LESSON 8

SCREEN SOLUTION/S BASED ON CUSTOMER REQUIREMENTS

In our previous lesson, we had learned on how to screen solution/s based on profitability of the business. In today's
lesson, we will screen solution/s based on customer requirement.

I know that you already have learned on viability and profitability for a business venture to be successful. Now, let's start
this lesson by putting some twist on our activity. I want you to think outside of the box to give the possible answers on
the activity below.

Instructions: (20 Points)

Let's say that you are a consumer who is very particular on the features and benefits of products and services for your
satisfaction. With the products/services listed below, try to list down your requirements for you to be convinced to
buy/avail the products/services you want. Write your answer in a separate sheet of paper.

Product/Services Your Requirements

Soap
Shampoo
Cellphone
Mask
Movie
1. What do you consider in identifying your requirement/s for you to buy/avail the product/service you want?

2. As a customer, why is it that we set requirement/s for us to buy/avail the product/service we need?

3. As a business owner, why do we need to understand and be aware of the requirement/s of our customers?

Customer Requirement refers to characteristics or specifications that should be present in a product for it to be deemed
desirable by the consumer.

There can be two types of customer requirements:

1. Service Requirement - Intangible aspects of purchasing a product that a customer expects to be fulfilled. It consists of
elements like on-time delivery, service with a smile, easypayment etc. It encompasses all aspects of how a customer
expects to be treated while purchasing a product and how smooth his buying process goes.

2. Output Requirement - These are mostly the tangible characteristics, features or specifications that a consumer
expects to be fulfilled in the product. If a consumer is availing a service as a product, then various service requirements
can take the form of output requirements. For other products such as gadgets, the product specifications like the
loudness and clarity of a pair of speakers becomes its output requirements.

Three levels of customer requirements:

1. Must Haves -These are the bare minimum requirements expected by the customers; if fulfilled customers will be not
show any exceptional appreciation but if not fulfilled, the customer will show dissatisfaction. The customers do not
explicitly express their desire for these but expect it to be understood. For example, a washroom in a restaurant; the
customer will feel that it is imperative to have a washroom in a decent restaurant where families or people from
business organizations come to dine.

2. Satisfiers -There are the requirements that customers express their desire for, explicitly. If you offer better or more of
these satisfiers, then the customers will appreciate it more and will be more satisfied. For example, the assortment of
desserts in a buffet; the customers might feel that they're entitled to at least two as they've paid heavily for the buffet
and will be happier if they get four.
3. Delighters - These are the extras or the add ons. Absence of these will not leave the customer dissatisfied; in fact, the
absence of these characteristics might not even be noticed. But adding these would increase the customer's satisfaction
greatly and will leave them delighted. For example, you order a-la-carte in a restaurant and get complimentary wine.

Good job! Now, let us check whether your proposed business venture will pass the requirement/s set by your
customers.

Instructions:

With your proposed business venture, write the features/benefits of it and try to ask somebody or neighbor in your
community what are their requirement/s for them to patronize your product/service using the template below. Write
your Answer in a separate sheet of paper.

Propose Business Feature & Benefits Customer Remarks for

Venture Requirements Improvement and
Suggestion.

Instruction:

Read each statement carefully and if you think it is True write the word TRUE and if you think it's False, write FALSE on
the blanks provided. Write your answer in a separate sheet of paper.

1. Entrepreneurs who come up with an idea for a business, have a good business plan, have the needed capital are
most likely to succeed.
2. A new product would need customer viewpoint after it's launched in the market.
3. Venturing into business, an entrepreneur must look into how it should be funded.
4. Savings and wise investments are characteristics of successful entrepreneurship.
5. A viable business is profitable.
6. Customer requirements is the specified product feature the customer wants.
7. Capital can be acquired by making loans.
8. Understanding the need of the customers include guessing what they want.
9. Identifying what you can offer the market must be recognized before identifying market needs.
10. A business shows viability if it does not gain profit.
11. The ability to select and offer the right products or services in a competitive market will determine success in
business.
12. Profitability means not losing nor gaining in business.
13. Viability is the ability of the business to earn a profit.
14. Revenue refers to the total collections from customer payments.
15. New product needs customer evaluation
LESSON 9
DEVELOPING A BUSINESS PLAN: SELECTING THE BEST PRODUCT OR SERVICE THAT WILL MEET THE TARGET NEED
In the previous module you tried to screen from the many business ideas you have what could be viable, profitable and
would fit customer requirements. As you continue learning entrepreneurship, this lesson will help you select the best
product or service to solve a market need. Let us answer Looking Back first below.

Directions: Read each statement properly. Encircle the letter that best corresponds to the statement.

