Page 620 - Business Principles and Management

C HAPTER 22 A SSESSMENT
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CHAPTER CONCEPTS

• Businesses must decide what to buy, when to buy, from whom to buy,
and how much to buy. Mistakes result in unsold products, dissatis-
fied customers, and losses rather than profits.
• When setting a product’s price, businesspeople consider payment terms,
discounts, and the elements that make up a product’s price. Pricing
strategies include pricing to meet the competition, to earn a specific
profit, to sell more products, and to provide customer services.
• Businesses attempt to control costs by establishing practices that help
reduce markdowns, damaged or stolen merchandise, and customer
returns.

• The most common methods of promotion are advertising, personal
selling, and sales promotion.
• Advertising is paid promotion directed at a large number of people
at the same time. An advertising plan outlines communication goals,
timing, budget, and evaluation criteria. The FTC and the FCC pro-
tect consumers from unfair and illegal promotion. Companies must
be able to prove all claims made in ads and can be asked to stop using
illegal ads, run corrective advertising, or pay a fine.

• Personal selling is selling through direct personal contact. Salespeople
study buying motives, demonstrate the product, answer customer
questions, and close the sale when customers are prepared to make a
purchase decision. The sale is complete when the salesperson follows
up with the customer to determine if he or she is satisfied with the
purchase.

REVIEW TERMS AND CONCEPTS

Write the letter of the term that matches each definition. Some terms will
not be used.
1. Initial price that the seller posts on a product
2. Price reduction given for paying by a certain date a. advertising media
3. Cost to produce a product or buy it for resale b. buying motives
4. Difference between the selling price and the cost of goods sold c. cash discount
5. Promotion through direct, personal contact with a customer d. cease-and desist-order
6. Methods of delivering a promotional message to the audience e. cost of goods sold
7. The reasons people buy f. discounts
8. Any promotional activities other than advertising and personal selling g. full disclosure
intended to motivate customers to buy h. list price
9. Difference between the selling price and all costs and expenses of i. margin (gross profit)
the business j. markdown
10. Providing all information necessary for consumers to make an k. net profit
l. personal selling
informed decision m. sales promotions
11. Ability to prove all claims made about a product or service in n. substantiation
promotions
12. Requiring a company to stop using specific advertisements

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