BEN 2208

BUSINESS PLAN PREPARATION

BY:
DR. ROBERTO H. VISITACION
Program Head / Business Practicum Program Coordinator / Cluster Head
Entrepreneurship Program
 COURSE
OUTLINE
I. MARKET, SEGMENTATION AND TARGETING
II.MARKETING MIX
A. The Product
B. The Price
C. The Place (Marketing Channels and Physical Distribution)
D. The Promotion (Integrated Marketing Communication)
III.BUSINESS PLAN PREPARATION AND INITIAL
IMPLEMENTATION
A. The Making of Business Plan
B. The Initial Implementation of Business Plan
 MARKET,
SEGMENTATION AND TARGETING
What is a Market?
- a Market is composed of people with needs to satisfy,
the money to spend, the willingness to spend, and the
ability to satisfy the objectives of the seller.
 MARKET,
SEGMENTATION AND TARGETING
Types of Market
1. Markets according to types of Institution (Consumer,
Organizational, and International Markets)
2. Market according to form (Primary and Secondary Markets)
 MARKET,
SEGMENTATION AND TARGETING
Types of
Market

According to According to
type of Form
institution

Consumer Primary

Organizational Secondary

International
 MARKET,
SEGMENTATION AND TARGETING
 Markets consist of various segments
 A market segment is a sub-group of particular market which is composed of units with more
or less similar characteristics.
Example: people with similar wants, financial resources, geographic locations, buying
attributes, and buying patterns.
 Market Segmentation may be defined as the process of identifying the various segments of
a company’s particular market.
 MARKET,
SEGMENTATION AND TARGETING
The Market
for Books

Teachers Students General Public

High
Elementary College
School
 MARKET,
SEGMENTATION AND TARGETING
The Advantages of Market Segmentation:
1. Segmentation forces the marketer to be aware of realities in the market.
2. Segmentation provides clues in the design of products and marketing
programs that will reach the prospect customers.
3. Segmentation can help identify opportunities for new product
development.
4. Segmentation can help improve the strategic allocation of marketing
resources.
 Bases for Segmentation

Geographic Demographic Psychographic Behavioral

Age Purchase
Nations Social Class
Sex Benefits sought
Regions Life Style
Family Size User status

Provinces Family Life Cycle User rate

Income Loyalty status

Cities
Occupation Readiness stage
towns
Religion Attitude toward product
barangays
Race

Nationality
 MARKET,
SEGMENTATION AND TARGETING
Requirement for Effective Segmentation
1. measurable (size, purchasing power, etc.);
2. substantial (large or wide, economically feasible);
3. accessible (effectively reached and served market segment);
4. differentiable (conceptually distinguishable and responds
differently to different marketing mix); and
5. actionable (firms must have the ability to serve various segments)
 MARKET,
SEGMENTATION AND TARGETING
Criteria for Selecting Target Markets:
1. Size (large enough to be worth serving)
2. Expected growth (expected to grow in the future)
3. Competitive Position (firm’s chance of successfully making profit)
4. Cost of reaching the segment (market segment easily reached by the
firm, and not too expensive)
5. Compatibility with the firm’s objectives and resources (enough
resources to serve prospective segment)
END
 QUESTIONS FOR REVIEW AND
DISCUSSION
1. What is a “market”? Does the term strictly denote “a place”?
2. How are primary markets different from secondary markets?
3. What is a market segment?
4. What are the requirements for effective segmentation?
5. What are the Criteria for Selecting Target Markets
 COURSE
OUTLINE
I. MARKET, SEGMENTATION, TARGETING, and POSITIONING
II.MARKETING MIX
A. The Product
B. The Price
C. The Place (Marketing Channels and Physical Distribution)
D. The Promotion (Integrated Marketing Communication)
III.BUSINESS PLAN PREPARATION AND INITIAL
IMPLEMENTATION
A. The Making of Business Plan
B. The Initial Implementation of Business Plan
 POSITIONING
Placing a product at a certain point or location within a market in the
minds of prospective buyers

Possible approaches
• Attributes
• Price/quality
• Competitors
• Application
• Product user/class
 UNIQUE SELLING
PROPOSITION
VALUE PROPOSITION; proposing the value of the product/service to
clients.

ADDED VALUE TO CUSTOMERS; A SUPERIOR ATTRIBUTE;