1. The ability of the business to survive or the quality of having a reasonable chance of success is called a. viability b.
profitability c. uniqueness d. customer requirement

2. It refers to the specification of the product or service that clients look for. a. viability b. uniqueness c. profitability d.
customer requirement

3. The excess amount after deducting income from expenses is_ c. profitability d. return on sales a. profit b. break-even

4. A business rival is called a. employer b. employees c. competitor d. entrepreneur

5. Financing business venture means a. money b. payment of loans c. having the right motivation d. sourcing funds for
the business activities

Directions: Read well the story and get encouraged to reach your dreams even from small but right steps! For you to
remember relevant points, write the appropriate words to complete the sentences on the spaces provided.

Josephine Rectin of Legazpi City, Albay is a typical Filipino micro entrepreneur who started with a small capital. Back in
1995, she sold vegetables on foot. She had Five Hundred Pesos (PhP500) in capital. Twenty years later-and this is where
her story deviates from most micro entrepreneur' stories, she heads a multi-million family business that encompasses a
mini grocery store, rice farming and trading, livestock raising, hardware store with gravel and sand, hollow blocks and
nipa shingles making, trucking and hauling service, and a computer printing shop. We grew the business gradually in
response to customer demands. Together with my husband, Robert, and our children, we pursued one new business
after the other in tune with the market conditions, says Josephine. She turned to what she knew -selling, to help Robert
provide for the needs of the family. I started as an ambulant vegetable seller. When customers asked for other goods
like dried fish, I would promptly supply them and then add these to my basket of products. From a portion of my
earnings saved up over a period of time, I raised enough money to establish a sari-sari (variety goods) store. My store
allows me to sell more and earn more. It also keeps me informed of what customers need and want. As I listen, I get
ideas for new businesses. The hardware business, for example, came about when there was a house construction boom
in the community. "It helped a lot that my husband is keen to run it", Josephine said.

Good customer relation is key to a successful business. Josephine makes times for small talk to make her customers feel
welcome. I support the saying that the customer is always right. And if they are wrong, I make them feel alright by being
patient when resolving issues that matter. A good entrepreneur should avoid being short-tempered and impatient with
customers.

Josephine shares, -the possibilities are endless especially if you are your own boss. As an entrepreneur, you have the
flexibility to manage your time and resources. If you want to accomplish more, work harder and longer. Success does not
come easy, but if you are willing to work for it, it is yours for the taking.

Start here:

1. Josephine Rectine's objective because she became a micro entrepreneur in 1995 was to ___________.

2. She used her skill in ________ and started being an ___________.

3. Her customers told her what they ___________ and she promptly ___________ them.

4. She was able to __________________ over a period of time.

5. She used it for financing her next venture, a ___________.

6. From that sari sari store how did Josephine get business ideas that eventually put her husband and children into doing
business as well? ______________________.

From the previous lesson you were able to state business ideas you want to venture and probably you have generated
even more ideas. That is a good sign and signals the start of your thinking stage in making good business.

You can select the most suitable ideas by thinking carefully about each idea. The selection of the right product or service
is critical. In fact, the choice of a product or service for your business can make or break your business.

1. Primary considerations in choosing a particular product

 financial benefit to your business

 relatively low investment requirements
 positive return on investment
 fit with present strategy
 feasible to develop and produce
 easy to source and procure
 relatively low risk, and
 time to see intended results.

2. Meet the needs of the customer and solve a specific problem.

 Product must address a need or an opportunity.

 Know how your products or services can assist customers.
 Product must have a real value that customers can recognize, want and need.

Know and Meet Customer Needs

3. Produce the product that you are capable of.

• Know if you have the time, resources and capability to produce your product.
• Find out if you can afford the manpower required.
• Find out if you have the resources to outsource the product development.
• Know if you can produce a strong demand at a specified period required with the same standard.

4. Consider the size of your potential reachable market.

• Get an idea of the size of your market.

• Know who are likely to use or benefit from your products.
• Define who will be your potential customers that will be interested in your product.
• Understand who and how big your market can pay off in the long run.

5. Comply with government rules and regulations.

• Be abreast with new laws or government rules and regulations can impact your product
• Comply with required permits, licenses and obtain approval from the government.

6. Your product must be superior in its functionality, presentation or marketing than any similar or existing in the
market. Know and understand your Unique Selling Proposition -

Is the one thing that makes that your product different than any other. It may be that the product has a lower price or
more convenient packaging, or it may taste or smell better, or last longer.

7. Identify barriers that must be overcome for a potential new product entry.
 • Barriers to entry include high research and development expenses.
• Patents are barriers where your competitor may hold legal protection for an integral component of your product
and may prevent you from manufacturing your product.
• Other barriers to entry include competitors offering lower prices due to their cost advantage.

