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ENTREPRENEURSHIPENTREPRENEURSHIP

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CHAPTER 7:CHAPTER 7:Advertising and Pricing Advertising and Pricing for Profitfor Profit

Zimmerer, T. W and Scarborough, Zimmerer, T. W and Scarborough, N. M. N. M. Essentials of Essentials of

Entrepreneurship and Small Entrepreneurship and Small Business Management (3rd ed.)Business Management (3rd ed.)

Prentice Hall © 2002.Prentice Hall © 2002.

It Pays to Advertise!




Developing an Advertising PlanDeveloping an Advertising Plan

Step 1: Create specific, measurable objectives.

Step 2: Identify and analyze the target audience.

Step 3: Design an advertising message and choose the media for transmitting it.




Build Ads Around a UniqueBuild Ads Around a UniqueSelling Proposition (USP)Selling Proposition (USP)

USP - A key customer benefit of a product or service that answers the critical question that every customer asks: "What's in it for me?"

Identify your product or service's USP by describing the primary benefit it offers customers and then list other secondary benefits it provides.

Briefly list a few facts that support this USP.

Then, focus your ads to stress these top benefits and the facts supporting them!




A Six-Sentence Advertising A Six-Sentence Advertising StrategyStrategy

What is the purpose of this ad?

What USP can you offer customers?

What other key benefits support your USP?

At whom are you aiming the ad?

What response do you want from your target audience?

What image do you want to convey in our ads?



Five Fundamentals of a Successful Advertisement.Five Fundamentals of a Successful Advertisement.

It should attract attention.It should emphasize a keybenefit of the product orservice to the customer.

It should communicate the company’s UniqueSelling Proposition (USP).

It should prove the USPand benefits to the customerwith facts, statistics, or testimonials.

It should motivate customersto take action immediately.

Source: Adapted from Jerry Fisher, “Fine Print,” Entrepreneur, November 1994, pp. 145-147.


Can Your Ad Pass These 7 Tests?Can Your Ad Pass These 7 Tests?

Scan test

Comprehension test

Differentiation test

Puffery test

Believability test

Immediate clarity test

USP test


Promotion Includes...Promotion Includes...

Publicity - any commercial news covered by the media that boosts sales but for which the small business does not pay.

Personal selling - the personal contact between sales personnel and potential customers resulting from sales efforts.

Advertising - any sales presentation that is nonpersonal in nature and is paid for by an identified sponsor.


Tips for Stimulating PublicityTips for Stimulating Publicity

Write an article of interest to customers.

Sponsor an off-beat event

Involve celebrities “on the cheap.”

Offer to be interviewed on TV and radio stations.

Publish a newsletter.

Speak to local organizations.

Sponsor a seminar.

Write news releases and fax or e-mail them to the media.

Serve on community and industry boards and committees.

Sponsor a community project or support a nonprofit organization.

Promote a cause.


Top Salespeople…Top Salespeople…

Are enthusiastic and alert to new opportunities.

Are experts in the products and services they sell.

Concentrate on select accounts.

Plan thoroughly.

Use a direct approach.


Top Salespeople…Top Salespeople…

Work from the customer’s perspective.

Use past success stories.

Leave sales material with clients.

See themselves as problem solvers, not just vendors.

Measure their success not just by sales volume but by customer satisfaction.

(continued)(continued)


Successful Personal SellingSuccessful Personal SellingRequires a Selling System Requires a Selling System

Approach - Establish rapport with prospect.

Interview - Let the prospect talk.

Demonstrate, explain, and show – Make clear the benefits of your product or service.

Validate - Prove the claims about your product or service.

Negotiate - Listen for objections and try to overcome them.

Close - Stop talking and ask for the order.


Selecting Advertising Media:Selecting Advertising Media:Key QuestionsKey Questions

How large is my firm's trading area?

Who are my customers and what are their characteristics?

Which media are my target customers most likely to watch, listen to, or read?


Selecting Advertising Media:Selecting Advertising Media:Key QuestionsKey Questions

What budget limitations do I face?

Which media do my competitors use?

How important are repetition and continuity of my advertising message?

What does the advertising medium cost?



Advertising Media OptionsAdvertising Media Options

Word-of-Mouth

Newspapers

Radio

Television

Magazines

Direct mail

World Wide Web

Outdoor ads

Transit advertising

Directories

Trade shows

Sponsorships and special events

Point-of-purchase ads


Snappy Radio Copy Should....Snappy Radio Copy Should....

Stress benefits to the listener.

Use attention-grabbers.

Zero in on a particular audience.

