SBANC Newsletter
June
14, 2005
Issue
376-2005
QUOTE
"I have found no greater satisfaction than achieving success through
honest dealing and strict adherence to the view that, for you
to gain, those you deal with should gain as well."
-- Alan Greenspan
FEATURE
PAPER
Contribution
Margin Pricing for Small Businesses
This
paper was presented by Dillard Tinsley and Phil E. Stetz of Stephen
F. Austin State University at the fall 2004 Association of Small
Business and Entrepreneurship conference.
ABSTRACT
If a small business is beyond its break-even point, contribution
margin pricing suggests a means through which a firm may profitably
utilize its unused capacity. Contribution margin pricing involves
only the price that may be charged for an added product compared
to the variable costs associated with adding that product. Thus,
unused capacity can be evaluated for usage in terms of the variable
cost associated with the incremental utilization of capacity
and prices that customers would be willing to pay. Fully understanding
the price-variable cost interrelationship embedded within the
contribution margin is a key in the creation of value. Small
businesses may
use this contribution
margin pricing strategically to acquire new customers or establish
new markets. Cautions in the use of this technique and suggestions on
how to segment customers are also addressed.
Read the Entire Paper...
TIP
OF THE WEEK
Potential Pricing Policies for a Small Business
| Policy Area |
Description |
Product life cycle:
|
|
| Skimming price |
Aimed at obtaining
the "cream" of the target market
at a high price before dealing with other market segments. |
| Penetration price |
Intended to try to sell to the entire market at a low price. |
| Meet the competition |
Below the market price.
At the competitors' price level.
Above the market price.
|
| Cost-oriented pricing |
Costs are accumulated for each unit of product, and a markup
is added to obtain a base price. |
| Price flexibility: |
|
| One price |
Offering
the same price to all customers who purchase goods under
the same conditions and in the same quantities. |
| Flexible price |
Offering
the same products and quantities to different customers at
different prices. |
| Suggested retail price |
Manufacturers often print a suggested price on the product
or invoice or in their catalog. |
| List prices |
Published prices that remain the same for a long time. |
| Prestige pricing |
Setting of high prices used, say, by fur retailers. |
| Leader pricing |
Certain products are chosen for their promotional value and
are priced low to entice customers into retail stores. |
| Bait pricing |
An item is priced extremely low by a dealer, but the sales-person
points out the disadvantages of the item and switches customers
to items of higher quality and price. (This practice is illegal.) |
| Odd pricing |
Prices end in certain numbers, usually odd, such as $0.95--
e.g., $7.95, $8.95. |
| Psychological pricing |
Certain prices for some products are psychologically appealing:
there can be a range of prices that customers perceive as being
equal to each other. |
| Price lining |
Policy
of setting a few price levels for given lines of merchandise--
e.g., ties at three levels: $8, $16, and $25. |
| Demand-oriented pricing |
Potential customer demand is recognized, and prospective
revenues are considered in pricing. |
Byrd, Mary Jane, William L. Megginson, and Leon C. Megginson Emeritus.
Small Business Management: An Entrepreneur's Guidebook. 5th ed.
New York:
McGraw-Hill/Irwin, 2006. 192.
CONFERENCES
World Association for Case Method Research and Application
(WACRA)
The
World Association for Case Method Research and Application (WACRA)
will hold its 22nd International Conference in Brno, Czech Republic
on July 3-6, 2005.
For more information, visit: http://www.wacra.org/CzechCallforPapers2005English.pdf
The Decision Sciences Institute
The
Decision Sciences Institute will hold its The 2005 International
Meeting at the IESE Business School, University of Navarra, in Barcelona,
Spain on July 3-6, 2005.
For
more information, visit: http://www.iese.edu/en/events/projects/dsi2005/home
Academy of International Business
The Academy of International Business will hold its 2005
Annual Meeting at The Québec City Convention Centre in Québec
City, Canada on July 9-12, 2005.