8. Know the potential sales, growth, profits, and time for payback.

• Get a clear idea of your costs.

• Understand how much sales you need to have to break-even.
• Post a profit.
• Know what your return on investment will be.

SWOT Analysis

One method people often use to decide which the most suitable business idea is the SWOT Analysis. It helps you focus
on possible problem areas and potential advantages of each idea.

Inside the business

To analyze the strengths and weaknesses of a business an entrepreneur should look inside the planned businesses.

What will be good at and what are its weaknesses?

1. Strengths are the specific positive aspects, which will give your proposed business an advantage over similar
business ventures competitors. It could be that you have a better product feature than your competitor, or you
can deliver the product faster than others because of the location near the customers.
2. Weaknesses on the other hand are specific aspects that your business will not be good at. Perhaps your costs
will be high because your location is far from suppliers and you will pay more for the transport.

Outside the business

To analyze the opportunities and strengths of your proposed business an entrepreneur must look outside the business
or the external environment. What aspects of the external environment will benefit the business and what aspects will
negatively affect the business.

3. Opportunities are on-going potential developments around you that will be good for your business. It could be
that the demand for the product you are proposing will increase because of the influx of tourists.
4. Threats are probable events that may affect your business negatively. For example, the business idea could be
so simple that other people may start similar businesses in your area and reduce your share of the market.
New products and services are essential in all businesses. Existing and new entrepreneurs understand that
investing in their product development is necessary for business growth and success. However, financing the
development process is very risky. It needs to be carefully planned and organized.

Product Life Cycle Concept

describes a product's sales, profits, customers, competitors, and marketing emphasis from its beginning until it is
removed from the market. It is a guide for you to know when will be the right time to start the development process. It
will explain how a planned and phased development process will help you make the wisest investment and budgeting
decisions.

Key Stages in the lifecycle of any product or service.

1. Product Development - at this point your product or service is only an idea. You're investing heavily in research and
development. The new product planning involves a series of steps:

1.1 Idea Generation Methods:

 a. Brainstorming - sharing ideas, comments, suggestions of members

b. Analyzing Existing products - learn how market is captured successfully

c. Visiting suppliers' facilities - suppliers' raw materials can be used as a method to innovate and modify
existing product.

d. Surveys - get feedback from customers and potential market.

e. Reading trade publications - inspirational story of successful entrepreneurs can be a basis of creating
new product.

1.2 Idea Screening

• Ideas which are unsuitable, unacceptable or poor must be junked.

• Ideas with attributes are rated on the basis of a rating form, rated 1-10 in categories: general, marketing
and production characteristics.

1.3 Concept Testing

• Ideas which passed screening stage will require feedback from consumer.

• Measures consumer enthusiasm by asking reactions in pictures, and oral description of product.

1.4 Business Analysis – a review of market factors, revenues, cost and trends

1.5 Product Development - ideas are converted into visible form

1.6 Test Marketing- involves selling a fully developed product in selected area and observing the actual or on
the spot performance. Depending on the result, decision as to go ahead, modify the product or services, modify
marketing plan or cancel the product.

1.7 Commercialization - involves actual marketing of the product in the target market.

2. Introduction - launching of product or service in the marketplace and objective is to generate customer interest.
Heavy spending on marketing confronts the entrepreneur.

• Sales growth depends on the desirability of the product

• Competition is limited, or selected
• High production and marketing costs
• Customers are called innovators as they took risk of the new product
• Promotions must be informative
• Free samples and discounts may be desirable

3. Growth - your product or service is establishing itself, sales are growing and profit margins are good.

• Product gains wider acceptance and objective to expand distribution and range of available product alternatives
• More firms enter the profitable and tested market.
• Profits are high due to less competitors who offers the same.
• Distribution is expanded coupled with mass advertising to meet new goals
• It's the time to work out reducing costs of delivering the new product.

4. Maturity - sales growth is slowing or has even stopped. You've been able to reduce production and marketing costs,
but increased competition has driven down prices. Now is likely to be the best time to invest in a new product.

• Product's sales level tries to maintain lower price and better features for as long as possible.
• Market is fully penetrated
• Competition is at its highest level.
 • Profits decline because discounting becomes popular.
• High cost in advertising.
• Products are available at most outlets at varying prices.
• Promotion is very competitive.

5. Decline - new and improved products or services are on the market and competition is high. Decline - Sales fall and
profit margins decline.

• Product's sales falls as substitutes and new competitors enter the market
• Firms may lessen or reduce the items produced and outlets used.
• Increased marketing will have little impact on sales and won't be cost-effective unless new markets are
identified. You can extend the lifecycle of a product or service by investing in an "extension strategy" you could.
• increase your promotional spending
• introduce minor innovations - perhaps by adding extra features or updating the design
• seek new markets but ultimately this only delays a product or service's decline. Ideally, you should always have
new products or services to introduce as others decline so that at least one part of your range is showing a sales
peak.

