Page 624 - Business Principles and Management

project:
MY BUSINESS , INC.

DEVELOPING A PRICING AND ADVERTISING STRATEGY
A businessperson must set prices on products that will provide a reasonable
net profit. In addition, a new business needs to plan promotion to introduce
people to the business and its products and to encourage customers to try
the products.

DATA COLLECTION
1. Use the Internet to locate sources of information on start-up expenses
for small businesses and develop a list of the common types of
expenses and the range of costs you might expect when you begin
your business.
2. Interview one or two small-business owners in your community.
Ask them to explain the terms and policies of some of the vendors
they deal with.
3. Ask one or two small-business owners to explain the types of promo-
tion they use, what assistance they get with promotional planning,
and how they estimate the amount of money they can spend on pro-
motional activities.
4. Collect samples of advertising and promotion that local small busi-
nesses are using. Analyze their effectiveness in communicating with
prospective customers. Analyze the publicity’s potential impact.
Prepare possible strategies for dealing with it.
5. Check with several media that offer advertising in your community
(newspapers, television, radio, etc.). Obtain a price list that indicates
the costs of advertising in each medium, based on the size, type, and
frequency of the advertising.

ANALYSIS
1. Assume that, in an average month, your sales will include 700 small
drinks, 800 large drinks, 900 supplement additions to the drinks
(beyond any free supplements), and 2,000 high-energy snack bars.
First, determine the price you will charge for each product, being
realistic about what you believe customers are willing to pay. Then
estimate your monthly expenses. Have several people review your
estimates to determine if they are realistic. Then calculate your esti-
mated monthly profit or loss.
2. Is your estimated monthly net profit adequate? If not, consider what
changes you could make to improve it. (Don’t make any price changes
at this time.) Which of the possible changes are most likely to be
successful? Which are least likely to be implemented?
3. Being as creative as possible, list several ways of promoting your new
business that would be (a) informative, (b) unique, and (c) affordable.
Consider methods in addition to advertising.
4. Develop a three-month promotional plan for your new business.
Include methods, media to be used, time schedule, budget, and
samples of the promotions.

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