EXAMPLES:
• BMW’S DRIVABILITY; Lexus for quality
• APPLE IPOD’S APPEALING DESIGN
• UPS OFFERS COMPLETE SUPPLY CHAIN SOLUTIONS
• RUSTAN’S: SUPERIOR CUSTOMER RELATIONSHIP
• SAVE MORE: SUPERIOR VALU
 UNIQUE SELLING
PROPOSITION
• IS THE VALUE PROPOSITION UNIQUE?
(a point of difference)
• IS THE STRATEGY FEASIBLE?
(HAVE RESOURCES AND CAPABILITIES TO EXECUTE
THE STRATEGY)
• IS THE u.s.p. relevant to target customers?
• is the U.S.P. SUSTAINABLE? (NOT Easily copied)
 MARKETING MIX
A.The Product
B.The Price
C.The Place (Marketing Channels and Physical
Distribution)
D.The Promotion (Integrated Marketing Communication)
 PRODUCT
• a PRODUCT is anything offered for sale by a firm to buyers to satisfy their (physical, social,
symbolic, and psychological) wants and needs.
Products may take any of the following forms:
1. A physical object like a toy or a kilo of pork;
2. A service like a ferris wheel ride or a dental check-up;
3. A place like London or Boracay;
4. An organization like the Knights of Columbus or Philippine Marketing Assn.;
5. An idea like “pro-life” or “the prevention of the ozone layer”; and
6. A personality like Evita Peron or Efren “Bata” Reyes.
 PRODUCT
Benefits of the Physical Products:
1. Quality
2. Reputation of the manufacturer
3. Packaging
4. Credit
5. Information about the product
6. Warranty
7. After sales service
8. Delivery
 PRODUCT
CLASSIFICATION OF PRODUCTS:
1. Consumer Goods – are those intended for final consumption by the
consumers, and they are classified according to: (1) the rate of
consumption and tangibility; and (2) the consumer’s shopping habits.)
2. Industrial Goods – are those used in the production of other goods.
They are categorized as follows: (1) installations; (2) accessory
equipment; (3) raw materials; (4) component parts and materials; (5)
supplies; and (6) services.
 PRODUCT: CONSUMER GOODS
A. Rate of Consumption and Tangibility:
1. Durable goods (i.e. motorbikes, refrigerator, and filing cabinets)
2. Nondurable goods (i.e. ice cream, black CD, and toothpicks)
3. Services (movie houses, transport services, tailoring services, and
haircuts)
 PRODUCT: CONSUMER GOODS
B. Consumer’s Shopping Habits:
1. Convenience goods (soap, bread, soft drinks, and milk)
2. Shopping goods (radio sets, ready-to-wear suits, cellphones, and
shoes)
3. Specialty goods (special medicines, jewelry, and exotic foods like
turtle eggs)
4. Unsought goods (Memorial plans, and life insurance plans)
 PRODUCT: INDUSTRIAL GOODS
Categorization of Industrial Goods:
1. Installations (i.e. buildings, generators, computers, elevators, and others)
2. Accessory equipment (i.e. hand tools, lift trucks in factories, fax machine, and
desk in offices)
3. Raw materials: (1) Farm products – those grown by farmers (i.e.
palay, tomatoes, eggplant, coconut, and milk.
(2) Natural products – those occur by nature ( i.e. fish,
lumber, gold, diamonds, coal, and oil.)
 PRODUCT: INDUSTRIAL GOODS
Categorization of Industrial Goods:
4. Component parts and materials (i.e. paper into printer
magazine, textiles into dresses, flour into bread, strings into
violin)
5. Supplies ( i.e. pencils, ink, paper clip, fastener, and others)
6. Services (i.e. maintenance services for housekeeping, security
services, and consultancy services)
 PRODUCT: DIFFERENTIATION
The purpose of product differentiation is not only to satisfy customers
and make more profits but to beat the competition.

Tools for Product Differentiation:

1. Branding 6. Location
2. Quality 7. Promotion
3. Image 8. Innovation
4. Product features 9. Different service levels
5. Packaging
 PRODUCTS

Industrial
CONSUMER
Installation

Accessory equipment
Rate of
Consumer’s
consumption and Raw materials
shopping habits
tangibility
Components parts and
materials
convenience Supplies
durable
shopping Services
nondurable
specialty
services New unsought
unsought
Regular unsought
Thank you for listening
 LEARNINGS
• Cite at least 2 learnings from the discussion.
• Limit your answers to 3 sentences only per learning.
• ½ crosswise yellow paper.
 PRODUCT: BRANDING
Branding – is that marketing action which identifies and helps differentiate the goods
or services of one seller from those of another.