Great! With the discussions that we had, let us examine the following business ideas and classify the stage they are
currently in the market which could affect profitability on investments, if selected to be offered in the market.

Directions: Find below a list of products and services, group them according to the stage of their life cycle, and write in
the provided columns for Product Development, Introduction, Growth, Maturity and Decline.

CoVid Vaccine Dengue Vaccine, Electric Fan

Sim Cards Tuna Chorizo E-Jeep

Landline Telephone Milk tea Solar Panel

Washable Masks Massage Parlor

Product Introduction Growth Maturity Decline

Development

One method people often use to decide which is the most suitable business idea is the SWOT Analysis. It helps
you focus on possible problem areas and potential advantages of each idea
Directions: Identify whether the following phrases are Strengths, Weaknesses, Opportunities and Threats of a business
venture as they have an impact in choosing the best business idea in meeting a market need.

1. Management Competence
2. Growing Demand
3. Excellent Product Quality
4. Shortage of fund
5. Favorable Government Assistance
6. Poor accommodation of customers
7. Stability and Profitability
8. Few Competitors
9. Lack of Technical Know-how
10. Natural Disaster
Directions: Read the following statements carefully and write TRUE if the statement is true and FALSE if not on the space
provided.

1. SWOT is the acronym for Strengths, Weaknesses, Opportunities, Threats.

2. Identifying where products or services are in their lifecycles is central to Opportunity.
3. Strengths refer to the positive aspects a business has over business competitor.
4. Introduction expenses for the product development is heavy.
5. The growth stage in product or service life cycle brings good profit margin.
6. Concept testing is a review of market factors, revenues, cost and trends.
7. Threats are probable events that may affect the business negatively.
8. Product development is converting ideas into visible form.
9. In the development of a product, it starts with idea screening.
10. A product that reached maturity can experience slow growth
LESSON 10
MARKETING MIX: PRODUCT & PRICE

You learned from your previous lesson about the environment and market of your locality/town. It is also necessary to
recognize the importance of marketing mix in the development of your marketing strategy particularly product/services
and price. Let's review some important points in your previous topic.

Directions: Read the sentences/statements carefully. Encircle the letter of the correct answer.

1. Refer to a specific group of consumers at which a company aims its products and services.
a. market b. target market c. market research d. market segmentation

2. A state of being without something believe to be important and useful to one's life for well-being.
a. need b. wants c. motives d. social needs

3. Human wants that are backed by buying power.

a. need b. wants c. motives d. demands

4. It is referred to the ability of the business measured by its long-term survival and its ability to sustain profits over a
period of time.
a. profit b. sales c. viability d. profitability
5. The degree to which a business or activity yields profit or financial gain.
a. profit b. sales c. viability d. profitability

The marketing mix is a significant tool for creating the right marketing strategy and its implementation through
effective tactics. The assessment of the roles of your product, promotion, price, and place plays a vital part in your
overall marketing approach.

The mix helps in determining which marketing strategy is right for your organization. It is the first step before
you even create your business or marketing plan. The reason is that your marketing mix decisions also have an impact
on your positioning, targeting, and segmentation decisions.

PRODUCT

A product is anything that satisfies a need or a want. It can be sold to a market for acquisition, use or consumption.

It includes physical, products, services, persons, places, organizations and ideas.

It is also defined as the tangible good or the intangible service that the business offers to its customer in order
to satisfy their needs and to produce their expected output.

Generally, there are three levels of a product.

1. The first level is the core product.

The core product is the reason for the product's existence. It is that part of the total product that the consumer is
actually buying. In Mary Kay's perfume case, it is the actual content of the perfume bottle. The distributor in this level
provides the buyer with the major benefits in buying the product, aside from the additional accompanying features and
privileges that the consumer may receive.

2. The next level is called the actual product. It is the physical and touchable property of a product.

3. Finally, the last level is called the augmented product. This level is the part where the dealer provides
additional services and benefits to consumers of the product. These services can take several forms like free
maintenance, discounts, and warranties.

FOUR GENERAL TYPES OF PRODUCTS:

1. Breakthrough products

These products offer completely new advantages. They may create a new demand. They may cater to a peculiar set of
customer needs that have not yet been tapped. Marketing breakthrough products need a higher level of customer
education and orientation. Common examples of breakthrough products are borne out of the biotechnology field
particularly in terms of coming up with new vaccines to protect from people from certain viruses like Corona Virus
Disease.

