ENTS01B Q2 LESSON 1 Physical products have several added

PRODUCT components: the PACKAGING and LABELLING.

Marketing Mix : PRODUCT
In order to appeal to the customers, PACKAGING- Protects
organizations must align all of the four LABELLING- Defines
elements of the marketing mix (4P’s:
product, price, place, promotion) effectively. PACKAGING serves to contain and protect, and
All four elements must focus on the target sometimes, identify and promote the product. A
market. They should create value by product’s packaging is different from its label.
satisfying the customers’ needs and wants.
WHAT IS THE PURPOSE OF PACKAGING? IS IT
We will learn more about the four elements
NECESSARY?
of marketing mix. We’ll start by discussing
• It protects the product enroute to the customer
the first element in the marketing mix which
• It makes product storage and display more
is the Product. After identifying need in the
market, a company may have a product that practical and effective
is capable of satisfying the need • It preserves the product for further customer
use
WE WILL DISCUSS THE FOLLOWING :
1 Goods and Services When deciding on product packaging, four
2 Packaging and Label factors must be considered:
3 New Product Development Process • The quantity of the product that should be
4 Essence of Marketing Mix : Product contained in the package
• The legal requirements that packaging may
PRODUCT comply with
applies to anything that is offered to • Physical attributes of the packaging that
satisfy the needs and wants of facilitate customer use
consumers, whether these are tangible • And the most appropriate shape of the
goods or intangible services. package
applies to anything that is being
marketed, whether it is a tangible
LABELLING is a display of information about a
product, an intangible good, a service,
product on its container, packaging or the
a place, or even a person.
product itself.
GOODS - refer to tangible products that
consumers can actually observe with their
senses . Goods are objects with physical
manifestations and attributes that can be
detected by our senses .
SERVICES - refer to intangible offerings
that are abstract in nature and cannot be
observed with our senses . In fact, a key
characteristic of services is that the act of
delivery itself is the product .
AS CUSTOMERS, WHAT QUESTIONS DO WE FREQUENTLY Labels are, a product’s “silent salesman” and
ASK BEFORE WE BUY A PRODUCT? Labels isare,
labelling nota an
product’s “silent
easy task salesman”
considering thatand
The following questions are asked: labelling is notother
an easy task considering that
1. What need does it satisfy? there are many competitive brands and
there are
products many other
displayed competitive
on the brandsalland
same shelves,
2. What value does it offer to its customer?
products
trying displayed
to attract on theattention
the customer’s same shelves, all
3. What makes it unique?
trying to attract the customer’s attention
4. What is its Unique Selling Proposition (USP)?
The following factors must be considered THE NEW PRODUCT DEVELOPMENT PROCESS
in deciding on the labelling of a product: STEP 1 : IDEA GENERATION
• Establish the image or personality of the STEP 2 : IDEA SCREENING
product based on the tastes and STEP 3: CONCEPT DEVELOPMENT AND TESTING
preference of the target market STEP 4: BUSINESS ANALYSIS
• Determine the most important feature of STEP 5: PRODUCT DEVELOPMENT
the product to the target market STEP 6: MARKETING TESTING
• Determine where the product will be sold ENTS01B Q2 LESSON 2
and the applicable regulatory MARKETING MIX : PRICE
requirements, if any PRICE
The price that a marketer charges for a product or
• Determine the placement of the product
service is a vital decision that has far-reaching
in relation to other products, particularly
consequences. | why set a price? - for profit
competitors customer has a specific price in mind “fair and
Legal requirements must also be profitable”
considered in a product’s labelling for food total cost of production must be considered before
and beverages. All food products must determining the price of a product
2 TYPES OR PRODUCTION COST
contain the name of the manufacturer,
1. Unit Variable Cost - The first one is the unit variable
country of origin, net content and its
cost which refers to all expenses incurred in
nutritional value table. manufacturing one unit of a product. This includes the
It must also include the product handling cost of direct materials, direct labor and direct
and preservation requirements. Some overhead.
marketers include other facts on their 2. Fixed Cost - unit share or operating and other
expenses
package label that enhance marketability
PRODUCT COST ESTIMATION
and even costumer’s trust. Examples are:
- With physical products, two types of costs are
the Sangkap Pinoy seal, organizational calculated: (1) unit variable cost and (2) unit share of
endorsement such as by the Philippine operating and other expenses, or what is sometimes
Dental Association or the Department of referred to as fixed costs.
