Bus 101 Final Study Cards

Benchmarking Comparing your business to a competitors 4 P's of Marketing Price - cost Place - where its sold Promotion - how to get word out about it Product - what is being sold Push Markting V. Pull Marketing Push - assuming customer is unable to make decision on their own, pushing information onto them, like car sales Pull - make information available for customer to make their own decision Marketing *To help buyers buy *Set standards of quality relative to price *Creating and communicating a product that has a set value for customers and society at large Evolution of marketing 1. 1860 -mass produce for profit 2. 1920s - over production, focus on persuasion 3. Post WW2 - baby boom, competition for the consumer's dollar 4. Consumer research to satisfy them Product a physical good or idea to satisfy a need or want Test Marketing testing products among potential customers Brand Name word, letter or phrase that differentiates one seller's goods from another Focus Group small group of people under direction of a discussion leader to communicate opinions on products and issues Marketing Mix The mix of different marking methods used to promote products. ie radio, tv, web ads, newspaper, magazine Influences of Marketing: Sociocultural Psychological Situational 1. family, culture, social class 2. perception, motivation 3. previous experiences, social and physical surroundings Ways to segment market: Demographics Geographics Psychographics 1. By city, region, state, physical location 2. By age, income, education 3. By values, attitudes, interests Mass Marketing developing products and promotions to please a large market or group Characteristics of Business to Business Marketing (6) 1. Few customers 2. usually larger organizations as customers 3. geographically concentrated 4. Rational as opposed to emotional 5. Usually direct sales 6. Concentrated on Selling rather than Advertising Top - Bottom Pricing based on costs to produce, then set price Bottom - Up Pricing set prices before considering costs Product Line v. Product Mix Line: group of products physically similar, intended for a similar market (ex. Frito Lay pretzels, chips, fritos) Mix: combination of lines offered by a manufacturer Product Life Cycle (4 steps) 1. Introduction (market tested, high price, selective distribution) 2. Growth/Competition (improve product, adjust price to competition, heavy advertising, increased distribution 3. Maturity (differentiate product from competition and other market areas, further reduce price, emphasize brand name 4. Decline ( cut product mix, consider price increase, reduce advertising to loyal customers, reduce distribution Pricing Strategies - Skimming Skimming - high prices, when product is highly demanded Pricing Strategies - Low Prices/Everyday Low Prices Low Prices - enter new market to beat competition Everyday Low Prices (Walmart) -low prices constantly, predatory pricing Pricing Strategies - Competition Base Competition Based - set pricing at, above, or below competition's pricing levels Pricing Strategies - Cost Based Set pricing based on costs of production comparing profit margins Pricing Strategies - Price Leadership One or more dominant firms set the pricing practices for all competitors in an industry to follow Pricing Strategies - Psychological Pricing pricing goods and services at price points that make the product appear less expensive than it is Fixed Costs expenses that remain the same no matter how many products are made/sold (ex. building, equipment, insurance) Variable Costs costs that change according to the level of production (ex. raw materirals, electricity, labor) Channels of Distribution intermediaries in the market that together transport and store goods in their path from producer to consumers ex. agents, brokers, wholesalers, retailers Supply Chain adds value at each step as the materials move to become a good, and information sent to the ultimate consumer Marketing Intermediaries Organizations that assist in moving goods/services from producers to consumers Tend to add cost at each step but can make things more efficient. Can't be eliminated, otherwise consumers would have to perform their functions Logistics marketing activity involving steps from planning to manufacturing to end user the most effectively and most efficiently Inbound Logistics managing the inbound raw materials from suppliers to producers Outbound Logistics managing the flow of finished products to business buyers and ultimate consumers Containerization bar coded shipments as it travels, easy to locate Freight Forwarder an organization that puts many small shipments together to send them in a larger shipment to transport more cost effectively Transportation Pros/Cons Trains - great for large shipments Trucks - good for small shipments to remote locations By Water - inexpensive but slow Pipeline - fast and efficient (water, petroleum) Air - Fast, expensive Loss Leader to sell something that is at a low price in order to gain a customer to buy a more expensive item Promotion Mix Using a variety of promotions tools (personal selling, public relations, sales promotions, advertising) Advertising paid, non-personal communication, through various media with an identified sponsor Ex. newspaper, TV, radio, magazines, direct mail, internet, mobile, product placement The Selling Process (7 steps) 1. Prospect and Qualify - research prospective buyers, see if there is a need for it 2. Pre-approach - gather information about customer, their wants/needs 3. Approach - first impression, emphasize benefits, sell whole package 4. Make a presentation, use testimonials 5. Answer Objections - anticipate questions, satisfy doubts 6. Close the Sale - use test questions to see if ready to buy 7. Follow Up - see if customer is happy, handle complaints, establish relationships Publicity any information distributed about a product or an organization through the media to the public, not paid for or controlled by the seller Sales Promotion to stimulate the consumer into purchasing and dealer interest by means of short term activities