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BUSINESS CHAP 13+14 - Coggle Diagram

- - - - the cost of manufacturing the product plus a profit mark-up
    - - easy to apply
      - different profit mark-ups could be used in different markets
      - each product earns a profit
    - - If selling price is higher than competitors' prices → could lose sales
      - a total profit will only be made if sufficient units of product are sold
      - no incentive to reduce costs
  - - - sales are likely to be high
      - it is difficult for consumers to tell the difference between products of different businesses
    - - If costs of production are higher than competitors → competitive price could lead to losses being made
      - Higher quality product need to be sold at higher price to give it a higher quality image
      - detail research would be needed → costs time and money
    - - when the product is priced in line with or just below competitors' prices
  - - - ensure sales are made and new products enter the market successfully
      - market share should build up quickly
      - used for newly launched products → create impact with customers
    - - customers might 'get used' to low prices → reject the product if it starts to raise
      - Not be appropriate for a branded product with a reputation for quality
      - profit per unit maybe low
    - - the price is set lower than the competitors' prices
  - - - a higher price is set for a new product on the market
    - - help to establish the product of being good quality
      - high research and development costs can be recouped from the profit
      - If the product is unique → profits being made before competitors launch similar products which price will have to be reduced
    - - may discourage some potential customers
      - may encourage more competitors to enter the market
  - - - useful for getting rid of unwanted inventory
      - help to renew interest in a product if sales are falling
    - - revenue will be lower
      - might lead to price competition → so business might have to reduce prices again
    - - a product is sold at a very low price for a short period of time
- - - - very simple
      - suitable for products which are sold straight form the farm
      - lower price
      - can be sold by mail order catalogue for via the internet
    - - impractical for most products
      - not suitable for products which can't be easily sent by post
      - can be very expensive
  - - - producer sells large quantities to retailers
      - reduced costs comparing to channel 1
    - - no direct contact with consumers
      - price is often higher than channel 1
  - - - wholesaler saves storage place and reduces storage costs
      - small retailers can purchase fresh products in small quantities
      - wholesaler may give credit to retail customers
      - saving transport costs
      - wholesaler can give advice to retailer, producer
    - - more expensive for small shops
      - wholesaler may not have full range of products to sell
      - may not be as good quality (fresh products)
      - wholesaler may be a long way from small shops
      - consumer price is higher than channel 1
  - - - manufacturer may not know the best way to sell the product in other markets
      - agents will select the most effective places to sell
    - - producer has less control