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ABM 009 user.

An agent never actually gains ownership of the


BASIC PARTS OF A BUSINESS PLAN product and usually makes moneyfrom commissions
1. Management and fees paid for their services.
-This aspect is aimed at designing the form of 2. DISTRIBUTOR
ownership. - Similar to wholesalers, distributors differ in one
2. Marketing regard. A wholesaler may carry a variety of
-This aspect is aimed at determining and analyzing competition brands and product types. A distributor
the demand and supply for the product in the past so however, will only carry products from a single
have a sound projection of future demand and supply brand or company. A distributor may have a close
of the product. relationship with the producer.
3. Production 3. WHOLESALER
-This aspect describes the production process in - they actually purchase goods from a producer in
making the product. bulk and store them in warehouses. These goods are
4. Financing then resold in smaller amounts at a profit.
-This aspect is meant to determine the total cost that 4. RETAILER
is required for the project along with a viable source - Wholesalers and distributors will sell the products
of financing. that they have acquired to the retailer at a profit.
Retailers will then stock the goods and sell them to
Marketing mix refers to determining which elements the ultimate end user at a profit.
of the product are necessary for successful selling.
Three Main Distribution Strategies
Core – This is the first level to be defined and 1. Intensive Distribution – This strategy may be used
explored. In the case of a camera, they are able to to distribute lower prices products that may be
capture memories forever through the purchase of a impulse purchases. Items are stocked at a large
product number of outlets and may include things such as
Actual – Here, any additional benefits are added on mints, gum or candy as well as basic supplies and
to differentiate the product and highlight its USP. necessities.
Augmented – Finally, there needs to be an 2. Selective Distribution – In this strategy, a product
assessment of what further benefits can be offered to may be sold at a selective number or outlets. These
the customer to ensure a loyal purchasing customer. may include items such as computers or household
appliances that are costly but need to be somewhat
PRODUCT - It can either be an intangible service or widely available to allow a consumer to compare.
a tangible good. Basically, a product should meet the 3. Exclusive Distribution – A higher priced item may
customers’ specific demands or needs. Products be sold at a single outlet. This is exclusive
usually follow a natural lifecycle and that’s why distribution. Cars may be an example of this type of
marketers should strive to understand and plan for strategy.
each stage accordingly.
Price is the value measured in money term in the part
BUSINESS NAME - Your business name (also of the transaction between two parties where the
referred to as your trade name) is the name that buyer has to give something up (the price) to gain
you register with your state to operate. something offered by the other party or the seller.

PRODUCT NAME - a product name identifies a Pricing Strategy, on the other hand, is the planning of
specific product or service and becomes a brand prices, including the setting of discounts, in
name when the company starts using it. considering items such as the price of competitive
products, manufacturing and distribution costs, the
DISTRIBUTION CHANNEL INTERMEDIARIES firm’s growth and profitability, customer wants, and
– these are middlemen who facilitate the distribution the elasticity of demand.
process through their experience and expertise.
1. AGENTS IMPORTANCE OF PRICING
- The agent is an independent entity who acts as an 1.Pricing as a Flexible Variable
extension of the producer by representing them to the
- Changes in price can be done when needed pricing into account which could place the company
compared to changing the product or a distribution at a competitive disadvantage.
channel. 10. Cost Based Pricing
2. Define the Right - This is similar to cost plus pricing in that it takes
-A price set too high can result in potential buyers costs into account but it will consider other factors
staying away altogether. such as market conditions when setting prices.
3. Pricing Pricing as a Trigger for First impressions 11. Value Based Pricing
-A consumer will form a perception about its quality -This pricing strategy considers the value of the
and relevance as soon as they see the price. product to consumers rather than the how much it
4. Pricing as a Key to Sales Promotions cost to produce it. Value is based on the benefits it
- Sales promotions are often a short time price based provides to the consumer e.g. convenience, well-
offering such as a percentage reduction or a two in being, reputation or joy.
one type offer.
Formula: Price = Total Costs + (Profit Margin *
PRICING STRATEGY Total Costs)
1. Penetration Pricing Where Total Costs = Direct Cost (Direct Labor and
-Here the business sets a low price to increase sales Materials) + Overhead (Factory Cost)
and market share. Once market share has been
captured the firm may well then increase their price. EXAMPLE: A company has an overhead costs
2. Skimming Pricing totaling to P50,000, direct labor and materials
-The business sets an initial high price and then totaling to P10,000. The company wanted to have a
slowly lowers the price to make the product available profit margin of 20%. Determine the price of their
to a wider market. The objective is to skim profits of product.
the market layer by layer. Price = 10,000 + 50,000 + (20% * 60,000)
3. Competition Pricing = 60,000 + 12,000
-Setting a price in comparison with competitors. In Answer = 72,000
reality a firm has three options and these are to price
lower, price the same or price higher than MAJOR TARGETS OF PROMOTIONAL MIX
competitors. - Any promotional activity is usually designed with a
4. Product Line Pricing specific target audience in mind. The activity
- Pricing different products within the same product is therefore created using messages, cues and
range at different price points. information that they will respond to.
5. Bundle Pricing 1. TARGET AUDIENCE
-The business bundles a group of products at a - These are the current customers of the product
reduced price. Common methods are buy one and get as well as former customers and any potential new
one free promotions or BOGOFs as they are now customers.
known. 2. INFLUENCER
6. Premium Pricing - People or organizations that may have their own
- The price is set high to indicate that the product is sphere of influence over the target audience make up
"exclusive" this category.
7.Psychological Pricing 3. DISTRIBUTION CHANNEL MEMBERS
-The seller here will consider the psychology of price - The product is handled and provided to the
and the positioning of price within the market place. customer through this channel making them an
8. Optional Pricing important category of targets.
-The business sells optional extras along with the 4. OTHER COMPANIES
product to maximize its turnover. - Communicating with other companies may open up
9. Cost Plus Pricing opportunities to collaborate on joint ventures.
-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