The Language of Small Business Texts and Vocabulary Training (for students of Economics) Part 2. Учебное пособие

Definitions of Terms

Benefit (1) something to one’s advantage, interest or profit. Something done that is for the good of a person or thing. (2) MAN. Something given to an employee in addition to his salary or wages, to save tax or to encourage hard work. Syn.: employee’s amenity; fringe benefit (3) INSCE. Money, usu. an allowance, paid under an insurance policy for some kinds of losses, or given by the government to people who cannot earn by working, such as disability, industrial injury, maternity, sickness, unemployment and death benefits.

Benefit in kind MAN. Something extra given to an employee, other than money, in return for his services, such as free meals, the use of a house or car, or a luxury holiday. Syn.: fringe benefit.

Value (1) the quality of being useful, of satisfying man’s wants; or of being desirable for his enjoyment or happiness. Usefulness; utility, desirability. (2) ECON. THEORY – the amount of satisfaction that is obtained from an article, commodity or service.

(3) ECON THEORY – the amount that can be obtained for something by exchanging it for money or goods. (4) COM. What an article or commodity is worth.

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Return FIN. The gain from an investment, either as income or yield or as profit on the sale of the investment.

Public relations (PR) ADVTG. – the business of forming and preserving in the eyes of the public an attractive image of a person or organization. Cf. Publicity.

Publicity ADVTG. – the business of attracting public attention and of encouraging general feelings of goodwill towards a product or service in order to sell it.

Goodwill (1) COM. – the advantage possessed by an established business over a new business. The attractive force that brings in customers. (2) LAW – the right to use and to profit from the established name and connections of a business (3) FIN – the capital value of an intangible asset, that is the right to receive the extra profits which an established business may be expected to earn, over and above the normal earnings for a similar business.

Advertising ADVTG. – making a product or service known to the public, esp. in order to sell it, by using the various media, or means of spreading information, including newspapers, magazines, radio, TV, street signs, direct mail, etc.

Direct mail advertising – by letter addressed to possible buyers.

Advertisement ADVTG. – (1) a public notice usu. printed in a newspaper, of goods for sale or services offered; or of goods and services wanted (2) a printed sheet bearing information about good for sale, a poster.

Leaflet – a single sheet of printed paper, sometimes folded to form several pages, containing matter either advertising a product or giving directions on how to use it.

Letterheads – the heading printed, usu. at the top of the notepaper on which letters are written or typed, giving the full name and address of the person or organization, telephone and telex numbers, cable and telegraphic addresses, and other useful information.

Promotion (1) ADVTG.®COM. – activities aimed to increase the demand for a product.

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Sales promotion – the work of selling a product by all useful methods such as: powerful advertising; personal persuasion of possible customers by visit, phone or letter; exhibitions, displays and demonstrations; competitions for prizes; free samples; trading stamps, etc. (2) STK. EXCH. – company promotion, the work of forming a new company. (3) MAN. – an increase in the rank and responsibility of an employee.

Definitions of Terms

Накладные расходы – затраты на хозяйственное обслу- живание производства и управление

Реклама, рекламирование – использование средств мас- совой информации, специальных печатных изданий, плака- тов и др. приемов для распространения информации о фирме и ее товарах среди потенциальных клиентов с целью увеличе- ния сбыта.

Рекламное объявление – целенаправленное воздействие на потребителя с помощью средств информации для продви- жения товаров на рынке сбыта.

For Discussion

1.What is the importance of the message?

2.Why should you know your target market?

3.What information do you give in your message?

4.Explain: «speaking the message», «writing the message», «implying the message».

5.Does the message always work?

6.What are the possible ways of advertising?

7.Why is it advisable to summarize your message in the first paragraph?

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8.What are the general guidelines for composing an ad?

9.Why should an ad be run several times?

Summary

1.Чтобы передать сообщение о преимуществах вашего продукта, вам следует знать, кому вы хотите его пере- дать, в чем должно состоять ваше сообщение и каковы наилучшие способы его распространения.

2.Рекламирование способно пробудить внимание, ин- формировать, напоминать, содействовать продажам и утвердить имидж вашего продукта. Но отдача от рекла- мы не является определенной. Затраты на нее и время воздействия больше и дольше, чем вы полагаете.

3.Наиболее подходящая для малого бизнеса реклама включает брошюры и листовки, PR, почтовые рассылки, рекламные объявления в специализированных журналах и справочниках.

4.Не полагайтесь лишь на одну форму рекламирования, чтобы достичь целей. Если можете себе это позволить, то используйте сочетание видов рекламирования и попы- тайтесь растянуть это во времени (если только для рек- ламы вашего продукта вы не ограничены определенным периодом времени).

5.Реклама должна соответствовать впечатлению от ваше- го продукта и бизнеса, которые вы пытаетесь создать у потенциальных покупателей.

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UNIT 6.

How to Set a Price

There are four ways you can increase your profits. You can cut your costs, you can sell more, you can change your product mix or you can increase your prices. Clearly your aim should be to set your prices initially at the level which gives you your highest profits possible. Needless to say, as with everything else to do with your business it is easier said than done. There is no clear-cut or agreed method of establishing a price for your product or service.