Health, ISO Certification, “free from animal DIRECT MATERIALS - materials used in the
testing” label or if it conforms to the manufacture I.e. fabric, thread and buttons
requirements of Muslim practices, the DIRECT LABOR - include the ages of all workers
Halal seal responsible for making the product, for example,
workers are paid on a per- piece basis, its unit direct
WHAT IS NEW PRODUCT DEVELOPMENT? labor cost would be as follows
One of the most effective ways to get ahead DIRECT OVERHEAD - amount spent in the
of the competition is through new product manufacturing overhead I.e. energy, water and other
development. Introduction of new products utility costs. | This can be computed by dividing the
are instances when customers are forced to total factory manufacturing overhead in a month by the
buy existing products and services in the number of units of shirts produced within the same
market even if these only partially serve month. | The sum of the three costs (direct materials,
their needs. This is because there are only direct labor, and direct overhead) is the product’s unit
limited product options available in the variable cost or the cost tp produce one unit of the
market. History is full of successful new product.
product launches that have changed the FIXED COSTS - The second type of cost unit share of
shape of entire industries and created are fixed costs. These are the expenses incurred by the
organization that are not related to the manufacture of
entirely new ones. You may also add the
the product. These include executive and staff salaries,
rationale behind new product development
office rental, advertising, and promotions, professional;
and elaborate the rationale.
fees and other similar expenses.
FIXED COSTS - Total fixed costs incurred
in a specific period must be shared by all
units of the product produced in the same
period. This means that if in a particular
month, the shirt factory incurred total fixed
costs of P400,000 and was able to
produce 4,000 units of shirt for the same
month, each shirt would have to absorb
P100.00 of fixed costs.
2) Target Return Pricing - is a pricing method that
allows a product manufacturer to recover a certain
portion of his/her investment every year. Because
unit sales is also included in its target price
determination, target return pricing has the same
weakness as that of mark-up pricing.

BREAK-EVEN POINT - the company would

make no profit but will also incur no loss.
This is the lowest possible price the
company can set for its shirts (under
normal circumstances)
>PRICE is LOSS and <PRICE is PROFIT
NOTE: Service and experience costing are
3) Odd pricing or Psychological pricing - is a
also computed, with unit variable costs
pricing method premised to the theory that
represented by the cost of the
consumers will perceive products with odd price
service/experience providers.
endings as lower in price than they actually are. As
PRICING STRATEGIES such, consumers may find products priced at
1. Mark-up pricing P99.95 closer to P99.00 than to P100.00. There
2. Target Return Pricing are about an equal number of researches that say
3. Odd pricing or Psychological pricing this is true, and those that say that it is
4. Loss leader pricing inconclusive.
5. Price lining
4)Loss leader pricing - a pricing strategy
6. Prestige pricing
frequently utilized by supermarkets. It is based on
7. Predatory pricing
the practice of housewives to use only a few
8. Going rate pricing
selected essential products (e.g. sugar, coffee,
9. Promotional pricing
eggs, laundry detergents, and some canned good
1) Mark Up pricing - allows the seller a fixed
products) as their sole basis for price comparison.
mark-up every time the product is sold. |
Supermarket retailers will deliberately price these
The biggest weakness of this pricing
“loss leaders” or comparison items low to make
strategy is the inclusion of unit sales in
their products appear more affordable than others.
determining the product’s mark-up price. In
The markup lost on these loss leader items are
reality, total unit sales is affected by the
recovered from other items where markups are
product’s final mark-up price
higher.
3) Price lining - a pricing strategy designed to When new products are introduced into the
simplify a consumer’s buying decision. This market, one of the two pricing strategies can be
method involves reducing the number of price used: 1.) Price skimming
points on merchandise to as little as possible, 2.) Penetration Pricing
in extreme cases to only one price point. For 1. Price Skimming - where the product’s
example, some stores price all the selling price is way above its unit cost. This
merchandise in their store at P66.00 or P88.00. allows the company to recover its research and
Ex.: LIMA LIMANG PISO, LIMA LIMANG PISO development costs and expenses. This is
LAHAT NG KLASE LIMANG PISO. usually accompanied by intense expensive
4) Prestige pricing - a pricing strategy that advertising and promotional campaign. This
disregards the unit cost of a product or service. pricing decision is usually effective with
Instead, it capitalizes on the high value electronic products, especially when the said
perception or positive brand reputation of a products are still nonexistent in the market.
product or service. It charges a price much There is hardly a way to compare prices.
higher than its unit cost. This is pricing strategy Customers are usually left with little or no
implemented by some fragrance and skin care choice. This was the strategy employed by a
products. Using prestige pricing, it would not mobile company when it launched its mobile
be unusual for a fragrance brand to have a unit phone in the Philippines in the early 1980’s.
cost of P1,300.00 and a selling price of The mobile phone was initially priced at almost
P3,500.00 P60,000.00. The price was reduced gradually
5) Predatory pricing - a pricing strategy where when similar devices were introduced in the
the firm prices its product lower than unit country and initial advertising, promotions and
variable cost, initially resulting in short-term research and development costs were
losses. The objective of this pricing strategy is recovered. The inherent weakness of the price
to price a new or persistent competitor out of skimming strategy is that it makes the market
the market. After its purpose is achieved, the very attractive for would-be competitors
product’s original selling price is restored and because of the appeal of large price markups.
