Merch Exam 4 Flashcards by Shun Shun

Goods that are bought and sold.

Merchandise:

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is the purchasing, pricing, displaying, selling of merchandise

MERCHANDISING

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MERCHANDISE

Caskets
Vaults
Clothing
Urns
Register books
Sundry items

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Developing a merchandising plan Also known as “sales objectives” or “sales plan”
Planning = Profit

What is Merchandise Planning?

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Plan Components

Merchandise:
Selection
Cost and pricing
Display

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Steps in Planning

Evaluate the market
Evaluate sales history
Determine product availability
Consider supplier recommendations
Establish product and service mix

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Selecting Suppliers

Vendors:
Payment terms
Availability of product
Product support
Product quality

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Types of Payment Terms

Cash discount
Quantity discount
Rebate
Consignment

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Reduction of price for payment of an account within time limits established by the sales contract

CASH DISCOUNT

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CASH DISCOUNT Example

Casket company invoices you with the following:
Terms: 2/10 Net 30
What does this mean?
Funeral home will get
2% discount if paid within 10 days
If funeral home fails to pay invoice within 10 days
Full payment(net) is due in 30 days

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Reduction in amount of a bill when a minimum quantity of merchandise has been ordered
Caskets
Embalming Fluids

QUANTITY DISCOUNT

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Return of a portion of a payment

REBATE

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Supplier gives merchandise to an agent to be cared for or sold
Payment IS NOT MADE to the supplier until the merchandise is sold

CONSIGNMENT

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Pricing of services and merchandise

What is Pricing?

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Methods of Determining Merchandise Prices

Markup
Consumer value index
Merchandise value ratio
Fixed multiple
Graduated recovery

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Difference between merchandise (wholesale) cost and selling (retail) price
Retail - Wholesale =
PROFIT MARGIN

MARKUP

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MARKUP Example

RETAIL - WHOLESALE = MARKUP
    Wholesale = $100.00(purchased amount)
    Retail = $125.00(selling amount)
Calculation
$125.00 - $100.00 = $25.00
Markup or profit margin= $25.00

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Percentage derived by dividing wholesale cost by the retail price
Wholesale ÷ Retail =
Spending more money should provide more value for each dollar spent

CONSUMER VALUE INDEX (CVI)

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CONSUMER VALUE INDEX (CVI) Example

Wholesale ÷ Retail = CVI
Wholesale = $100.00
Retail = $125.00
$100.00 ÷ $125.00 = 0.8
CVI = 80%

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Relationship between wholesale cost of merchandise and total cost of both service and merchandise to the consumer
Wholesale ÷ (Service + Merchandise) =

MERCHANDISE VALUE RATIO (MVR)

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Staff services for obits, DCs, paperwork, etc plus
Overhead Costs such as
Salaries, office supplies, rent, maintenance, utilities, etc.
Sum of these costs divided by number of services(historically or projected)
Equals service fee
Should be reasonable

Service (Fee) Pricing

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MERCHANDISE VALUE RATIO (MVR) Example

Wholesale ÷ Service and Merchandise = MVR
Wholesale = $200
Service and Merchandise = $4,000
$200 ÷ $4,000 = .05
MVR = 5%

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A price determination method whereby the casket cost is multiplied by a constant factor(number)

FIXED MULTIPLE

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Fixed Multiple - Example

Wholesale x Factor=Retail(Selling Price)
$200 x 3 = $600(selling price)
$400 x 3 = $1,200(selling price)
Advantage - easy to use & provides quality
Disadvantage - no improvement in CVI
 - no incentive to buy up

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Return of money produced by varying the amount expected on each selection The amount of markup(factor) varies with the cost of the merchandise $200 x 2.50 = $500(Selling Price) $400 x 2.62 = $1,048(Selling Price)

GRADUATED RECOVERY

GRADUATED RECOVERY TYPES

Increase Decrease Modified

Sales Trend Terminology

Average(Mean) Median Mode Quartile

The sum of a group of numbers divided by the number of units | “Mean”

Average

``` A director’s casket sales for the week $ 700 $1,500 $1,200 800 $4,200 $4,200 ÷ 4 = $1,050 Average Sale ```

Average - Example

A value in an ordered set of values which represents the midpoint, whereby there are an equal number of values above and below the midpoint value.

Median

Median - Example

``` A director’s casket(5) sales for the week $ 700 $ 800 $ 900 Median Sale $1,000 $1,100 ```

The number that appears most frequently in a listing of numbers

Mode

Mode - Example

``` A director’s casket(7) sales for a week $ 750 $ 925 $ 925 $925 = Mode(most frequent) $1,175 $1,525 $ 925 $ 925 ```

A division of the total into four intervals, each one representing one-fourth of the total

Quartile

Quartile - Example

``` A director has 20 caskets in the display room 1st Quartile 5 2nd Quartile 5 3rd Quartile 5 4th Quartile 5 Total 20 ```

The caskets sold in the 2nd and 3rd quartile Example: 1st 2nd 3rd 4th

Range

The number of times sales in a given price bracket occurs over a fixed period of time

