ______ _______ _______ _______ 40 155 31 _______ 71 11 ______ 168 ______ _______ 61.33 13 ______ 183 ______ _______ _______ 15 ______ 223 ______ _______ _______ _______ ______ 307 ______ 507 56.33 _______ 20 510 51 710 71 203
(1)
Cost Structure for Individual Firm (with missing numbers filled in)
(2) Total fixed cost TFC (3) Average fixed cost AFC (4) Total variable cost TVC (5) (6) Average Variable Total cost (TFC+TVC=TC) Cost TC AVC (7) Average Cost
(AC=TC/Q)
Quantity Q
AC
0 1 2 3 4 5 6 7 8 9 10
$200 200 200 200 200 200 200 200 200 200 200
$200 296 316 331 344 355 368 383 423 507 710
$96 20 15 13 11 13 15 40 84 203
Psychological pricing
odd-even pricing price lining
Implementation Objectives
Innovative thinking and approaches may help the marketing manager overcome challenges and better achieve major implementation objectives
Better, so customers really get superior value as planned Faster, to avoid delays that cause customers problems Lower cost, without wasting money on
Examples of Approaches to Overcome Specific Marketing Operational Problem Implementation Approach Implementation Problems
Develop design of a new product as rapidly as possible without errors Pretest consumer response to different versions of a label Coordinate inventory levels with middlemen to avoid stock-outs Quickly distribute TV ad to local stations in many different markets Answer final consumers questions about how to use a product Identify frequent customers for a quantity discount Figure out if price sensitivity impacts demand for a product; make it easier for customers to compare prices Use 3-D computer sided design software Prepare sample labels with PC graphics software Use bar code scanner, EDI, and computerized reorder system Distribute final video version of the ad via satellite link Put a toll-free telephone number and web site address on product label Create a favored customer club with an ID card Show unit prices (for example, per oz.) on shelf markers; set different prices in similar markets and track sales, including sales of competing products
Product
Place Promotion
Price
Marketing Control
Feedback process that helps the marketing manager learn
how ongoing plans and implementation are working how to plan for the future
Development of a Measure of (1) (2) (3) (4) Sales Performances (by region) Expected
Regions Northeastern Southern Midwestern Western Total Population Distribution of as Percent of Sales Based United States on Population 20 25 35 20 100 Actual Sales Performance Index $200,000 $210,000 250,000 250,000 350,000 420,000 200,000 120,000 $1,000,000 $1,000,000 105 100 120 60
Cost Analysis
Must understand costs to control them Analyzing and dealing with fixed costs can be a challenge
full-cost approach allocates fixed costs contribution-margin approach is an alternative two approaches have different benefits, limitations
Profit and Loss Statement by Department if Department 1 Totals Dept. 2 Dept. 3 Were Eliminated Sales $50,000 $30,000 $20,000
Cost of sales Gross margin Other expenses Selling expenses Administrative expenses Total other expenses Net profit or (loss) 35,000 15,000 2,500 6,000 8,500 6,500 25,000 5,000 1,500 3,500 5,100 (100) 10,000 10,000 1,000 2,400 3,400 6,600
Dept. A
Dept. B
Dept. C 4,000
Dept. D -1,000
Total
January Planned 27,000 9,000 Actual Variation February Planned 20,000 6,500 Variation ----------- ----------- ----------November Planned 32,000 7,500 Variation December Planned 63,000 12,500 Actual Variation Total 316,000 70,000
39,000
15,000
2,500
-1,000
28,000
24,000 --------24,000
4,000 ----------18,000
19,000 ----------106,500
4,000
9,000
88,500
32,000
56,500
163,000
69,000
-4,000 453,000
288,000
163,000
163,000
*the objective of minus $4,000 for this department was established on the same basis as the objectives for the other departments- that is, it represents the same percentage gain over last year, when Department Ds loss was $4,200. Plans call for discontinuance of the department unless it shows marked improvement by the end of the year.