Some people use the level of costs as a way of fixing price. This may seem a fairly straightforward calculation, but it has drawbacks. For example, if your costs are very low, does it automatically mean that your prices should be low too? And even working out the cost of your product can be fraught with possible errors.

Other people argue that the price should be set by what the market can bear. But there are no quick and simple calculations which can tell you what this should be. Instead, you have to establish the price by looking at the market you are in and the particular part of it your product appeals to. How does your product rate against others competing in the same marketplace? There are also different strategies you can adopt depending on whether your product is a new or old one. Often overriding all your plan can be the effect which your competitors’ pricing policy has on yours.

It is probably more realistic to think in terms of a range of prices. The lowest price you should consider setting will be fixed

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How to Set a Price

by the cost. On the whole, you should not go below this price; if you have to, it would be better not to be in business at all. There are a couple of exceptions, of course, where temporarily it may make sense. The highest price will be the highest the market can bear without sales disappearing altogether. Between the two will be the price which will give the highest possible profits.

THE PRICE RANGE

There is a range of prices open to you to charge for your product or service. Your aim should be to get as near as possible to the price which is going to give you the highest profit. But this is a long-term strategy; there may be short-term considerations which imply that another price could be more appropriate at that time.

THE HIGHEST PRICE

This strategy means you have decided to go for the cream at the top of the market. In marketing jargon, it is called price skimming or prestige pricing. You are pricing your product to appeal to those of your potential customers with the highest incomes or those seeking the snob value of buying a very high-priced item. You can also carry out this price-skimming policy if you have a product with a genuine technical advantage or if it has novelty value.

Adopting a price-skimming policy implies usually that you are accepting that you could make bigger profits if you lowered the price, because you would sell correspondingly more. Nevertheless, this sort of strategy can be very appealing to small businesses. To sell more you may need to invest in bigger production facilities, or employ more staff if you are offering a service. This

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could involve raising funds to be able to do so. And you may find that this bigger business is harder for you to control. Creating a specialist niche could be ideal for the self-employed and small business owner. While it may not give the highest possible profits, it could make you a very acceptable living.

A pitfall to watch out for is that high prices attract competitors. Your profitable niche may soon be invaded by those offering lower prices or a better service or product. You need to allow for this competition in a price-skimming strategy. This particularly applies if you are adopting a price-skimming policy because your product is new with a technical innovation. It is unlikely to remain unique for long. Your strategy needs to involve either reducing prices in the longer term or concentrating on other advantages or benefits, so that your product establishes its own image. This allows it to carry on commanding a higher price even when the technical advantage no longer exists.

THE LOWEST PRICE

The lowest price you should consider accepting for your product is the one which covers your direct costs and contributes something to the cost of your overheads. But this must be regarded as a last resort and not to be accepted if you can obtain business at a higher price.

HOW IS IT WORKED OUT?

You need to find the direct costs of your product or service. Direct costs are the costs which you would not have if you were not producing that particular item. Your business will also have other costs, indirect costs or overheads. You will still have to pay for these whether you produce the item or not.

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Example:

Sidney Smith knows that the cost of producing his sta-

Lowest price Sidney should consider accepting for his stationery pads is 15 pence plus something towards the cost of his overheads, for example, 16 pence a pad.

WHEN SHOULD YOU USE THIS PRICE?

As little as possible, must be the answer. You would need to sell very large volumes of your product to have enough contribution to cover the cost of your overheads, never mind make a profit.

The main circumstance in which you can justify selling as cheaply as this is if you have spare capacity in your business, with very little prospect of using it for product or services selling at a higher price. If this is the case anything you sell which helps to contribute to the cost of your overheads should be considered.

However, making this decision can have longer-term effects which must be considered. If you are operating in a market which is very competitive or in one in which your customers tend to be in contact, you may find that you are being forced to sell all your products or services at this very low price. If your customers talk to each other, it will soon become an established fact that you can be forced to sell at this low price. Raising or maintaining your prices can be very difficult in these circumstances.

Selling your product at the lowest price, even on a one-off basis, can have an even worse effect on your business if it triggers off price-cutting by your competitors. This could well occur if customers use your low price to force the competition to lower their prices.

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The moral is only sell something at this contribution price if it is a one-off product, perhaps not part of your normal range of goods, and if you are very confident that it will not lead to secondary effects on your other product or the competition. You must only consider this price if you have spare capacity. If you do not have any spare capacity, choose the price which gives you the biggest contribution.

CAN YOU GO LOWER THAN THIS PRICE?

Only in exceptional cases, such as if you need to clear excess stocks or low-selling lines. If this is the case, try to clear these outside your main selling channels, so it can have no counter-effect on your normal selling activity.

WHY YOU SHOULD NOT USE COST AS A BASIS FOR ESTABLISHING YOUR NORMAL PRICE

Many businesses work out their prices by calculating what it costs to make the product or service and adding on what they consider a suitable profit margin. But this approach is not satisfactory for two reasons:

−it is surprisingly difficult to work out what it costs to produce an item;

−the cost of an item tells you nothing about whether customers will buy it at that price at all or whether they would have paid much more.

There are various different ways of working out the cost of something. But very often businesses use some variation of a standard costing system. Typically, it looks something like this:

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