SALES FREQUENCY

PRICE QUOTATIONS

``` Different methods: Itemization(FTC) Package Pricing Bi-Unit Pricing Functional Pricing Unit Pricing(Historical Method) ```

The method of price quotation by which each unit of service and/or merchandise is priced separately. Requirements of FTC

ITEMIZATION

The pricing method which groups together selected services and/or merchandise. Unit Pricing Bi-Unit Pricing Functional Pricing FTC- states any pricing method acceptable if family receives an itemized General Price List

PACKAGE PRICING

``` Price quotation showing separately the price of the service and the price of the casket. Example: Service $3,000 Casket $1,500 Bi-Unit Price $4,500 ```

BI-UNIT PRICING

``` Price quotation in which the itemized charges are combined into several component parts. Professional Services $2,500 Facilities $ 400 Automobile $ 100 Casket $1,500 Functional Pricing Total $4,500 ```

FUNCTIONAL PRICING

Historical Method used prior to FTC regulations A price quotation which creates one total price package for both service and merchandise. Professional Fee/Merchandise=$4,500 is the total for Unit Price

UNIT PRICING

Any item of service or merchandise describe to a purchaser as a “cash advance,” “accommodation,” “cash disbursement,” or a similar item.

CASH ADVANCE ITEMS

Any item obtained from a third party and paid for by the funeral provider on the purchaser’s behalf.

CASH ADVANCE ITEMS

CASH ADVANCE ITEM Examples

``` Cemetery or Crematory Services Casket Bearers Transportation Clergy Honoraria Flowers Musicians or Singers Nurses Obituary Notices Gratuities Certified Copies of Death Certificates ```

Common to all forms of price quotation. Must comply with applicable federal and state law(s). In most states, the funeral director can charge ONLY the price of the cash advance items and handling fee cannot be charged for these items  Texas - does allow handling fees as long as they are disclosed to the family on the funeral contract

CASH ADVANCES

those goods or stock of goods which are held for resale.

INVENTORY

the number of times the average inventory has been sold or used up during a period.

Inventory Turnover

the quantity to be purchased which minimizes total costs.

Economic Order Quantity (EOQ)

MERCHANDISE PRESENTATION

``` Funeral Home Casket manufacturer’s selection room Catalog Computer Price Lists ```

SELECTION ROOM

Locations Within funeral home Separate building Off premises

ORDER OF PREFERENCE

IN THE FUNERAL HOME MAIN LEVEL - PREFERRED Upper Level - 2ND PREFERENCE Lower Level - 3rd preference

SELECTION ROOM TYPES

``` Full size caskets Fractional Displays Quarter or End Panels/Pictures Catalog Computers ```

TRADITIONAL SELECTION ROOMS

CASKETS Minimum 12 (5 according to Texas State Law - 2 full size) Maximum 30

SELECTION ROOM SIZE

40 to 60 square feet per casket is recommended

LIGHTING

90 to 100 foot candles of illumination at casket level | Foot candle - amount of illumination produced by one candle at a distance of one foot

SELECTION ROOM LIGHTING

Direct Indirect Fluorescent Incandescent

Illumination directly shining on an object

DIRECT LIGHTING

Reflected illumination of an object

INDIRECT LIGHTING

The illumination produced by a tubular electric discharge lamp  The fluorescence of phosphors coating the inside of a tube

FLUORESCENT

The illumination resulting from the glowing of a heated filament

INCANDESCENT

CASKET DISPLAY EQUIPMENT

Distance from floor to bottom of casket | Should be 26 to 30 inches

A wheeled collapsible support for the casket, used in the funeral home, church, or home

CHURCH TRUCK

The stand or support upon which a casket rests in the selection room Casket Standard

CASKET STAND

A device upon which two or three caskets are placed, one on top of the other for display

CASKET RACK

OTHER DISPLAYS

``` Urns Outer Burial Containers Sundry Items Cremation Containers Memorials ```

OTHER LOCATIONS

Casket manufacturer’s selection room Catalog Computer

SELECTION ROOM ARRANGEMENT

ONE ROOM - that accommodates all caskets Furniture group (table, lamp, and 2 chairs) DEMONSTRATION GROUP - several caskets used to familiarize families Traffic Casket Arrangements CONSECUTIVE METHOD - increasing or decreasing in price GROUPING METHOD - Woods, Coppers,etc

Methods of Presentation

Direct presentation | Indirect presentation

The method of selling caskets whereby the funeral director remains in the selection room the entire selection period

Direct Selection Room Procedure

``` Advantages: Some families prefer the support Disadvantages: No privacy and restricts communication May influence Misrepresent needs of family ```

Direct Selection Room Procedure

Makes introductory presentation to family Leaves the selection room Returns upon request

Indirect Selection Room Procedure

Indirect Selection Room Procedure Advantages: Privacy Influence by funeral director eliminated Communication occurs Information may be better analyzed

Indirect Selection Room Procedure Disadvantages: | No support; Funeral director not available for questions; information may be ignored