BRAND – is a name, term, sign, symbol, or design, or a combination of these

elements, that is intended to identify the goods or services from one seller or a
group of seller.
– may either be: (1) legally registered; or (2) not legally registered.
Legally registered brands are provided with legal protection called TRADEMARK
 PRODUCT: BRANDING
Two distinct parts of a Brand:
1. Brand name – part of a brand consisting a words, letters, and/or
number that can be vocalized (i.e. Suzuki, Tide, and Hundred Islands)
2. Brand Mark – part of a brand that appears in the form of a symbols,
design, or distinctive coloring or lettering, and which cannot be
vocalized. (i.e. three flowers in carnation milk, and a boy in Dutch
Boy).
 PRODUCT: BRANDING
Licensing as an Alternative
 In licensing agreement, the firm
which owns or controls a brand
allows another firm to use the
brand in exchange for royalties or
some other form of payment.
 PRODUCT: BRANDING
Criteria for a Good Brand:
1. It should suggest something about the product’s benefits and qualities. (i.e. Great
Taste, Close Up, and Coloroof.
2. It should be easy to pronounce, recognize, spell, and remember.
(i.e. Ligo, Milo, and Alaska.
3. It should be distinctive. (i.e. Minola, Condura, and Cortal).
4. It must be adaptable to additional product lines. (i.e. Hitachi brand has been
adapted by several Hitachi products like TV’s, electric fans, and refrigerators).
5. It must be capable of being legally registered. Names that sound like an already
registered name is no longer acceptable for copyright registration. (i.e. café mate
which infringes on Coffee Mate).
 PRODUCT: BRANDING
When to Adapt a Brand:
1. The demand for the general product class should be large.
2. The demand should be strong enough to make the effort profitable.
3. There should be economies of scale.
4. The product quality should be the best for the price, and easy to maintain.
5. The brand or trademark should make it easy for the product to be identified.
6. Availability of the product is dependable and widespread.
7. Favorable shelf location or display space in store must be available for retailing
activities.
 PRODUCT: BRANDING
STRATEGIES
Option for Branding products or Services:
1. Manufacturing branding (multiproduct approach, and
multibrand approach)
2. Reseller branding (firms products sell them under the brand
name of a seller)
3. Mixed branding (use of the manufacturer and reseller
brands in a product)
4. Generic branding (no product name, only a description of the
contents, i.e. rice, salt, sugar, and charcoal)
 PRODUCT: PACKAGING
Packaging – refers to all activities involved in designing and producing the
container or wrapper for a product.

Three Levels of Materials in Packaging:

1. The primary package which is the product’s immediate container.
2. The secondary package which protects the primary package.
3. The shipping package which contains the secondary packages. It provides
ease storage identification, and shipping.
 PRODUCT: PACKAGING
REASONS FOR PACKAGING:
1. It provides protection to products before and after they are in the
possession of the intended users.
2. It provides convenience to the user.
3. It provides safety.
4. It provides economy to both the seller and the user.
5. It allows sellers to effectively promote the product.
 PRODUCT: PACKAGING
What Makes a Good Package?
 packages must be made to assist in the marketing effort.
 defective packaging may contribute to lost sale and product damage.
 too much packaging, on the other hand, may be costly and will eat up
profits.
 PRODUCT: LABELING
Labeling – part of the product which provides information about the product and the
manufacturer.

Four Types of Labels:

1. The brand label – identifies the product or brand
2. The descriptive label – provides information about the product (who made it,
where and when it was made, its contents, how it is used, and how to use it
safely)
3. The grade label – identifies the product’s judged quality with a letter, number,
or word like “grade A”, or premium grade.”
4. The promotional label – provides attractive graphics to help promote the product.
 PRODUCT: WARRANTY
Product Warranty – one of the product components that attract customers to
patronize a product, which is a statement explaining what the seller promises about
the product. It is actually a manufacturer’s written promise as to the extent of the
repair, replacement, or compensation for defective goods.

Variation of Warranty
1. Express warranties – written statements of a manufacturer’s liabilities for product
deficiencies (limited-coverage or full warranty).
2. Implied warranties – assign responsibility for product deficiencies to a
manufacturer even if the item was sold by retailer.
 PRODUCTS PRODUCT: WARRANTY

Express Implied
Obligations of the Warranty obligation
manufacturer not express by the
stated in written or manufacturer
spoken words

Limited Liability coverage

coverage is limited
warranty

Liability coverage
Full
is not limited
Warranty
 PRODUCT LIFE CYCLES
Product Life Cycles (PLC) – refers to a product’s sales growth from the beginning to its
peak, followed by a decline and its eventual withdrawal from the market. PLC is the period
between the birth and death of a product.

Four Distinct Stages of PLC

1. Introduction
2. Growth
3. Maturity
4. Decline
 PRODUCT LIFE CYCLES:
INTRODUCTION STAGE
The Introduction Stage – the product is introduced to the public.

Generally Characterized by:

1. Slow growth of sales;
2. Heavy promotional expenditures in relation to sales;
3. Relatively high prices for the products; and
4. Limited product offerings, like limited variations in sizes, color, and the like
 PRODUCT LIFE CYCLES:
GROWTH STAGE
The Growth stage in the PLC follows a successful introduction stage

Characterization of Growth Stage:

1. Sales start climbing rapidly as distribution increase and the consumers are persuaded to try
the product.
2. The ratio of promotional expenditures to sales decreases.
3. Prices tend to remain high except when demand stimulation is required and entry of
competitors is discourage.
4. New forms of the product appear, like new colors, new models, and new sizes.
 PRODUCT LIFE CYCLES:
MATURITY STAGE
When the growth in sales slows down, the Maturity Stage begins to take
over.

Characterized by the following:

1. Sales settle down as the product becomes well-known;
2. Price reductions are used as a tool of competition.
3. Competition is intensified; and
4. The market becomes saturated.
 PRODUCT LIFE CYCLES:
DECLINE STAGE
The Decline stage begins with a permanent drop in sales.

