The Price Is Right!
In this unit, we will be creating a sticker to sell in the school store along with a pricing strategy for it. We will learn how to set a price at an amount that returns a specific margin, while also learning about the difference between margin and mark up. From there we will review a few promotional considerations such as :
The purpose and types of promotion
Promotional mix
Components of advertising (AIDA principle)
Brand loyalty ladder
Word of mouth (WOM) and Influencers
How to create a promotional plan and budget
Push and pull tactics
Visual merchandising
Point of purchase displays
The role of technology in promotions
User Experience (UX) Optimization
***The summative grade for this unit will be a test instead of a project.
The purpose and types of promotion
Promotional mix
Components of advertising (AIDA principle)
Brand loyalty ladder
Word of mouth (WOM) and Influencers
How to create a promotional plan and budget
Push and pull tactics
Visual merchandising
Point of purchase displays
The role of technology in promotions
User Experience (UX) Optimization
***The summative grade for this unit will be a test instead of a project.
Standards In This Unit
Utilize pricing strategies to maximize return and meet customers’ perception of value.
a. Explain the nature and scope of pricing.
b. Compare and contrast markup, markdown, sale prices, and discount dollars and percentages.
d. Identify key price mix strategies.
e. Explain pricing policies in relation to product life cycle.
Utilize promotional knowledge and skill for communicating information to achieve a desired marketing outcome.
a. Explain the purposes of promotion.
b. Identify the types of promotion including personal selling, advertising, and public relations.
c. Define promotional mix and promotional mix strategies.
d. Distinguish between publicity and public relations.
a. Explain the nature and scope of pricing.
b. Compare and contrast markup, markdown, sale prices, and discount dollars and percentages.
d. Identify key price mix strategies.
e. Explain pricing policies in relation to product life cycle.
Utilize promotional knowledge and skill for communicating information to achieve a desired marketing outcome.
a. Explain the purposes of promotion.
b. Identify the types of promotion including personal selling, advertising, and public relations.
c. Define promotional mix and promotional mix strategies.
d. Distinguish between publicity and public relations.
Assignment 1: Let's Create and Sell Stickers In The School Store!
To begin the unit, we need to create something to sell then establish a price for it. To accomplish this, complete the following:
1. CLICK HERE to learn about pricing. Pay close attention to margins and markups!
Also CLICK HERE to see the difference between ROI and profit margin.
2. Watch the video below to see how to create a sticker for printing in our Cricut machine. You only need to watch the first 3:30 to see how to trace and create a border around your image in Illustrator. NOTE: I WILL SHOW YOU HOW TO DO THIS IN PHOTOSHOP (MUCH EASIER)
3. Your mission: Create a sticker that would sell well in the school store. Consider making a sheet of themed stickers such as the one shown on the left. Do not use copyrighted images!
1. CLICK HERE to learn about pricing. Pay close attention to margins and markups!
Also CLICK HERE to see the difference between ROI and profit margin.
2. Watch the video below to see how to create a sticker for printing in our Cricut machine. You only need to watch the first 3:30 to see how to trace and create a border around your image in Illustrator. NOTE: I WILL SHOW YOU HOW TO DO THIS IN PHOTOSHOP (MUCH EASIER)
3. Your mission: Create a sticker that would sell well in the school store. Consider making a sheet of themed stickers such as the one shown on the left. Do not use copyrighted images!
4. Justify why your sticker would sell well by answering the following questions. These are general SOMIE questions so it should be easy. Margin is the only new concept.
- Situational Analysis: Why is there an opportunity to sell stickers in the school store?
- What would threaten the success of sticker sales?
- Promotions: How would you market stickers so that people start buying them from the school store?
- Pricing: How much does it cost to make each one of your stickers? Show your math! NOTE: A PACK OF TWENTY 8.5x11 STICKER SHEETS COSTS $25. Remember, you can get 6-8 small stickers or two car window decals on each piece of paper.
- If the store expects to make a 45% margin on everything that it sells, what would your retail price need to be for each sticker?
- How many stickers would you need to sell to break even. Your only expenses are the pack of paper as well as the .75 cents that the school store keeps for every sticker purchase.