2. Differentiated products

These products try to claim new space in the mind of the customer different from the spaces occupied by existing
products. The performance benefits may be close to existing products but there would be additional benefits on special
aspects of the product. Examples are cameras that can take pictures in ground and underwater.

3. Copycat products

Sometimes called look alike products will not make much conception on the consumer's mind. Aggressive advertising
may add to market demand but at a greater cost than the leading brands. The marketer should apply different strategies
by offering lower prices more physical space in the shelves, easier access and promotional freebies.

4. Niche products.

They are products with lower reach, lower transparency and lower prices. They play minor roles in specific and smaller
market segment. Examples are particularly expensive and high- quality coffee and customizable products, like toys which
can be individually tailored for children.

FOUR CLASSIFICATIONS OF CONSUMER PRODUCTS

First classification is the Convenience Products, these are regularly & immediately bought, low priced and has many
purchase locations. It includes staple goods, impulse goods and emergency goods.

The second classification is the Shopping Products these are items for which buyers are willing to spend considerable
effort in planning and making a purchase, these products also have little purchase locations and buy less frequent

The third classification is the Specialty Products these are items for which there are no acceptable substitute in the
consumers' mind. They possess one or more unique characteristics where a significant group of buyers is willing to
expend considerable effort to obtain them.

The fourth classification is the Unsought Products these are items that are purchased when a sudden problem has to be
solved. Examples of unsought products are emergency automobile repairs, cemetery plot, life insurance, encyclopedias
and pre-needs goods. This requires new innovations and much advertising and personal selling.

PRODUCT DESCRIPTION A product description is the marketing copy that explains what a product is and why it's worth
purchasing. The purpose of a product description is to supply customers with important information about the features
and benefits of the product so they're compelled to buy. It also gives additional information to help readers visualize
what is being described like the following shape, size, function, materials and operation.
8 ELEMENTS OF GOOD DESCRIPTION

1. Title which should promise exactly what the description will deliver;
2. Appropriate level of Detail which give enough detail to convey a clear picture but don't burden the reader with
unnecessary information;
3. Identify your audience and their reason for using the description;
4. Illustrative visuals which use drawings, diagrams and photograph with caption and labels that help users
understand what they are looking for;
5. Appropriate and clear sequence;
6. Spatial which is used when we want readers to visualize a static item. A part of physical description;
7. Functional that is used in describing a mechanism/device in action. Reflects the order in which the parts function;
8. Chronological which is used to describe the process.

PRICE

Price refers to the amount of money paid by the customer to the selling firm so the customer can use the product. It is
the value of a thing or service that is expressed in terms of money. In simple marketing term, price is the whole amount
of money that is equal to cost plus all incidental expenses paid for goods or services. It is the only element among the
seven P's of the marketing mix that generates sales revenues.

Pricing Policies

There are several pricing policies that can be adopted by leading firms. These includes:

1. Cost-Plus Pricing. This is the most commonly used pricing method. Here, management determines first the cost of the
goods and incidental expenses, and finally adds its desired profit percentage to arrive at the selling price. This method is
simple and straightforward.

This selling price can easily be computed

2. Flexible Mark-up Method. This is a special form of cost-plus pricing. It calls for a mark-up that is variable depending
on the basis of several considerations instead of a constant margin. This can be described as the difference between the
selling price and the cost. It can also be expressed as a percentage (%) of cost price.

3. Less-Than-Cost Pricing. This pricing method is based on the theory that it is desirable to sell goods at prices below the
cost. It is sometimes known as the market- minus price policy. This is used if there is a need to dispose products as
15fast as it can be done. This supports the belief that it is better to lose 25% than not to be able to sell at all and as a
result incur a 100% loss.

4. Perceived-Value Pricing. This pricing method is set by businessmen by simply estimating how many people are willing
to pay for the products. This is usually done when pricing items or other goods that people buy based on what they
perceived is the value of the product. If the consumers think that the value of the product is high, then they will pay a
high price for it.

5. Price Maintenance. This pricing policy believes in price stability. It adheres to the set price that has been charged in
the past. Whenever feasible and competitive, prices are kept as is. The status quo is maintained.

6. Breakeven Pricing. In this type of pricing policy, the company first determines the breakeven point of the product.
Using this data, the company can find out how much the selling price will be to gain its desired profit.

7. Sealed Bid Pricing. In this kind of pricing policy, price is determined based on the contract bid. Examples of this type of
pricing are found in government biddings where contracts are farm out ideally through an objective and fair process.

