Business Plan for ‘Perfect’, Business Proposal Example
Words: 909Business Proposal
‘PERFECT’ is a new product at Excellent Company, a new company dealing with the manufacture of cleaning agents. ‘PERFECT’ is a powerful cleaning agent capable of removing stubborn stains on surfaces and can be an excellent disinfectant.
How to increase revenue from ‘PERFECT’
The company intends to accept credit cards, offer affordable prices, increase sales productivity, offer quantity discounts and start making online sales in order to increase revenue from ‘PERFECT’. The management has learnt that consumers tend to leave businesses, which do not accept the use of credit cards (Balineau & Dufeu, 2010)). Some customers use debit or credit card instead of cash or checks. The company is going to open a merchant account with one of the local banks to facilitate transactions by means of credit cards. We are also going to ensure that we offer the customers steady prices to maintain the sales and even increase.
We have also come up with discounts for the quantity bought by customers. In this case, any customer who will purchase ‘PERFECT’ valued $500 and above will get a 20% discount. We have also packed four 500-gram ‘PERFECT’ products written “BUY THREE, GET ONE FREE”. In this case, we are expecting to encourage customers to buy and come back again, which will boost the revenue from the new product. The company will also maximize use of the sales force to ensure that customers get to know about the new product. We are also developing a system to enable customers buy products online.
How to determine the profit-maximizing quantity
We will determine the profit-maximizing level by equating the marginal revenue of ‘PERFECT’ to the marginal cost. We will supplement information regarding prices and market demand to determine the profit-maximizing level of output. The company has established a limit of sales to individual customers in order to avoid negative marginal profits. There are normally many variable costs for many goods sold in business (Stelian Brad, 2010). The variable costs include commissions, labor, shortage, and raw materials. The company will also work to determine where to increase revenue and lessen expenses in order to optimize sales.
To determine each level profit sales, consider the business selling one packet of 500-gram ‘PERFECT’ at $25. The business must account for quantity discounts, labor costs, increased shortage and other variable costs. Given that the profit from 20 packets is $250, 40 packets give $350, that for 60 packets is $550 and that for 80 packets $500. In this case, a unit is equal to 20 packets of ‘PERFECT’ detergent. When sales increase from zero to 20 packets, we get a marginal profit of $250. Increasing sales from 20 to 40 gives a marginal profit of $100, while increasing from 40 to 60 gives a marginal profit of $200 and increasing from 60 to 80 gives a profit margin of negative $50.
Suggested mix of pricing and non-pricing strategies
The company is going to employ strategic pricing in order to set the prices for the new product ‘PERFECT’. In the future, we will consider using tactical pricing to ensure that the sales of the product remain constant. We will involve price adaptation strategies including promotional pricing, product-mix pricing and discounts and allowances.
We are going to ensure a careful conception and control of discounts and allowances to avoid losses. We hope to offer discounts including quantity discounts, cash and settlement discounts and promotional discounts. We will ensure that quantity discounts are small so that we stand a chance of maximizing profits. We will offer promotional discounts whenever there is a need to boost the sales of products. Indeed, promotional discounts attract customers for a new product (Ulaga & Reinartz, 2011).
We will also engage non-pricing strategies including long opening hours, enhanced service quality, extended warranties and advertising. This will help the company in improving market performance and maximizing consumer response.
Barriers to entry
We will employ barriers to entry to ensure that the company monopolizes the market. We will use barriers to entry alternatives including limiting of prices, patents, cost advantages, advertising and marketing and research and development expenditure.
The company will ensure an increased product differentiation by offering customization features, greater values and convenience options. We will ensure customization by producing ‘PERFECT’ and packing in different colors of containers. The company has planned to work on convenience by ensuring that the product is in a position easily seen by customers. We have also planned to offer delivery services to cater for customers’ preferences and schedule. We have done research and noted that customers appreciate finding the product next to related items (Ulaga & Reinartz, 2011). Thus, we will ensure that ‘PERFECT’ is next to washing equipment.
The company is new, and the product is new. We need to ensure that the production cost is minimal to allow the company to maximize profits. The management will be proactive, and there is a need of finding ways to get raw materials cheaply and plan. We will also keep financial aspects in front while making decisions purchase. The company has developed inventory control and accounting systems to check expenses on inventory.
Balineau, G., & Dufeu, I. (2010). Are Fair Trade Goods Credence Goods? A New Proposal, with French Illustrations. Journal Of Business Ethics, 92331-345. doi:10.1007/s10551-010-0577-z
Stelian Brad, (. (2010). Equating business value of new high-tech products. CIRP Journal Of Manufacturing Science And Technology, 2(Competitive Design: CIRP Design Conference, Cranfield, United Kingdom), 272-278. doi:10.1016/j.cirpj.2010.05.001
Ulaga, W., & Reinartz, W. (2011). Hybrid Offerings: How Manufacturing Firms Combine Goods and Services Successfully. Journal Of Marketing, 75(6), 5-23. doi:10.1509/jmkg.75.6.5
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