The selling price finally must be determined by competition. This factor has already been considered in Chapter XVI. The number of competitors in the field, the prices that they charge, the possibility of future competition—all these things closely restrict the ability of the individual manufacturer to name his price. In practice the manufacturer usually finds out first what competitive conditions will permit him to charge, and then, with a known gross profit, he sets aside for selling expenses such part of the margin as he can afford, and keeps what is left for profit.
4. How to reach buyers.—The determination to sell by means of salesmen, aided or not by advertising, or by mail-order methods, is a step in the plan for the campaign that both aids in fixing the price and is, in turn, largely influenced by the price that can be charged. The question of how to sell is usually an swered at the same time that sales channels are selected, because the sales channels and the best method of reaching them are simply two phases of the same problem.
There are few general principles to guide the manufacturer in deciding how to sell. The problem has several parts. Shall the selected trade channels be cultivated by salesmen, by mail, or by both? If mail selling is to be attempted either to dealers or to consumers, advertising must be used to initiate the mail inquiries. If salesmen are to be used, shall they be relied on alone to make sales? Shall they be aided by advertising designed to send consumers to stores to make their purchases, or to influence dealers favor ably toward the advertised goods so that the task of the salesmen will he rendered easier? We arc not to discuss here whether selling by sales men or by mail is the better method in any particular case, or whether advertising should or should not used as an aid to the salesmen. Our purpose now is merely to point out that this problem must be solved early in the plan for the campaign, and to indicate its relation to the other steps in the plan.
5. Sales policy.—The various factors in sales policy are sometimes left to be standardized as the need is developed in the working out of the campaign. This is wrong. Sales policies should be determined in ad vance, as well as prices, trade channels and selling methods. Many things are a part of sales policy. Among them are credit, quantity prices, fixed prices and guarantees.
6. Credit.—To what extent is the business to be conducted on a credit basis? If the industry is one in which cash sales are the rule, shall the individual manufacturer take advantage of this fortunate con dition, or shall he offer credit as a selling point in his attempt to get business? For many years auto mobiles have been sold largely on a cash basis. Some manufacturers are now openly offering credit as a buy ing inducement. Before a manufacturer does this, lie should very carefully consider what effect his action will have on his own businesS, the industry as a whole, and on public opinion. On the other band, if credit is the rule, the determination to do business on a cash basis may, while reducing accounting and losses, re sult in small sales at the beginning and very slow de velopment of the business. The decision to grant credit or not to grant it, and, if the former, the par ticular terms to be offered, form problems of first im portance in the plan for the campaign.
7. Quantity prices.—Another phase of sales pol icy involves the prices at which various quantities of the product are to be sold. This is a different matter from the selection of the price for the unit ordi narily sold. Its importance is illustrated in the break fast-food field. One manufacturer for years has re fused any quantity prices; he has had a fixed price per case, no matter what the quantity purchased. Practically all other manufacturers in this field grant reduced unit prices on large quantities.
Which of these practices is a manufacturer to fol low? Some of the arguments for quantity prices are the following: (1) It costs the seller less per dollar of sales to make a large sale, to pack the order and to handle the account; accordingly the large buyer should share in the saving. (2) When the buyer takes a large quantity at a time, Ile stores his surplus stock for himself, instead of requiring the seller to store it for him; he should, therefore, be compensated for assuming the storage function. (3) But with or without reasons it is customary in trade for the man with large buying capacity to get the minimum price, and the man with small buying capacity to get the maximum price. It is maintained that a manufac turer will injure himself by going counter to this tra dition.