8. Competitive Pricing. This kind of pricing policy is based on competitors' prices. Under this kind of system, the firm will
change approximately the same prices as the competitors, or maybe more depending on its ability to convince
consumers to purchase and patronize its product.
Pricing Approaches

Prices of products and services may be based on any of the various pricing approaches:

1. Cost based approach

2. Buyer based approach, and
3. Competition based approach

Cost based Approach

The cost-based approach in pricing refers to the setting of prices on the basis of costs. Under this approach the total
costs are calculated and a margin of profit is added. There are two types of pricing under the cost-based approach. They
are the following:
1. 1.cost plus pricing, and
2. target rate of return pricing.

Cost plus pricing method calls for adding a percentage of cost on top of the total cost. The added percentage constitutes
the profit margin, while total costs 16 represents the direct costs and the overhead costs. The formula adapted, is as
follows:

Price = direct costs + overhead costs + profit margin where direct costs = materials + labor;

Overhead costs a share of fixed indirect costs;

Profit margin = a fair amount of return

Example:

If direct costs of a certain product is P750.00, overhead costs is P250.00 and profit margin is 25% of total cost, the
following will be derived:

Buyer Based Approach

The buyer-based approach of pricing deals with consumer perceptions or behavior as bases for determining the selling
price of a product or service. This approach is composed of the following methods:

1. 1.perceived value pricing

2. price-quality relationship pricing
3. loss-leader pricing
4. odd-numbered pricing
5. price lining pricing

Perceived Value Pricing

This method establishes the price for a product based on the buyer's perceptions of the value of the product or service.
Most works of art, like paintings and sculptures, are sold at prices based on the buyer's own value analysis. Costs has a
little to do with the selling price.

Price-Quality Relationship Pricing

This approach hinges on the observation that consumers associate high price with high quality and low quality with low
price.
Loss-Leader Pricing

This refers to the practice of setting low prices on selected products which will result in the generation of less profits, but
with the objective of increasing the sales volume of other products sold by the company

Odd-Numbered Pricing

This refers to the practice of setting price even below peso amounts. An example is selling at $99.50 rather than at flat
#100. There are good reasons for this method:

1. At only a 50-centavo difference, #99.50 appears to be more attractive to the prospective buyer than the 100
price; and
2. The sales clerk will be forced to give a 50-centavo change prompting him to enter the sales transactions in the
cash register.

Price Lining Pricing

Thus, method refers to the practice of selling merchandise at a limited number of predetermined price levels. The
different price levels are intended to represent various levels of quality. The buyer is then provided with various buying
options increasing his chance of making a purchase. The various models of handy phones offered for sale at varying
prices by manufacturers, like Nokia, Samsung and Sony Ericsson are examples of price lining pricing in action.

Competition Based Approach

The competition-based pricing approach refers to the setting of prices based on what prices are being charged by
competitors. There are two kinds of pricing under this approach. They are the following:

1. going-rate pricing; and

2. sealed bid pricing

Going-Rate Pricing

Under this pricing method, the firm adapts a price based on the competitor's prices. The price adapted may be a little
higher or lower that the competitors. Less attention is given to the firm's own costs and demand.
LESSON 11
Marketing Mix: PLACE G PROMOTION
What is a place? A place is the process of moving products from the producer to the intended user. Once you had
already determined the right location, now you are ready to promote your product.

What is promotion? A promotion refers to communicating information between the company and potential buyers to
influence buying attitudes and behavior. Promotion is a key element in putting across the benefits of your product or
service to the customers. Well- designed marketing and promotional strategies ensure longterm success, bring in more
customers and ensure profitability for businesses

Directions: Read the sentences/statements carefully. Choose the letter of the correct answer and encircle the correct
letter of your choice.

1. This refers to the physical look of a location, sanitary conditions, crime and safety levels. The reputation of a location
is also important.
a. exact fit to target customers b. image and location conditions c. fiscal and regulatory requirements d. clustering of
competitor establishments.

2. This will answer if the location traffic generally composed of your target customers.
a. exact fit to target customers b. image and location conditions c. fiscal and regulatory requirements d. clustering of
competitor establishments.

3. This oftentimes results in drawing bigger market to the location.

a. exact fit to target customers b. image and location conditions c. fiscal and regulatory requirements d. clustering of
competitor establishments.

4. An entrepreneur would want to set up shop in a town or city within low tax rates, good governance, excellent
infrastructures, and great public services.
a. exact fit to target customers b. image and location conditions c. fiscal and regulatory requirements d. clustering of
competitor establishments.