Characterized by:
1. A pruning of product models and variations to eliminate those not
producing profit;
2. Promotional expenses are reduced; and
3. Plans for phasing out the product is made.
THANK YOU FOR LISTENING
 FILL IN THE BLANKS
1. A _ _ _ _ _ _ is anything offered for sale by a firm to buyers to satisfy their wants
and needs.
2. Products may either be consumer goods or _ _ _ _ _ _ .
3. _ _ _ _ _ _ are goods purchased with a minimum of effort.
4. Raw materials are of two types: farm products and _ _ _ _ _ _ .
5. A _ _ _ _ _ _ is name, term, sign, symbol, or design, or a combination of these
elements, intended to intended to identify the goods or services of a seller.
6. Legally registered brands are provided with legal protection called _ _ _ _ _ _ .
7. _ _ _ _ _ _ is a branding strategy which list no product name, only a description of
contents.
8. The _ _ _ _ _ _ protects the primary package.
9. The _ _ _ _ _ _ is the type of label which identifies the product or brand.
10. _ _ _ _ _ _ is a statement explaining what the seller promises about the product.
 ANSWERS
1. Product
2. Industrial goods
3. Convenience goods
4. Natural products
5. Brand
6. Trademark
7. Generic branding
8. Secondary package
9. Brand label
10. warranty
 MARKETING MIX
A.The Product
B.The Price
C.The Place (Marketing Channels and Physical
Distribution)
D.The Promotion (Integrated Marketing Communication)
 THE PRICE: MEANING OF
PRICE
PRICE is the money, good, or service exchanged for the ownership or use
of a good or service.

Example:
1. When one hundred pesos is paid for a sack of corn, that amount is the
price of the corn.
2. When a boy is asked to carry a sack of corn from the parking area to
the store and is paid a kilo of corn, the price of the service is one kilo
of corn.
3. When a bundle of sweet potato tops is exchanged for a bundle of string
beans, each is the price of the other.
 THE PRICE: MEANING OF
PRICE
VARIOUS NAMES OF PRICE:
Another Name of Price Commodity Purchased
Tuition Education
Interest Use of Money
Taxes Government Service
Subscription Regular receipt of a periodical
Royalty Use of copyright
Rent Use of Asset
Fare Taxi or bus ride
Fee Services of physician
 THE PRICE: MEANING OF
PRICE
VARIOUS NAMES OF PRICE:

Another Name of Price Commodity Purchased

Retainer Lawyer’s services over a period of time
Toll Long distance call or travel on some highways
Salary Services of an executive or white collar worker
Wage Services of a blue collar worker
Commission Salesperson’s services
Honorarium Guest speaker’s services
Dues Membership in a union or club
 THE PRICE: MEANING OF
PRICE
What is sold? (or what is offered the price in exchange)

Ownership of
product Money

Use of product Product

Use of service Service

 THE PRICE: PRICING DEFINED

PRICING may be defined as those activities involved in the

determination of the price at which products that will be offered for sale
considering the various objectives of the firm.

Pricing Objectives:
1. Profit-oriented objectives;
2. Sales-oriented objectives; or
3. Status quo-oriented objectives
 THE PRICE: PROFIT-
ORIENTED OBJECTIVES
PROFIT-ORIENTED OBJECTIVES:
1. Target Return Objective – refer to pricing objective
requiring a certain level of profit. i.e. 21%
return on investment required by company.
2. Profit Maximization Objective – refer to the pricing
objective of seeking as much profit as possible.
 THE PRICE: SALES-
ORIENTED OBJECTIVES
SALES-ORIENTED OBJECTIVES:
1. Increasing Sales Volume – requires an increase in sales
volume for a given period. i.e. company may seek to increase
its sales by 20% annually.
2. Maintaining or Increasing Market Share – requires
maintaining or increasing the company’s market share. i.e.
company’s market grew from 30% last year to 40% this year.
 THE PRICE: STATUS QUO-
ORIENTED OBJECTIVES
STATUS QUO-ORIENTED OBJECTIVES
- requires maintaining the same prices for company’s products.
This happens when the firm is satisfied with its current market
share and profits.
Reasons:
1. To stabilizes prices;
2. To meet competition, and
3. To avoid competition.
 THE PRICE: PRICING
PROCEDURE
PRICING PROCEDURE – refers to the series of steps adapted in
the determination of price.
The series of steps are the following:
1. The determination of the realistic range of choice;
2. The selection of pricing strategy;
3. The evaluation of economic feasibility; and
4. The setting of the price.
 THE PRICE: PRICING
PROCEDURE
A. DETERMINING REALISTIC RANGE OF CHOICE
Example:
if blank CDs are sold at various prices from above P20, between P20
and P10, and below P10. the price setter will have to find out from the
stated price information his realistic range. If a small volume is sold at
price above P20 and below P10, then his realistic price range is between
P20 and P10.
 THE PRICE: PRICING
PROCEDURE
B. SELECTING A PRICING STRATEGY
The Decision-Maker may adapt any of the following:
1. Market skimming strategy – setting of price at the upper limit of the
realistic range of choice. Purpose is to maximize profits.
2. Penetration strategy – setting of price at the bottom of the realistic
price range. Purpose is to penetrate the market as rapidly as possible.
 THE PRICE: PRICING
PROCEDURE
C. EVALUATING THE ECONOMIC FEASIBILITY
- a list of the various price alternatives must prepared.
Alternative Price/Unit Potential Sales Potential Gross ROI
(Units/year) Profit