Be simple and to the point.

Sell early and often.

Be written for the ear.

Be rehearsed before presentation.

Use positive action words.

Put the listener in the picture.

Mention the advertiser often.

Focus on getting a response.


Creating Direct Mail Ads That Creating Direct Mail Ads That Really WorkReally Work

Promise benefits in the headline.

Use short “action” words.

Leave lots of white space.

Use eye-catching words.

Forget grammatical rules.

Repeat the offer at least three times.

Offer proof of claims and endorsements.

Ask for the order.


Creating Direct Mail Ads That Creating Direct Mail Ads That Really WorkReally Work

Ask the reader questions in the copy.

Use high-quality paper and envelopes.

People usually open envelopes that resemble bills.

Address envelopes to a particular person.

Use stamps if possible.

Use a “P.S.” because recipients almost always read them.

Make the order form easy to fill out.



Advertising on the WebAdvertising on the Web

Banner ads

Cookies

Full-page ads

Push technology ads

E-mail ads


Preparing An Advertising Preparing An Advertising BudgetBudget

What is affordable

Matching competitor's advertising expenditures

Percentage of Sales Past Sales

Forecasted Sales

Objective-and-Task


How To Advertise "Big"How To Advertise "Big"On A Small BudgetOn A Small Budget

Hire "free-lance" copywriters and artists.

Use cooperative advertising.

Participate in shared advertising.

Maximize publicity with techniques such as cause marketing.


What determines price?What determines price?

Price CeilingPrice Ceiling ("What will the market bear?") ("What will the market bear?")

Price FloorPrice Floor ("What are the company's costs?") ("What are the company's costs?")

AcceptableAcceptable PricePrice RangeRange

??

??

??

??

??

????

??

??

??

??

Final PriceFinal Price (What is the (What is thecompany's desired "image?")company's desired "image?")

Final PriceFinal Price (What is the (What is thecompany's desired "image?")company's desired "image?")

??


Introducing A New ProductIntroducing A New Product

3 Goals:

Getting the product accepted

Maintaining market share as competition grows

Earning a profit

3 Basic Strategies:

Penetration

Skimming

Sliding-down-the-demand-curve


Pricing TechniquesPricing Techniques

Odd pricing

Price lining

Leader pricing

Geographical pricing

Opportunistic pricing

Discounts

Suggested retail prices


Pricing for Retailers: MarkupPricing for Retailers: Markup

Dollar Markup = $25 - $15 = $10

Dollar Markup = Retail Price - Cost of MerchandiseDollar Markup = Retail Price - Cost of Merchandise

Percentage (of Retail Price) Markup = Percentage (of Retail Price) Markup = Dollar MarkupDollar MarkupRetail PriceRetail Price

Percentage (of Cost) Markup = Percentage (of Cost) Markup = Dollar MarkupDollar MarkupCost of UnitCost of Unit

ExampleExample::

Percentage (of Retail Price) Markup = Percentage (of Retail Price) Markup =

$10$10

$25$25= 40%= 40%

Percentage (of Cost) Markup = Percentage (of Cost) Markup = $10$10

$15$15= 67%= 67%


Pricing for Manufacturers: Pricing for Manufacturers: Breakeven Selling PriceBreakeven Selling Price

BreakeveBreakeven n

SellingSelling

Price Price

QuantitQuantityy

Example:Example:

= ProfitProfitVariable Variable

cost per cost per unitunit

produceproducedd

Total Total fixed fixed costscosts++

{{ xx

}} ++

Quantity Quantity producedproduced

BreakeveBreakeven n

SellingSelling

Price Price

= $$ 6.98/6.98/unitunit

50,000 50,000 unitunit

$110,00$110,0000

+ { xx }+

50,000 50,000 unitsunits

= $9.18 per = $9.18 per unitunit


Pricing for Service Firms: Pricing for Service Firms: Price per HourPrice per Hour

Price per Hour = Total cost per x 1Price per Hour = Total cost per x 1 productive hour (1 - net profit target productive hour (1 - net profit target

asas a % of sales)a % of sales)

Example: Ned’s TV Repair ShopExample: Ned’s TV Repair Shop

Price per Hour = $13.44 per x 1 Price per Hour = $13.44 per x 1 hour (1 -.18)hour (1 -.18)

= $16.38 per hour= $16.38 per hour


Consumer CreditConsumer Credit

Credit cardsNational

Private

Installment credit

Trade credit

Documents

7-17-1 Visit UMT online at © 2007 UMT Visit UMT online at University of Management and Technology 1901 N