Pricing and Sales Strategies

Flashcards covering key vocabulary and concepts related to pricing strategies, channel management, logistics, sales techniques, and ethical behavior in selling.

Importance of Pricing

The link to profit; when too high, demand is too low; when too low, margin is too low.

Revenue

Price multiplied by Quantity sold (pQ).

Profit

Revenue minus Cost.

Cost

Variable Cost plus Fixed Cost.

Breakeven Sales

Fixed Cost divided by (Price minus Variable Cost).

Pricing Formula

Price = Cost + Markup.

4C Framework for Pricing

Considerations in a manufacturer’s pricing decision: Cost, Channel, Competition, Customer.

Guidelines for Channel Pricing

Each reseller must get a profit margin; margins should be proportionate to cost of functions performed; prices should align with rival brands; margins should conform to percentage norms; retail price should end at expected price points.

Gray Markets

The sale of brand-name products at low prices by unauthorized dealers, often due to price differences between markets. Distinct from black markets.

Double Marginalization

When each channel member adds a margin and maximizes its profit, leading to a higher price and lower demand than optimal for the channel as a whole.

Solutions for Double Marginalization

Vertical integration, disintermediation, bargaining & contract agreements, and pricing strategies.

Channel Management

Concerned with all channel flows.

Logistics Management

Concerned with product flow.

Logistics

Moving the right quantity of the right products to the right place at the right time.

Containerization

Goods transported in standardized shipping containers to make logistics more efficient and secure.

Supply Chain Management (SCM)

Emphasizes cooperation to integrate the logistical operations of channel members.

Third-Party Logistics Providers (3PL)

Specialize in performing the logistical tasks of manufacturers or other channel members.

Total Cost Approach

Management attempts to minimize the cost of using the components taken as a whole.

Systems Concept

Management views logistics as a system of interrelated components.

Materials Handling

The range of activities & equipment involved in the placement & movement of products in storage areas.

Lead Time

The time between when an order is placed and when it is received by the customer.

Inventory Control

The time between when an order is placed and when it is received by the customer. Minimize inventory costs (ordering, holding, and stock-out costs).

Dropshipping

A business model where the seller does not keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.

Internet Limitations: Physical Product Flow

New technologies are working on improving physical flow after internet ordering, particularly last mile delivery – self-driving cars, 3D printing, drone delivery, parcel lockers.

Personal Selling

Interaction between a buyer and seller, often face-to-face, designed to influence purchase decision.

Sales Management

Planning the selling program and recruiting, training, motivating, and rewarding sales force activities.

Salespeople

Salespeople form close relationships with their clients and add value through relationship marketing.

Multi-level marketing (MLM)

Salespeople recruit more salespeople.

Mentors

Experienced individual who helps another develop personal and business skills through conversations.

Cross-Sell

Sell a related product to an existing customer.

Up-sell

Encouraging a potential buyer to buy a more expensive/higher quality, quantity, or features version of the product or upgrade to it.

Formula Selling: AIDA

Buyers are led through Attention, Interest, Desire, Action.

Objection Handling Method: LAARC

Listen, Acknowledge, Assess, Respond, Confirm

Closing

Getting the customer’s commitment to buy.

Salary

Fixed payment, regardless of sales.

Commission

A percentage of sales.

Bonus

Exceeding sales quota results in this.

Sales Contests

Competitions to achieve some short-term goal.

Benefits

Health and retirement contributions.

Compensation Plan

Salary + Commission + Bonus.

Efficiency Wage

A higher-than-market wage.

Integrated Marketing Communications (IMC)

Integrating all the promotional tools, so that they work synergistically for maximum impact.