1 P700.00 80,000 P12M 20%

2 800.00 70,000 12M 25%

3 900.00 60,000 15M 30%

Economic Feasibility of Price Alternatives for Product A of Company X

 THE PRICE: PRICING
PROCEDURE
D. SETTINGTHE PRICE

PRICING APRROACHES:
1. Cost based Approach
2. Buyer based approach, and
3. Competition based approach
THE PRICE: COST BASED APPROACH
COST BASED APPROACH:
1. Cost Plus Pricing – method calls for adding a percentage of
cost on top of the total cost.
2. Target Rate of Return Pricing – enables a company to
establish the level of profits that it feels will yield a
satisfactory return.
 THE PRICE: COST BASED APPROACH
Cost Plus Pricing Example:
If direct cost is P75, overhead costs is P25,
Price = direct cost + overhead cost + and profit margin is 25% of total cost.
profit margin
Computation:
Where direct cost = materials + labor
Price = direct cost + overhead costs + 25%
Overhead cost = a share of fixed indirect (direct costs + overhead costs)
costs
= P75 + P25 + 25% (P75 + P25)
Profit margin = a fair amount of return
= P100 + P25
= P125
 THE PRICE: COST BASED APPROACH
Target Rate of Return Pricing Example:
P = DVC F/X + RK/X If company’s direct unit variable cost is P75,
fixed costs are estimated to P2,500,000 on a
Where P = selling price using the target rate standard volume of P100,000 units, a 25%
of return method return on a capital of P10,000,000 is
DVC = direct unit variable cost required, the unit selling price is P125
F = fixed costs; Computation:
X = standard unit volume P = P75 + P2,500,000/100,000 + 25%
R = rate of return desired (P10,000,000/100,000
K = capital (total operating assets) = 75 + 25 + 25 = P125
employed
 SEATWORK: BY GROUP
I. Compute your company’s products or services using the two types of pricing under the
Cost-Based Pricing

1. Cost Plus Pricing 2. Target Rate of Pricing

Price = direct cost + overhead cost + profit P = DVC F/X + RK/X
margin
Where P = selling price using the target rate of return
method
Where direct cost = materials + labor DVC = direct unit variable cost
Overhead cost = a share of fixed indirect costs F = fixed costs;
Profit margin = a fair amount of return X = standard unit volume
R = rate of return desired
K = capital (total operating assets) employed
 PRICING
APPROACHES
THE PRICE
COST BASED BUYER BASED COMPETITION

Cost plus Perceived Going-rate

pricing value pricing pricing

Price-quality
Target rate of relationship Sealed bid
return pricing pricing pricing

Loss-leader
pricing

Odd-numbered
pricing

Price lining
pricing
 THE PRICE: PRICING
PROCEDURE
D. SETTINGTHE PRICE

PRICING APRROACHES:
1. Cost based Approach
2. Buyer based approach, and
3. Competition based approach
THE PRICE: BUYER BASED APPROACH
Buyer Based Approach of pricing deals with consumer perception or behavior as
bases for determining the selling price of a product or service.

Methods of Buyer Based Approach:

1. Perceived value pricing
2. Price-quality relationship pricing
3. Loss-leader pricing
4. Odd-numbered pricing
5. Price lining pricing
THE PRICE: BUYER BASED APPROACH
Perceived Value Pricing – methods establishes the price for a product based on
the buyer’s perceptions of the value of the product or service.
Example: most of works of arts, like paintings and sculptures
 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 – 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.
THE PRICE: BUYER BASED APPROACH
 Odd-Numbered Pricing – this refers to the practice of setting price even below
peso amounts.
Example: Selling at P99.50 rather than at flat P100
 Price Lining Pricing – this method refers to the practice of selling merchandise
at a limited number of predetermined price levels. The different levels are intended
to represent various levels of quality. The buyer is then provided with various
buying options increasing his chances of making a purchase.
 THE PRICE: PRICING
PROCEDURE
D. SETTINGTHE PRICE

PRICING APRROACHES:
1. Cost based Approach
2. Buyer based approach, and
3. Competition based approach
 THE PRICE: COMPETITION BASED
APPROACH
COMPETITION BASED PRICING APPOACH – refers to the setting of prices
based on what prices are being charged by competitors.

Two Kinds Competition Based Pricing:

1. Going-rate pricing – under this pricing method, the firm adapts a price based on the
competitor’s price.
2. Sealed bid pricing – the firms sets its price which is thought to be a little lower than
the competitors. This happens in bidding where competitors undo each other in
winning the bid.