5. In selecting the region, which of the following criteria is considered?

a. Competition b. labor supply c. transportation d. average annual income of family

6. In selecting the city or town, which of the following criteria is considered EXCEPT?
a. population b. public services c. police and fire protection d. reputation of the location

7. In selecting the province, which of the following criteria is considered?

a. competition b. population growth c. local laws and regulations d. proximity to supply of raw materials

8. This consists of any form of paid, nonperson presentation of ideas, goods, or services by an identified sponsor.
a. promotion b. advertising c. primary advertising d. indirect advertising

9. Aimed at informing and stimulating market demand for an advertised product brand or service.
a. primary advertising b. product advertising c. indirect advertising d. secondary advertising

10. This involves companies on different levels of distribution like manufacturers and retailers.
a. direct advertising b. indirect advertising c. vertical cooperative advertising d. horizontal cooperative advertising

11. Political campaign of a candidate for national election is an example of.

a. advertisements by individuals b. advertisement by governmental units c. advertisements by service businesses d.
advertisements by organizations or institutions

12. Colgate Toothpaste with calcium where advertiser is Colgate Palmolive, Philippines, Inc. is an example of?
a. advertisements by individuals b. advertisement by manufacturer c. advertisements by service businesses d.
advertisements by organizations or institutions

13. This are advertisements in newspapers, magazines, journals. Payment is based on per column centimeter.
a. print media b. broadcast media c. movie advertising d. transit advertising

14. These are advertisements in television and radio. Payment is based on time measured per 30 seconds.
a. print media b. broadcast media c. transit advertising d. price movie advertising

15. Billboard/neon advertisements on public utility vehicles.

a. print media b. broadcast media c. movie advertising d. transit advertising

You learned from your previous lesson about product and price. Now you had already known how to describe and
compute the price of your product. However, it is also necessary to recognize the importance of marketing mix in the
development of your marketing strategy particularly place and promotion. Let's review some important points in your
previous topic

Directions: Read the sentences/statements carefully. Encircle the letter of the correct answer.

1. It refers to the cost being charged for the product/services offered for sale.
a. price b. service c. market d. product

2. Refers to tangible and discernible items that you can physically touch, has packaging and usually a shelf life which an
organization produces.
a. price b. service c. market d. product

3. Is the production of an essentially intangible benefit, either in its own right or as a significant element of a tangible
product, which through some form of exchange, satisfies an identified need?
a. price b. service c. market d. product

4. This can be described as the difference between the selling price and the cost.
a. mark-up b. cost-plus pricing c. price maintenance d. less-than-cost pricing

5. This refers to the practice of setting price even below peso amounts.
a. Price Lining Pricing b. Loss-Leading Pricing c. Odd-Numbered Pricing d. Price-Quality Relationship Pricing

PLACE/LOCATION

In the marketing mix, the process of moving products from the producer to the intended user is called place. In other
words, it is how your product is bought and where it is bought. This movement could be through a combination of
intermediaries such as distributors, wholesalers and retailers.

What is the right location?

The right location refers to that one which will bring the highest possible benefits to the firm. The wrong location is one
which will bring the most disadvantages to the small business. Although finding a good location proves to be challenging,
even more challenging is maximizing the potentials of that location.

Initial Location Screening In finding a good location, one needs to consider the following:

1. The number of customers residing or working in the area, and the number of customers who frequently pass
through the area.
2. The density or number of customers per unit area.
3. The access routes to alternative locations and their traffic count in those routes.
4. The buying habits of customers or where they buy, at what time and how frequent.
5. Locational features such as parking spaces, foot access, creature comfort, and the like
In addition to the above factors, the final choice of location must be based on the following:

1. Image and location conditions. This refers to the physical look of a location, sanitary conditions, crime and safety
levels. The reputation of a location is also important.
2. Exact fit to target customers. This will answer if the location traffic generally composed of your target customers.
3. Clustering of competitor establishments. This oftentimes results in drawing bigger market to the location.
4. Future area development. A certain location might not have the most customers or the best economics in the short
term, but it might become central business hub within the next five years. Watch out for signs of development like
a construction boom or a new shopping mall nearby.
5. Fiscal and regulatory requirements. An entrepreneur would want to set up shop in a town or city within low tax
rates, good governance, excellent infrastructures, and great public services. Marketing is communicating the value
of a product, service or brand to customers, for the purpose of promoting or selling that product, service or brand.

Benefits of a very Good/Strategic Location

1. Attract lots of customers

Customers prefer to buy their needs in a very strategic location. Gaisano for example is quite nearer compared to
Robinsons so most people living near that place prefer to buy in Gaisano rather than in Robinson due to proximity or
distance, but of course there are other factors that they considered like the price or convenience.

2. Helps improve sales

Good location helps to remove barriers to sales. Once a customer is physically close to your store, you have a far better
chance of persuading them to purchase from you.

3. Attract new customers

Good location attracts new customers, KCC or SM malls for example, it is located within the city, and the transportation
is very accessible so plenty of new customers are coming every day.

4. Maintain loyal customers

Satisfied and happy customers are maintained if the location is very comfortable and convenient to stay.

