ABM 009
An agent never actually gains ownership of the
BASIC PARTS OF A BUSINESS PLAN
1. Management
-This aspect is aimed at designing the form of
ownership.
2. Marketing
-This aspect is aimed at determining and analyzing
the demand and supply for the product in the past so
have a sound projection of future demand and supply
of the product.
3. Production
-This aspect describes the production process in
making the product.
4. Financing
-This aspect is meant to determine the total cost that
is required for the project along with a viable source
of financing.
Marketing mix refers to determining which elements
of the product are necessary for successful selling.
Core – This is the first level to be defined and
explored. In the case of a camera, they are able to
capture memories forever through the purchase of a
product
Actual – Here, any additional benefits are added on
to differentiate the product and highlight its USP.
Augmented – Finally, there needs to be an
assessment of what further benefits can be offered to
the customer to ensure a loyal purchasing customer.
PRODUCT - It can either be an intangible service or
a tangible good. Basically, a product should meet the
customers’ specific demands or needs. Products
usually follow a natural lifecycle and that’s why
marketers should strive to understand and plan for
each stage accordingly.
BUSINESS NAME - Your business name (also
referred to as your trade name) is the name that
you register with your state to operate.
PRODUCT NAME - a product name identifies a
specific product or service and becomes a brand
name when the company starts using it.
DISTRIBUTION CHANNEL INTERMEDIARIES
– these are middlemen who facilitate the distribution
process through their experience and expertise.
1. AGENTS
- The agent is an independent entity who acts as an
extension of the producer by representing them to the
user.
product and usually makes moneyfrom commissions
and fees paid for their services.
2. DISTRIBUTOR
- Similar to wholesalers, distributors differ in one
regard. A wholesaler may carry a variety of
competition brands and product types. A distributor
however, will only carry products from a single
brand or company. A distributor may have a close
relationship with the producer.
3. WHOLESALER
- they actually purchase goods from a producer in
bulk and store them in warehouses. These goods are
then resold in smaller amounts at a profit.
4. RETAILER
- Wholesalers and distributors will sell the products
that they have acquired to the retailer at a profit.
Retailers will then stock the goods and sell them to
the ultimate end user at a profit.
Three Main Distribution Strategies
1. Intensive Distribution – This strategy may be used
to distribute lower prices products that may be
impulse purchases. Items are stocked at a large
number of outlets and may include things such as
mints, gum or candy as well as basic supplies and
necessities.
2. Selective Distribution – In this strategy, a product
may be sold at a selective number or outlets. These
may include items such as computers or household
appliances that are costly but need to be somewhat
widely available to allow a consumer to compare.
3. Exclusive Distribution – A higher priced item may
be sold at a single outlet. This is exclusive
distribution. Cars may be an example of this type of
strategy.
Price is the value measured in money term in the part
of the transaction between two parties where the
buyer has to give something up (the price) to gain
something offered by the other party or the seller.
Pricing Strategy, on the other hand, is the planning of
prices, including the setting of discounts, in
considering items such as the price of competitive
products, manufacturing and distribution costs, the
firm’s growth and profitability, customer wants, and
the elasticity of demand.
IMPORTANCE OF PRICING
1.Pricing as a Flexible Variable
- Changes in price can be done when needed
compared to changing the product or a distribution
channel.
2. Define the Right
-A price set too high can result in potential buyers
staying away altogether.
3. Pricing Pricing as a Trigger for First impressions
-A consumer will form a perception about its quality
and relevance as soon as they see the price.
4. Pricing as a Key to Sales Promotions
- Sales promotions are often a short time price based
offering such as a percentage reduction or a two in
one type offer.
PRICING STRATEGY
1. Penetration Pricing
-Here the business sets a low price to increase sales
and market share. Once market share has been
captured the firm may well then increase their price.
2. Skimming Pricing
-The business sets an initial high price and then
slowly lowers the price to make the product available
to a wider market. The objective is to skim profits of
the market layer by layer.
3. Competition Pricing
-Setting a price in comparison with competitors. In
reality a firm has three options and these are to price
lower, price the same or price higher than
competitors.
4. Product Line Pricing
- Pricing different products within the same product
range at different price points.
5. Bundle Pricing
-The business bundles a group of products at a
reduced price. Common methods are buy one and get
one free promotions or BOGOFs as they are now
known.
6. Premium Pricing
- The price is set high to indicate that the product is
"exclusive"
7.Psychological Pricing
-The seller here will consider the psychology of price
and the positioning of price within the market place.
8. Optional Pricing
-The business sells optional extras along with the
product to maximize its turnover.
9. Cost Plus Pricing
-The price of the product is production costs plus a
set amount ("mark up") based on how much profit
(return) that the company wants to make. Although
this method ensures the price covers production costs
it does not take consumer demand or competitive
pricing into account which could place the company
at a competitive disadvantage.
10. Cost Based Pricing
- This is similar to cost plus pricing in that it takes
costs into account but it will consider other factors
such as market conditions when setting prices.
11. Value Based Pricing
-This pricing strategy considers the value of the
product to consumers rather than the how much it
cost to produce it. Value is based on the benefits it
provides to the consumer e.g. convenience, well-
being, reputation or joy.
Formula: Price = Total Costs + (Profit Margin *
Total Costs)
Where Total Costs = Direct Cost (Direct Labor and
Materials) + Overhead (Factory Cost)
EXAMPLE: A company has an overhead costs
totaling to P50,000, direct labor and materials
totaling to P10,000. The company wanted to have a
profit margin of 20%. Determine the price of their
product.
Price = 10,000 + 50,000 + (20% * 60,000)
= 60,000 + 12,000
Answer = 72,000
MAJOR TARGETS OF PROMOTIONAL MIX
- Any promotional activity is usually designed with a
specific target audience in mind. The activity
is therefore created using messages, cues and
information that they will respond to.
1. TARGET AUDIENCE
- These are the current customers of the product
as well as former customers and any potential new
customers.
2. INFLUENCER
- People or organizations that may have their own
sphere of influence over the target audience make up
this category.
3. DISTRIBUTION CHANNEL MEMBERS
- The product is handled and provided to the
customer through this channel making them an
important category of targets.
4. OTHER COMPANIES
- Communicating with other companies may open up
opportunities to collaborate on joint ventures.