Note: both have less attention given to the firm’s cost ad demand.
 PRICE ADAPTATION STRATEGIES
PRICE ADAPTATION STRATEGIES – are those that are used to address the
variations in geographical demand, costs, market segments, purchase timing, and
other factors.
The strategies consist of the following:
1. Geographical pricing
2. Price discounts and allowances
3. Promotional pricing
4. Discriminatory pricing
 PRICE ADAPTATION STRATEGIES
GEOGRAPHICAL PRICING – refers to pricing decisions related to products intended for
customers in different locations. The cost of shipping is a primary consideration which led
to the following strategies:

1. Point-of-production pricing – refers to the situation where the seller quotes the selling
price at the point of production, and buyer select the mode of transportation and pays all
freight costs.
2. Uniform delivered pricing – the seller quotes to all buyers the same delivered price
regardless of their locations.
3. Zone-delivered pricing – the seller sets prices that are different from zone to zone.
4. Freight-absorption pricing – the seller pays for some of the freight charges in order to
penetrate more distant markets.
 PRICE ADAPTATION STRATEGIES
PRICE DISCOUNTS AND ALLOWANCES – are price modification designed to
reward customers for early payment volume purchase, and off-season buying.

 Discounts – are reduction from the list price that are given by sellers to buyers
who either give up some marketing function or provide the function themselves.
 Allowance – are reductions in price given to final consumers, customers or channel
members for doing some tasks or accepting less service.
PRICE DISCOUNTS AND ALLOWANCES
DISCOUNTS AND ALLOWANCES are classified as follows:
1. Cash Discount – reductions in price to encourage buyers to pay their bills
quickly.
Example: P100 discount offered to monthly installment dues of a customer if
he pays on or before due dates.
2. Quantity discounts – reductions in unit costs for larger order.
Example: firm may sell its products at P1,000 per box containing 10 units,
P1,900 per box containing 20 units, and P2,700 per box containing 30 units.
PRICE DISCOUNTS AND ALLOWANCES
DISCOUNTS AND ALLOWANCES are classified as follows:
3. Functional or Trade Discounts – reductions from the list price given by the
manufacturer to reward wholesalers and retailers for marketing functions, they will
perform like selling, storing, and record keeping.
4. Seasonal Discounts – price reductions given to buyers who buy goods or services
out of season. This type of discount is designed to help the manufacturer maintain
production even during seasons of low demand.
PRICE DISCOUNTS AND ALLOWANCES
DISCOUNTS AND ALLOWANCES are classified as follows:
5. Allowances – reductions from list prices to buyers for performing some activity.
Two Types of Allowances:
1. Trade-in allowance – a price reduction given when a used product is part
of the payment on a new product.
2. Promotional allowance – a price reduction granted by a seller as
payment for promotional services performed by buyers.
 PROMOTIONAL PRICING
PROMOTIONAL PRICING – refers to the temporary reduction of prices of a
company’s products.
Forms of price reduction in promotional pricing:
1. Sale – is the form where the prices of the products of the firm are reduced for a
limited time.
2. Special Event Pricing – special prices in certain seasons are made to draw in
more customers.
3. Cash Rebates – are offered to customers to encourage them to make purchases
within a specified time period.
 PROMOTIONAL PRICING
PROMOTIONAL PRICING – refers to the temporary reduction of prices of a
company’s products.
Forms of price reduction in promotional pricing:
4. Low-Interest Financing – involves low-interest financing to customers.

5. Warranties and Services Contracts – involve adding a free warranty offer or

service contract.
 DISCRIMINATORY PRICING
DISCRIMINATORY PRICING – refers to modifications of the basic price to
accommodate differences in customers, products, and locations.
Forms of Discriminatory Pricing:
1. Customer Segment Pricing – different prices for the same product or service
are charged for different customer groups.
2. Product Form Pricing – different product versions are priced differently without
considering costs.
3. Image Pricing – identical products but with different images are priced at two
different levels.
4. Location Pricing – different locations are priced differently even if the cost of
offering each location is the same.
 DISCRIMINATORY PRICING
Forms of Discriminatory Pricing:
5. Time Pricing – prices varied by season, day, or hour; example are telephone
companies charging different rates on different days and hours.
 Price Adaptation
Strategies
THE PRICE
Geographical Price discount Promotional Discrimination
Pricing and allowances Pricing pricing

sale Customer segment

Point-of- pricing
Cash discounts Special
production Product form
event
pricing
Uniform Quantity pricing
delivered discount Cash Image pricing
rebates
Zone-
Functional or Low-
delivered Location pricing
trade discounts interest
Freight- financing Warranty
Seasonal Time pricing
absorption and service
discounts contract
promotional
allowances
Trade-in
 PRICING UNDER VARIOUS
MARKET CONDITION
KINDS OF COMPETITIVE SITUATION