- Evaluation: What would be considered a "success" for your sticker promotional strategy?
- Control: If very few stickers are being sold in 6 weeks, what would/could you do to spark sales?
Some Useful Calculations For This Unit
Mark up = Profit per unit /Cost per unit
Definition: Mark up refers to the value that a player adds to the cost price of a product. The value added is called the mark-up. The mark-up added to the cost price usually equals retail price.
Profit Margin = Profit per unit /Revenue per unit
Definition: Profit margin represents what percentage of sales has turned into profits. Simply put, the percentage figure indicates how many cents of profit the business has generated for each dollar of sale. For instance, if a business reports that it achieved a 35% profit margin during the last quarter, it means that it had a net income of $0.35 for each dollar of sales generated.
Setting a price so that you hit a 40% margin goal if your cost is $1.00 per unit
$1.00 (which is your cost) / .60 (which is 100 - 40) = $1.67
So you would need to sell your item at $1.67 if you wish to hit a 40% margin. KEEP IN MIND that this will not result in a 40% total margin because you are not factoring in expenses like rent, advertising, employees wages, utilities, insurance, etc. into your calculation.
Breakeven Point= Total Fixed Cost/Price per unit -Variable Cost per unit
Definition: The break even point is the production level where total revenues equals total expenses. In other words, the break-even point is where a company produces the same amount of revenues as expenses
If you sell a product for $20 and it costs you $10 in variable costs to make each one of them along with $500,000 of fixed cost to produce all of the units, then you would have to sell 50,000 units just to break even and start making a profit.
Equation: 500,000/ (20-10) = 50,000 units
CLICK HERE FOR A VIDEO if this doesn't make sense.
Key Take-Aways
1. You need to know how may units you have to sell to make up for the COST of the goods you sell. For example, how many units do you have to sell to start earning a profit? This is called your break even point. Is it achievable within a reasonable timeframe?
2. Margin and Mark Up are different things. People often think they are the same thing.
3. Be sure to factor in ALL variable and fixed expenses when creating a budget or reporting quarterly earnings for your business.
Pricing PowerPoint/Screencast
If you understand the concepts in the screencast below, you will do o.k. on the pricing portion o the test. 10/7 will apply pricing strategies to a shark tank episode. 10/8 students will do the same so be sure you understand it thoroughly.
Assignment 2: Let's Promote the School Store and Our Sticker
Look at the Screencast below to see an overview of promotions. You will add to your initial promotional ideas so that you can answer the questions below. You will turn these questions and answers into Canvas.
- What should the school store website look like so that it can turn prospects into advocates?
- How will you analyze the UX of the website?
- What push and pull tactics should the school store use?
- What role will buzz marketing and WOM play in your marketing? How will you track these two topics?
- How will you determine a promotional budget for this plan?
- How should the store combine product and institutional promotion in your marketing efforts for the sticker event?
- How should the store engage in personal and non-personal marketing for the store?
- What type of internal communication is need for the school store employees so they can sell more stickers? What incentives can you give for them to sell more stickers?
- Explain how your sticker sales will go through the the product life cycle
- List the steps to determining a price and explain the pricing strategy that you are suggesting to the school store (skimming, prestige, competitive,etc.)
Note: Please look at the Power Point below. It is the complete Power Point used in the two screencasts above and it has 2 slides added to it that discuss a few promotional tactics that are often forgotten about. These were not included in the screencasts due to recording time restrictions.
|
|
Assignment 3: Reflect in the Shark Infested Water!
For the reflection component of this unit, we will watch an episode of shark tank and answer questions to show that WE COULD BE SHARKS OURSELVES! As always, we will end with a blog entry that describes what we learned and links to our sticker and ad. We will understand break even and margins and discuss how we could promote the item shown.
Rewarding Greatness
Stickers will be printed out and studentswill vote on the best stickers. Finalists will discuss why their sticker is the best and the overall winner will be determined. As always, winners will receive a prize!
***Test Time
Your summative grade for this unit is an actual test. It will contain information about the sections of a marketing plan, product life cycle, pricing strategies , and promotions. "Wait a minute, that sounds like we only have one more P to discuss this semester!" ;0)