For more information, visit: http://aib.msu.edu/events/2005/
Enterprise
Development Growth & Expansion (EDGE)
Enterprise Development Growth & Expansion (EDGE) will hold
its 2005 conference at the Singapore Management University in Singapore
on July 11-13, 2005. The theme for the conference will be "Bridging
The Gap: Entrepreneurship in Theory And Practice." Topics include:
entrepreneurism, business creation, venture capital, SME consulting,
family business,
etc.
For
more information, visit: http://www.hud.gov/offices/hsg/mfh/nnw/2005conf.cfm
Allied
Academies
Allied Academics is holding the
8th International Summer Internet Conference beginning July 18 through July 31, 2005. Registration materials are due by July 8, 2005.
For more information, visit: http://www.alliedacademies.org/internet-call.html
CALL
FOR PAPERS
USASBE/SBI
USASBE/SBI
will hold its 2006 Joint Conference at the JW Marriott Starr Pass
Resort in Tuscon, Arizona on January 12-15, 2006. The theme for this
conference is "The Changing Entrepreneurial Landscape."
Submission Deadline: July 15, 2005
For more information, visit: http://www.usasbesbi2005.org
IPSI-2005
SLOVENIA
IPSI
will hold its IPSI BgD Conference at the Hotel Toplice Bled in Slovenia
on December 8-11, 2005. One of the main topics of this conference is "E-education
and E-business with Special Emphasis on Semantic Web and Web Datamining."
Submission Deadline: July 5, 2005
For more information, visit: http://www.lkn.fe.uni-lj.si/ipsi/
Allied
Academies
Allied
Academics will hold the 2005 International Internet Conference from
July 18 through July 31, 2005.
Submission Deadline: July
8, 2005
For more information, visit: http://www.alliedacademies.org/
Marketing Management Association (MMA)
The
Marketing Management Association (MMA) will hold it 10th Annual Fall
Educators' Conference in Kansas City, Missouri, USA on September 24-27,
2005. A wide variety of topics within the Teaching, Research, and/or
Service fields will be accepted for this conference.
Submission Deadline: July 15, 2005
For more information, visit: http://www.alliedacademies.org/internet-call.html
Western Decision Sciences Institute
The
Western Decision Sciences Institute will hold its 35th Annual Meeting
at the Hilton Waikoloa Village in Waikoloa Hawaii on April 11-15, 2006.
All manuscripts and proposals must be submitted electronically at the
link below.
Submission Deadline: October 1, 2005
For more information, visit: http://www.wdsinet.org
ANNOUNCEMENTS
We congratulate Dr. Jerome Katz of the John Cook School of Business
at Saint Louis University on his appointment as The Coleman Foundation
Chair in Entrepreneurship.
The SBANC Newsletter is provided as
a service to the members of our affiliates: Academy
of Collegiate Marketing Educators (ACME), Association for Small
Business& Entrepreneurship (ASBE), Decision
Sciences Institute (DSI), Federation of Business
Disciplines (FBD), International Council for Small Business Congress
(ICSBC), Institute
for Supply Management, The International Small Business Congress
(ISBC), Marketing Management Association (MMA), Small Business
Administration
(SBA), Service Corps of Retired Executives, Small Business Institute
(SBI), Society for
Marketing Advances (SMA), United States Association for Small Business & Entrepreneurship
(USASBE), U.S. Department of Veterans Affairs and Western
Decision Sciences Institute (WDSI). If you are interested in membership
or would like
further information on one of our affiliates, please see our web
site at
http://www.sbaer.uca.edu
SBANC STAFF
Main Office Phone: (501) 450-5300
Dr. Don B. Bradley III, Executive
Director of SBANC & Professor
of Marketing
Direct Phone: (501) 450-5345, E-mail: donb@uca.edu
Esther
Mead, Graduate Research, E-mail: esthermead@gmail.com
Ashley
Ford, Development Intern, E-mail: ASHatsbanc@hotmail.com
Kim Hensley, Development Intern, E-mail: hensleyanthony@hotmail.com
Brad Lawrey, Development Intern, E-mail: bradlawrey@hotmail.com
Olivia Johnson, Development Intern: reneeatuca_2003@hotmail.com
To subscribe or unsubscribe to the SBANC
Newsletter, please E-mail SBANC at sbanc@uca.edu