Total
Fixed Variable
January Planned 60,000 18,000 9,000 6,000 3,000 Actual 46,000 16,300 8,300 6,000 1,150 Variation -14,000 -1,700 700 0 700 February Planned 50,000 15,000 8,500 6,000 2,500 Actual Variation ------------ ---------- ------------ --------- --------- ----------November Planned 70,000 21,000 13,500 10,000 3,500 Actual Variation December Planned 90,000 27,000 14,500 10,000 4,500 Actual Variation Total Planned 600,000 180,000 110,000 80,000 30,000 Actual Variable
------------7,500
------------57,500
12,500
70,000
70,000
70,000
Marketing Audit
A systematic, critical, and unbiased review and appraisal of the basic objectives and policies of the marketing functionand of the organization, methods, procedures, and people employed to implement the policies
Production
Flexibility, costs of products offered
Mass customization
Natural accounts
Categories to which costs are charged in
Profit and Loss Statement, One Profit and Loss Statement, One Month Month Sales $17,000
Cost of sales Gross Margin Expenses: Salaries $2,500 Rent 500 Wrapping Supplies 1,012 Stationery and Stamps 50 Office equipment 100 Net profit 11,900 5,100
4,162 $ 938
Spreading Natural Accounts to Functional Accounts Functional Accounts Natural Billing and
Accounts Salaries Rent Wrapping supplies Stationery & stamps Office equipment Total Cost $2,500 500 1,012 50 100 $4,162 _______ $1,000 _______ $2,312 Sales Packaging Advertising $900 400 1,012 25 50 $425 25 50 $425 Collection $300 50 $1,000 $300 50
Products
Customers
Advertising
$425/10 units of C
Sales
Whole Company
$17,000
Cost of Sales A B C Tot. Cost of Sales Gross margin Expenses: Sales call ($10 ea.) Order costs ($12.50 ea.) Packaging Costs A B C Advertising Total of Expenses Net profit (or loss)
11,900 5,100
4.162 $938
Competition: becomes more intense, moves toward pure competition Product: typically moves toward more variety, and then less variety in decline stage Place: typically moves toward more intensive distribution Promotion: emphasis changes from
Approaches to Forecasting
Extending past behavior
Trend extension Assumes future patterns will be like past patterns
Factor method
Based on finding a variable (a factor) that is related to the variable being forecast Multiple factors may be helpful
Sample of Pages From Sales & Marketing Management's Survey of Buying Power
Solid Fiber Boxes for Industry Groups, Phoenix, Arizona, Metropolitan Statistical Area
National Data
(1) (2) NAICS Code Major Industry Group
Food and Kindred Products Furniture and Fixtures Stone, Clay, and Glass Products Primary Metal Industries Fabricated Metal Products Machinery (except electrical) Electrical Machinery, Equipment and Supplies
Mariposa County
(3) (4) (5) Value of Shipments per Estimated Employee by Sales In Industry Employment This Market Group by Industry (3X4) (1 divided by 2) Group ($000)
Marketing Mix
A Spreadsheet Comparing the Estimated Sales, Costs, and Profits of Four "Reasonable" Alternative Marketing Mixes
Price Selling Cost Advertising Total Cost Units $5,000 Sales Revenue Total Cost Total Profit
A B C D
$75,000
$70,000 $95,000
$5,000
$10,000 $25,000 $0
$115,000 $125,000
Response Functions
Show how a target market is expected to react to changes in marketing variables Hard to estimate, but that doesn't mean they can be ignored Might be used to evaluate
a firm's whole marketing mix elements of a marketing mix how customers respond to competitors
A Spreadsheet Analysis Showing How a Change in Price Affects Sales, Revenue, and Profit
Marketing Mix Price Selling Cost Advertising Total Cost Units $30,000 $30,000 $30,000 $30,000 $30,000 Sales Revenue Total Cost Total Profit
Name of Product-Market Analysis of Other Aspects of External Market Environment (favorable & unfavorable factors and trends) Customer Analysis (organizational and/or final consumer) Competitor Analysis Company Analysis
Place Promotion Price Special Implementation Problems to Be Overcome Control Forecasts and Estimates Timing
Exporting
Selling some of what the firm is producing to foreign markets
a market development type opportunity some changes in product may be required
Usually a low risk way to get into international marketing "Red tape" is real, but usually worth the hassles
Multinational Corporations
Have a direct investment in several countries Run the business depending on the choices available anywhere in the world
selecting vendors locations for production target markets to go after
Some Important Changes and Trends Affecting Marketing Strategy Planning - Communication Technologies The Internet and intranets
Satellite communications E-mail and fax communications Teleconferencing and Internet telephone Cellular telephones
Demand Schedule for Potatoes (1) (10-pound (2) bags) (3) Price of Quantity Total
Point A B C D E Potatoes per Bag (P) $1.60 1.30 1.00 0.70 0.40 Demanded (bags per month) (Q) 8,000,000 9,000,000 11,000,000 14,000,000 19,000,000 Revenue per Month (P x Q=TR) $12,800,000 ------------11,000,000 -------------------------
Demand Curve for Potatoes (10$1.60 Price ($ per bag) 1.30 1.00 0.70 0.40 Demand
pound bags)
0.00
A B C D E
Demand
D E
Quantity
Quantity
Supply Curve for Potatoes (10$1.60 Price ($ per bag) 1.30 1.00 0.70 0.40
pound bags)
Supply
0.00
Equilibrium of Supply and Demand for Potatoes (10-pound bags) $1.60 Supply
Price ($ per bag) 1.30 1.00 0.70 0.40 Demand
Equilibrium point
0.00
Interaction of Demand and Supply in the Potato Industry and the Resulting Firms (each producing about Whole Industry 1/10,000 of industry output) Demand Curve Facing Individual Potato $1.60 $1.60 Farmers Supply
1.30
Price ($ per bag)
Price ($ per bag)
1.30
Equilibrium point
Demand 0 10 20 30
500
1,000
1,500
Oligopoly Situation with Kinked Demand Curve A. Industry Situation B. Each firms view of
P Supply Price ($) Price ($) Market price P its demand curve
Demand 0
Quantity
Quantity
Monopolistic Competition
Sellers in the market feel they have some competition Customers view competing products as heterogeneous, not homogeneous Firms may vary their marketing mixes to further differentiate them Thus, customers can choose among
60,000 20,000 20,000 100,000 30,000 10,000 5,000 45,000 10,000 5,000 15,000 160,000 $40,000