Competitive Number of Sellers Number of Buyers Degree of Control Over Prices Buyer
Situation Seller
Pure Monopoly One Many Very High None
Oligopoly Few Many High Very slight
Pure Competition Many Many None None
Oligopsony Many Few Very Slight High
Monopsony Many One None Very High
 PRICING UNDER VARIOUS
MARKET CONDITION
1. Pure Monopoly – is a competitive situation where there is only one seller in a market. The
monopolist enjoys a very high degree of control over the price of his products. His only
worry is pricing too high to invite competition.
2. Oligopoly – only few firms compete in the sale of commodity. These few firms are
interdependent in many of their activities including pricing. Example: Organization of
Petroleum Exporting Countries (OPEC) which prescribes prices for crude.
3. Pure Competition – refers to that market where there are a great number of sellers and
buyers. Products sold are regarded as homogenous and the buyers will be motivated to
switch from one seller to another because of price. Example: Vegetable Trading
 PRICING UNDER VARIOUS
MARKET CONDITION
4. Oligopsony – only few buyers compete in the purchase of a commodity. The sellers are
helpless in controlling the prices of their products.
Example: the existence of a very few buyers of fighter planes.
5. Monopsony – characterized by the presence of only one buyer. The Monopsonist has
very high degree of control over the price of the commodity he is buying.
Example: the Government which is the only authorized buyer of explosives.
Thank you for Listening
 MARKETING MIX
A.The Product
B.The Price
C.The Place (Marketing Channels and Physical
Distribution)
D.The Promotion (Integrated Marketing Communication)
 THE PLACE: MARKETING
CHANNELS
Marketing Channels are human creations and they may be
designed and structured to serve the needs of the user.

Marketing Channel may be defined as set of interdependent

organizations and individuals that facilitate the movement and
transfer of ownership of commodities from the producers to the
ultimate users.
 THE PLACE: MARKETING
CHANNELS
TYPES OF MARKETING CHANNELS:

1. Consumer Channels – are those that are used in the distribution of

consumer goods. This is an arrangement where the producer sells his
goods or services directly to consumers.

2. Industrial Channels – are those which are used in the distribution of

industrial goods.
 MARKETING CHANNELS FOR
CONSUMER PRODUCTS
Channel A Channel B Channel C Channel D

Producer
Producer Producer Producer

Agent
Consumer Retailer Wholesaler
Wholesaler

Consumer Retailer
Retailer

Consumer Consumer
 MARKETING CHANNELS FOR
INDUSTRIAL PRODUCTS

Channel F Channel B Channel C

Producer Producer Producer

Industrial Industrial
Agent
User Distributor

Industrial Industrial
User User
 THE PLACE: MARKETING
CHANNELS
FACTORS THAT INFLUENCE CHANNELS SELECTION:
1. The nature of the product (i.e. highly expensive products like ship
and airplanes require more direct dealing with users.)
2. The nature of the market (i.e. buyers of detergent soap are scattered
throughout the country, manufacturer will choose a channel that will
serve this market.)
3. The nature of the company (i.e. large companies can afford to
adapt a multi-channel approach in its distribution activities.)
 THE PLACE: MARKETING
CHANNELS
DISTRIBUTION STRATEGIES:
1. Intensive distribution – a strategy that requires the firm to sell its
products through every available outlet in a market where a consumer
might reasonably try to find them. Example: convenience goods like
groceries, cigarettes,
 THE PLACE: MARKETING
CHANNELS
DISTRIBUTION STRATEGIES:
2. Selective distribution – selling through only those outlets which will
give the product special attention. It is used for purposes like avoiding
making sales to middlemen with any of the characteristics:
1. Poor credit rating
2. Reputation for making too many returns or requesting too much service
3. Place orders that are too small
4. Are not a position to perform satisfactorily.
 THE PLACE: MARKETING
CHANNELS
DISTRIBUTION STRATEGIES:
3. Exclusive distribution – is one where the producer grants exclusive
selling to a middleman in a certain area. In return, the middleman is
required to carry all the producer’s products.
Example: specialty products or services like automobiles and
expensive watches.
 THE PLACE: MARKETING CHANNELS
STRATEGY Number of Outlets

INTENSIVE MANY

Distribution
Strategy and the
Number of SELECTIVE FEW
Outlets

EXCLUSIVE ONE
 THE PLACE: PHYSICAL DISTRIBUTION
PHYSICAL DISTRIBUTION -
Supplies Warehouses
a marketing function which
facilitate the movement of goods
from the manufacturer to the Parts THE Wholesalers
location of the ultimate users. FIRM

Raw Materials Retailers

The Objective of Physical Distribution is not directly concerned

with the generation of income through actual selling, it can contribute CONSUMERS
to profitability by reducing costs. This may be achieved through the
efficient management of its functions.
 THE PLACE: PHYSICAL DISTRIBUTION
SUPPLY CHAIN
MANAGEMENT

Physical
Marketing Channels
Distribution

Order Inventory Material Transpor-

Ware-housing
Processing Control Handling tation

Physical Distribution, in combination with marketing channels, comprise the

total system perspective of distribution.
 THE PLACE: PHYSICAL DISTRIBUTION

OPPORTUNITIES IN PHYSICAL
DISTRIBUTION:
1. Improve customer service
2. Reduce distribution cost
3. Create time and place utilities
4. Stabilizes prices
5. Influence channel decisions
6. Control shipping costs
 THE PLACE: PHYSICAL DISTRIBUTION

