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Advertisement: a form of public communication to promote a product or business
Budget: a money-spending plan
Business Plan: a plan outlining the intentions, goals, and strategies of a business
Competition: a rivalry between businesses with similar products
Cost: the price of a good/service
Customer: someone who buys products
Discount: a price reduction to the cost of a good
Goods: items to be sold
Inventory: a business's good or products that are ready to be sold
Investment: putting money into something with the intention of making a profit
Market: a place where goods are sold to consumers
Product: a good or service made to be sold
Profit: how much money is made from a sale after expenses are paid
PROFIT = REVENUE - EXPENSES
Revenue: the total amount of money brought in by a business
Sale: the exchange of a product for money
A. B. C.
This diagram demonstrates the relationship between profit, revenue and cost.
A. Bob's bakery makes $100 in revenue, the total amount of money he brought in to his business, on his first day open. He did this by selling 10 cupcakes for $10 each.
10 cupcakes x $10 revenue a cupcake = $100 in revenue.
B. It costs Bob $5 to make each cupcake (including all expenses such as ingredients and materials. If he made 10 cupcakes, and it cost him $5 to make each cupcake, he spent $50 on materials to make those 10 cupcakes.
10 cupcakes x $5 cost to make a cupcake = $50 cost
C. Profit equals revenue minus expenses, meaning profit is the amount of money Bob makes from selling his cupcakes. His revenue from selling 10 cupcakes is $100. His expense from making 10 cupcakes is $50. So, Bob's total profit is $50.
$100 (revenue) - $50 (cost) = $50 (profit)
(This example is simplified to be easier to understand, but note that a business such as Bob's would have more factors to take into account such as the cost of appliances and rent)
This is an example of a discount used to increase sales. The website offers a $5 coupon and free shipping if the customer orders before the timer goes off. Why do you think the timer a useful tool in this marketing strategy?
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