Pricing/ Promotion Flashcards
What is a promotional strategy?
A plan for reaching target audiences with messages that drive them to take action, such as buying a product.
It includes the promotional objectives, budget, and promotional mix (advertising, sales promotions, etc.).
What is included in a promotional mix?
Advertising: Paid messages through TV, radio, print, or online.
Sales Promotion: Short-term incentives like coupons, discounts, or giveaways.
Public Relations: Activities to build goodwill and a positive image.
Personal Selling: Direct communication with customers to persuade them to buy.
Direct Marketing: Direct communication to customers (e.g., email marketing, telemarketing).
What are some types of promotional activities businesses use?
Price-based promotions: Discounts, coupons, rebates.
Non-price promotions: Free samples, buy one get one free (BOGO), contests.
Event promotions: Special events like product launches or seasonal sales.
How do you measure the effectiveness of a promotional plan?
Track sales data before, during, and after the promotion.
Customer feedback and surveys to assess the impact on customer perception and loyalty.
Monitor changes in market share, brand awareness, and customer engagement.
What is elasticity of demand and how does it apply to promotions?
Elasticity of Demand: The responsiveness of consumer demand to price changes.
Elastic Demand: A small price change leads to a large change in demand (e.g., for luxury items).
Inelastic Demand: A price change has little effect on demand (e.g., necessities).
What is cross-merchandising and why is it used in promotions?
Cross-Merchandising: Placing complementary products together to encourage additional purchases (e.g., chips placed near salsa).
It’s used to increase sales by making it easy for customers to find related items.
What types of promotional special events can businesses use?
Seasonal Sales: Discounts for holidays or specific seasons (e.g., Black Friday).
Product Launches: Introducing a new product with special deals or events.
Store Anniversaries: Celebrating milestones with limited-time offers.
Contests and Sweepstakes: Engaging customers with the chance to win prizes
What are some common visual merchandising techniques used in promotions?
Store Layout: Organizing the store in a way that makes it easy for customers to navigate.
Displays: Eye-catching product displays that attract attention and encourage sales.
Signage: Clear, attractive signs to guide customers and promote sales.
What factors affect pricing decisions?
Cost of Production: The cost to produce or acquire the product.
Competitors’ Pricing: Prices set by competitors in the market.
Target Market: What customers are willing to pay.
Economic Conditions: Inflation, recession, and other market conditions.
Demand Elasticity: How sensitive the demand for a product is to price changes.
What is the break-even point and how is it calculated?
Break-even Point = Fixed Costs / (Selling Price per Unit - Variable Costs per Unit)
The point at which total revenue equals total costs, resulting in no profit or loss.
What are some types of pricing strategies?
Prestige Pricing: Pricing higher to indicate high quality.
Promotional Pricing: Temporary reductions to boost sales.
Odd-Even Pricing: Pricing just below whole numbers (e.g., $9.99).
Cost-Plus Pricing: Adding a markup to the cost of goods sold.
Multiple-Unit Pricing: Offering discounts for buying in bulk.
What is discount pricing and when is it used?
Discount pricing is when a business reduces the price of goods or services to encourage purchases.
Used during clearance sales, promotional events, or to attract new customers.
What is the difference between variable costs and fixed costs?
Fixed Costs: Costs that do not change with the level of production (e.g., rent, salaries).
Variable Costs: Costs that vary with production (e.g., raw materials, hourly wages).
What’s the difference between markup and margin?
Markup: The amount added to the cost of a product to determine its selling price.
Margin: The difference between the selling price and the cost of goods sold, usually expressed as a percentage of the selling price.
How do you evaluate pricing decisions?
Assess how the price affects customer demand, profit margins, and competitive positioning.
Track sales and feedback to determine whether the pricing strategy is successful.