ELEMENTS OF AN EFFICIENT PHYSICAL DISTRIBUTION

1. Inventory planning and control – maintaining an inventory of
stocks is a requirement of physical distribution. Too much
inventory will drain the financial resources of the firm, while too
small inventory may mean lost of sales.
2. Transportation – shipping of products to customers is one of
the most important activities in physical distribution. Forms of
Transportation (railroads, trucks, water vessels, pipelines, and
airplanes).
 THE PLACE: PHYSICAL
DISTRIBUTION
Comparison of Transportation Modes
Modes Quantity Cost Speed of Delivery Coverage/
Availability
Railroads Bulk Low Average Limited Area
Trucks Big Volumes Average Average Wide
Water Vessels Bulk Average Slow Limited
Pipelines Unlimited High Initials Fast Very Limited
Airplanes Limited Volumes High Fast Limited
Post Office Small Parcels Minimal Slow Complete Coverage
Parcel Service Small Parcels Low Fast Limited
Freight forwarders Big volumes Average Average Limited
 THE PLACE: PHYSICAL DISTRIBUTION

ELEMENTS OF AN EFFICIENT PHYSICAL DISTRIBUTION

3. Warehousing – the places where products are kept are called
warehouse and the activity done is called warehousing. Type of
Warehousing: Private and Public warehousing.
4. Order processing – refers to receiving, recording, filling, and
assembling orders for shipment.
5. Materials handling – effective materials handling can be made to
contribute to cost reduction and the effective flow of goods
 MARKETING MIX
A.The Product
B.The Price
C.The Place (Marketing Channels and Physical
Distribution)
D.The Promotion (Integrated Marketing
Communication)
 THE PROMOTION
Promoting a product may be done through any or all of the
following:
1. Advertising
2. Personal Selling
3. Public Relations
4. Sales Promotion
 THE PROMOTION:
ADVERTISING
What is Advertising?
- any paid form of nonpersonal presentation and promotion of
ideas, goods, or services, by an identified sponsor.

What Must a Firm Advertise?

1. Advertising creates awareness;
2. Advertising strengthens attitudes; and
3. Advertising leads to action.
 THE PROMOTION
Factors to Determine Advertisability
The are time when advertising is not advisable. Five factors must
be analyzed:
1. Primary Demand (total demand for a commodity).
2. Buying Motives (the product is purchased because of its price,
durability, reliability, or economy).
3. Hidden Qualities (some products have certain qualities that will
not be apparent during inspection). Example: Carnation Non-Fat
Dry Milk.
 THE PROMOTION
Factors to Determine Advertisability
The are time when advertising is not advisable. Five factors
must be analyzed:
4. Differential Advantage (some product are similar or maybe
only slightly different). Example: prawn or bangus produced
in a fishpond may not be much different from those adjacent
fishpond.
5. Money (Advertising is definitely helpful, but it is costly)
 THE PROMOTION
Types of Advertisers
1. Producers of consumer goods, industrial goods, and
services;
2. Middlemen such as wholesalers and retailers; and
3. Nonprofit organization (SSS, DBP)
 THE PROMOTION
Types of Advertisements
1. Product advertisement – present information and persuasive appeal about the
product and services.
2. Pioneer advertisement – present messages about product class.
3. Competitive advertisement – present brand-oriented messages designed to
stimulate selective demand.
4. Comparative advertisement – makes comparisons between advertised and
competing brands.
5. Institutional advertisement – seek to enhance overall image and build goodwill
for an organization
6. Trade advertisement – seek to stimulate reseller demand through messages in
trade media.
7. Cooperative advertisement – one where more than one party shares in the cost of
advertising.
 THE PROMOTION
Types of Advertising Media

1. Newspaper 7. Cable TV
2. Consumer Magazines 8. Yellow Pages
3. Radio 9. Transit
4. Television 10. Point-of-purchase
5. Outdoor ad 11. the internet
6. Direct mail 12. cell phone
 THE PROMOTION: PUBLIC
RELATIONS
Public Relations – is a form of promotion designed to
favorably influence attitudes toward an organization, its
product, and its policies.

Purpose of Public Relation

- is to build or maintain a favorable image for an
organization with its customers, prospects, stockholders,
employees, labor unions, the local community, and the
government.
 THE PROMOTION: PUBLIC
RELATIONS
Two Components of Public Relations
1. Publicity – is the generation of news about a person, product, or
organization that appears in broadcast or electronic media. Most often
used in promoting a film and its star, or new record release and its
singer. Forms of Publicity: News Release and Press Agentry (press
kit and speaker’s bureaus)
2. Public Affairs – is that part of public relations that deals with
community groups. It consist of two types: (1) lobbying; and (2)
community involvement
 THE PROMOTION: SALES
PROMOTION
Sales Promotion – is a short-term inducement of value offered
to arouse interest in buying a good or service. It is offered to
the middleman or to the final consumer.
Sales Promotion Objectives
1. To identify and attract new customers;
2. To introduce a new product;
3. To increase the total number of users for an established brand;
4. To encourage greater usage among users.
 THE PROMOTION: SALES
PROMOTION
Sales Promotion Objectives
5. To educate consumers regarding product improvements;
6. To bring more customers into retail store.
7. To stablish a fluctuating sales pattern;
8. To increase reseller inventories;
9. To combat or offset competitor’s marketing efforts; and
10. to obtain more and better shelf-space and displays.
THANK YOU FOR LISTENING