short-term losses recovered. Predatory pricing 2. Penetration pricing - a pricing strategy
is illegal in most countries including the where the new product is priced only
Philippines (under Republic Act 8479) marginally above its unit cost. The objective of
6) Going rate pricing - a pricing strategy where this strategy is to capture a large part of the
a company prices its product at the same level market at an early stage by making the product
as or very close to its competitors’ prices. This affordable to the greatest number of people. An
effectively maintains the product’s price advantage of this strategy is that it can
competitiveness in its market. The danger of discourage would-be competitors from
going rate pricing is that it may result in price entering the market because of low price mark-
wars, with each company trying to outprice up. The major disadvantage of this pricing
another, to the detriment of all industry method is that it can prolong the recovery
participants. period for research and development,
7) Promotional pricing - a pricing strategy advertising, and promotions costs.
involving a temporary reduction in the selling
price of a product/service in order to induce
trial or to encourage repeat purchase. Almost
companies, especially those involved in
fastmoving consumer goods (FMCGs),
implement promotional pricing at one time or
another.
The "Place" - in the marketing mix, often referred to as The 4Ms of Production
the "Distribution" element, is one of the four key 1) MONEY (Definition) Money refers to the financial
components that make up a company's marketing resources required to start, operate, and grow a
strategy. The other three elements are Product, Price, and business. It includes capital for initial investment,
Promotion. working capital for day-to-day operations, and funds
PLACE - refers to the activities and strategies involved in
for expansion. (Significance) Adequate funding is
making the product or service
crucial for launching a business, sustaining
available to the target customers at the right time and in
the right location.
operations, and supporting growth initiatives.
Here are some key aspects of the Place component of Entrepreneurs need to secure financing through
the marketing mix: various means, such as loans, investments, or
1) Channel Strategy: Companies need to decide how they personal savings.
will distribute their products to customers. This 2) MATERIAL (definition) Material refers to the
could involve direct sales through a company-owned tangible resources used in the production of goods
store, online sales, or through intermediaries like or services. This includes raw materials,
wholesalers, retailers, or distributors. The choice of components, and finished products. (Significance)
distribution channel can significantly impact how and Efficient management of materials is essential for
where the product is available to customers. Deciding how maintaining production processes, ensuring product
products or services will reach the end consumer. This quality, and managing inventory. Entrepreneurs
could involve direct sales through a company-owned must establish reliable supply chains and optimize
store, online sales, or distribution through intermediaries
the use of materials to control costs.
like wholesalers and retailers.
3) MACHINE (Definition) Machine refers to the
2) Location - is a crucial aspect of Place. Companies must
decide where they will make their products or services
equipment, tools, and technology used in the
available. This could involve selecting the right physical production or delivery of goods and services. This
store locations, setting up e -commerce websites, or includes machinery, computers, software, and other
targeting specific geographic regions. technological assets. (Significance) Effective
3) Inventory Management: Efficient inventory utilization of machines is critical for improving
management is essential to ensure products are available productivity, efficiency, and the quality of products
when and where customers want them. Overstocking or or services. Entrepreneurs need to invest in
understocking can lead to customer appropriate technology and equipment to enhance
dissatisfaction. operational capabilities.
4) Logistics and Supply Chain: The process of getting 4) MANPOWER (Definition) Manpower, also referred
products from the manufacturer to the end customer to as human resources, represents the workforce or
involves various logistical considerations, including labor pool within a business. It includes employees
transportation, warehousing, and order fulfillment.
at all levels, from entry-level workers to
5) Distribution Methods: This refers to how products are
management. (Significance) Manpower is a
physically distributed to customers. It could involve direct
shipping from a manufacturer's warehouse, delivery
fundamental resource in any business.
through a third-party logistics provider, or customers Entrepreneurs must recruit, train, andmanage
picking up products from a physical store. personnel to ensure the smooth functioning of
6) Retail Strategy: If a company sells its products through operations. Employee engagement, skills
retail outlets, the choice of retail partners, store layout, development, and effective leadership are key
and point-of-sale marketing can all impact the customer's aspects of managing manpower.
experience and purchasing decisions. _________________________________________
The goal of the "Place" element is to ensure that the Together, these four elements — Money, Material,
product is available to customers in the right place and at Machine, and Manpower — comprise the
the right time, meeting their needs and expectations. foundational resources that entrepreneurs need to
Effective distribution strategies can have a significant consider and manage in their business ventures.
impact on a company's overall success in the market by Balancing and optimizing these resources is
increasing accessibility and convenience for customers essential for the sustainable growth and success of a
while optimizing costs.
business. Entrepreneurs must make strategic
In the context of entrepreneurship and business
decisions related to financial management, supply
management, the terms "Money, Material, Machine, and
Manpower" often refer to the essential resources needed chain operations, technology adoption, and human
to establish and operate a business. These four resource development to create a robust and
components represent key aspects of resource resilient business environment.
management in a business environment.