Ex. Display boards, trade shows, events, contests, coupons, catalogs, demonstrations Managerial v. Financial Accounting Managerial: make decisions based on the #s, how to utilize the resources of the company Financial: figure out and analyze the numbers, pay people and bills Accounting System Inputs and Outputs Inputs: Sales Documents, reciepts, payroll, travel records Outputs: Financial statements such as balance sheets, income statements, statements of cash flows Sarbanes Oxely Act *when the accounting industry was under scrutiny *created government standards for publicly traded companies *created Public Company Accounting Oversight Board Balance Sheet financial statement that reports the financial condition at a specific time made up of assets, liabilities, and owner's equity Selling Accounts Receivable way to get rid of a liability - sell to a collections agency for pennies on the dollar, but better than nothing, get cash immediately Current Assets can be converted into cash with in a year ex. cash, accounts receivable, inventory Fixed Assets land, building, equipment Intangible Assets items like patents, copyrights, goodwill Current Liabilities payments due in one year or less ex. accounts payable, taxes, salaries Long Term Liabilities payments due in over one year ex. notes and bonds payable Owners Equity value of what stockholder's own in a firm (aka stockholder's equity) LIquidity ability for something to be converted into cash Income Statement shows a firm's profit after costs, expenses and taxes. It summarizes the revenue, resources in the firm, and net income Net Income revenue left after costs, expenses, and taxes are paid Revenue Value of everything received from goods sold, services, and other financial sources NIBT Net Income Before Taxes Proforma income statement projected over a period of time -usually 12 months. A way to budget based on current trends and possible future problems or periods of growth Operating Expenses costs involved with operating a business, such as rent, utilities, insurance, supplies, and salaries G & A Expenses General and Administrative part of a budget ex. office supplies, utilities Statement of Cash Flow reports cash receipts and disbursements related to a firms 3 major activities: operations, investments, and financing. showing the difference between cash coming in and going out Financial Management job of managing a firm's resources to meet its goals/objectives 3 major reasons why a firm fails financially 1. Under-capitalization (insufficient funds to start) 2. Poor control over cash flow 3. Inadequate expense control Capticla Budget a budget that highlights a firm's spending plans for a major purchase that requires a large amount of money Cash Budget estimates cash flowing in and out during amonth or period, helps to document trends and estimate future spending Financial Control when a firm compares its actual revenue, costs, and expenses to it's actual budget Capital Expenditures major investments in long-term tangible assets (land, buildings, equipment, copyrights, trademarks, patents) Trade Credit Practice of buying goods now and paying for them later Secured Loan loan backed by collateral Unsecured Loan Loan that doesn't require collateral Time Value (of money) Money has more power and value now, than sitting and doing nothing Factoring the process of selling accounts receivable for cash Credit Cards many business use them for readily available crdit as opposed to loans HOWEVER - very risky and costly with interest rates very high, and an expensive way to borrow money Venture Capital money invested in new or emerging companies that are perceived as having great profit potential Cost of Capital the rate of return a company must earn in order to meet the demands of its lenders and equity holders Money Supply the amount of money the Federal Reserve Bank makes abailable for people to buy goods and services M1 money money that can easily be accessed (coins, paper money, checks) M2 Money money in M1 plus money that takes a little more time to obtain (savings accounts, mutual funds, CDs) M3 Money M2 PLUS deposits like money market funds Weak dollar v Strong Dollar Weak -falling value can't buy as much with it, weak economy Strong - rising value, can buy more with it, increased value and strong economy Federal Reserve Sets reserve requirements and interest rates for banks, buys and sells government securities (bonds/stocks), buys and sells foreign currency Using Checks/Check Clearing Lengthy process, expensive. Saving and Loans Banks Financial institution that accepts savings/checking deposits,and provides home mortgage loans Commercial Banks profit-seeking, receives deposits through checking and savings accounts, which uses those funds to make loans Nonbanks do not accept deposits, but offer services like banks - these types of non-banks include pension funds, insurance companies, commercial finance companies, brokerage houses Pension Funds money put aside by corporations, non-profits or unions to cover the needs of members financially when they retire. Risk the chance, probability, and amount of possible loss Speculative Risk chance of loss OR profit Self-Insurance setting aside money to cover routine claims and buying only Catastrophe polocies to cover big losses Liability Insurance covers people found liable for professional negligance, protected them rom being sued "malpractice insurance" Key Executive Insurance if the owner dies, money goes back into the business as pposed to a beneficiary Insurance way to give risk to a third party, who pays for the risk insteadI IRA Individual Retirement Account, save money now, so money available when ready to retire Rainy Day Money SAVE MONEY NOW - for unexpected expenses that may happen Credit Union a cooperative financial institution the is owned and controlled by its members, aimed at providing credit at reasonable rates, and. community developement. Debt Financing v Equity Financing Debt: to get a loan Equity: using equity as collateral in order to get money Revolving Credit a line of credtit readily available but usually involves a Fee