5. Get to know your customers better

While good location are designed to attract new customers, good services, justifiable price are also a way to maintain
and know your existing customers better.

Generally, a bad location decision may result to low sales and production. When the management or firm is far from its
projected target market, it will be difficult to meet the market's demands. Not only will this affect the sales but it will
also affect the costs and expenses of the management for it needs more resources in meeting the market's demands.
Thus, the profit may decrease or the firm may have a net loss.

Promotion refers to communicating information between the company and potential buyers to influence buying
attitudes and behavior. Promotion takes the form of any or all of the following:

1) Advertising - this consists of any form of paid, non-personal presentation of ideas, goods, or services by an identified
sponsor.

ELEMENTS OF ADVERTISING

1. Advertising is a form of communication

2. It pays for the use of the communication media. 3. It is non-personal, unlike personal selling.
3. It communicates facts and information, not the actual goods, services, ideas or institutions.
4. It is openly persuasive and convincing in order to sell or secure favorable consideration.
 5. It is a marketing function.

OBJECTIVES OF ADVERTISING

1. Aid in the introduction of new products to specific target market.

2. Increase market share
3. Assist in securing new dealers
4. Make prospective customers more familiar with company's brand.
5. Make more buyers accessible to the company's salesmen.
6. Increase the middlemen's knowledge about the profitability of the company's product.

TYPES OF ADVERTISING

A. Product and institutional advertising.

Product advertising aimed at informing and stimulating market demand for an advertised product brand or service.

a. Pioneering advertising attempts primary demand for a type or class of product like milk, coffee and books.
b. Competitive advertising stimulates selective demand for a specific product like General Electric or LG
Refrigerators.

B. Primary and selective demand advertising

a. Primary advertising - to stimulate demand for a product

b. Selective demand advertising is a competitive advertising to persuade the potential customers through
emphasizing particular benefits

C. Cooperative Advertising

a. Vertical cooperative advertising. This involves companies on different levels of distribution like manufacturers
and retailers.
b. Horizontal cooperative advertising. This involves companies on the same level of distribution such as group of
retailers.

CLASSIFICATION OF ADVERTISING

I. According to source or gain

a. Advertisements by manufacturers
b. Advertisements by resellers (wholesalers and retailer)
c. Advertisements by service businesses
d. Advertisements by organizations or institutions
e. Advertisement by governmental units
f. Advertisements by individuals
II. According to media used
a. Print Media - this are advertisements in newspapers, magazines, and journals. Payment is based on per
column centimeter.
b. Broadcast media - these are advertisements in television and radio. Payment is based on time measured per
30 seconds.
c. C. Outdoor Advertising – Neon signs, streamers, billboards, Poster panels, aerial signs. Measured on the basis
of space occupied and duration of occupancy. d. Transit Advertising - billboard/neon advertisements on
public utility vehicles.
d. Field Advertising - uses a vehicle that roams around subdivisions or places announcing a new product through
a loud speaker.
e. Movie Advertising - advertisements on theaters. Important consideration for advertising fee is seating
capacity of the movie house an audience class.
 f. Direct Advertising - handouts, leaflets, catalogues, brochures, advertising a product or service
III. According to Objectives
a. Promotional Advertising - it mentions a brand of product or service intended to stimulate demand.
b. Institutional Advertising - it advertises an outlet's name without mentioning any brand, intended to develop
goodwill.
II. According to Action desired
a. Direct or immediate advertising - these are promotional advertisements.
b. Indirect action advertising - these are institutional advertisements.
III. According to audience targeted
a. Consumer Advertising – advertisement of product in finished form for personal use by the buyer.
b. Industrial Advertising – advertisements targeting businessmen to buy products advertised for use in their
business operations, either in manufacturing or facilitating operations.
c. Trade Advertising - advertisements targeting resellers to buy product for re-sale purpose in the same from in
order to gain profit.
d. Professional Advertising - advertisements targeting professionals, or educators to prescribe the product
advertised. Commonly supplemented by samples like medicines or complimentary copies like books or
magazines

2) Sales Promotion - this is a promotion activity that stimulates interest, trial, or purchase by final customers. Example of
sales promotion are the use of coupons, point-of-purchase display materials, samples, signs, catalogs, novelties, and
circulars.

3) Public Relations - refer to the activities of an organization, person or institution directed toward one or more groups
of people, such as employees, consumers, dealers and stockholders, for the purpose of creating goodwill and an
understanding of its policies.

4) Publicity - is the dissemination of news and information about a person, product, service, idea or institution through
mass media in order to create impressions to the public. It uses mass media without openly paying for them.

5) Personal Selling - this involves direct contact/ communication made by representatives of business firms to induce
the purchase of merchandise or services by oral persuasion