Developing the Marketing Mix
Product
The product is the first element
in the marketing mix.
The following questions should be asked?
1. what is the product’s function, appearance, quality,
design, features, packaging and brand?
2. What need that does it satisfy?
3. What value does it offer to its customers?
4. What makes it unique?
5. What is its unique selling proposition?
Any changes in any of the product’s features or
attributes may necessitate a consequent change in
one or all of the other elements of the marketing mix
(price, place and promotion)
Physical products have several
added components:
PACKAGING
Serves to contain and protect, and sometimes,
identify and promote the product.
A product packaging is different from its label.
1. protects the product en route to the consumer.
2. makes product storage and display more practical
and effective.
3. preserves the product for further customer
useWhen deciding on product packaging, the
following must be considered:
[Link] much quantity of the product should be
contained in the package?
2. What physical attributes should the packaging have
to facilitate customer use?
3. What legal requirements must the package comply
with.
4. What is the best appropriate shape of the product
packaging
Labeling
is a display of information about a product on
its container, packaging, or on the product itself.
The following factors must be considered in deciding
on the labeling of a product:
1. establish the image or personality of the product
based the tastes and preferences of the target
market.
2. determine the most important features of the
product to the market.
3. determine where the product will be sold and the
applicable regulatory requirements, if any
4. determine the placemant of the product in relation
to other products, particularly competitors.
New Product Development
Why do companies intoduce new products? Here
are somereasons:
A. To defend its market share
B. To position ahead of competition in a
marketsegment.
C. To establish a foothold in a future marketD. To
take avantage of strenghts in product
distribution
The New Product Development
Process
Price
The price that a marketer charges for a product or
service is a vital decision that has far reaching
consequences.
Product cost estimation
Types of cost
1. unit variable cost
2. fixed cost
Unit variable cost include:
Direct materials used in the manufacture of a shirt
may include the fabric, thread, and cuttons
Example
: 2 meters of fabric, five meters of thread, six
buttons and one cadboard box for product packaging
are used, its material cost would be:
Material Cost Cost per shirt
Fabric Php100 per meter Php200
Thread Php4 per meter Php20
Buttons Php5 per meter Php30
Cardboard box Php10 per piece Php10
Total Ppp260
Direct labor would include the wages of all workers
directly responsible for making the shirt.
Example: Workers are paid on a per-piece basis,
its unit direct labor cost would as follows:
Process Labor Cost per Piece
Fabric cutting Php30
Sewing Php25
Collar attachment Php5
Button attachement Php5
Total Php65
Direct overhead is the amount that was spent in the
manufacturing overhead (energy, water, and other
utility cost) for every shirt produced.
This can be computed by dividing the total
manufacturing overhead in a month by the number
of units of shirt produced within the same month
Example: If the total manufacturing overhead for a
particular month is Php 20,000 and the total number of shirts
produced with the same month is 4,000 pieces, the direct
overhead cost per unit would be Php5.
Php20,000/4,000 = Php5
The sum of the three costs (direct materials, direct labor ,
direct overhead which is Php65) is the products’s unit
variable cost, or how much is costs to produce one unit of
the product
The second type of cost is unit share of fixed costs
This cost are expenses incurred by the organization
that are not related to the manufacture of the product.
These inlude: executive and staff salaries, office rental,
advertising and promotions, professional fees, and other
similar expenses
Total fixed cost 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 Php400,000 and was able to
produce 4,000 units of shirt for the same month, each shirt
would have to absorb Php100 of fixed costs
(Php400,000/4,000) = Php100
Taking the entire costing example, therefore the total
unit cost of each shirt would be:
Cost component Amount
Direct materials Php260
Direct labor Php65
Direct overhead Php5
Unit fixed cost Php100
Total Php430
Therefore, if the shirt factory is able to sell each of the 4,000
shirts it produced in a particular month at its unit cost of
Php430, the company would make no profit but will also incur
no loss. This is called the break-even [Link] lowest
possible price the company can set for its shirts.
If the company decides to sell its shirts at only Php425, it will
incur loss of Php5 per shirt. If in a given month is is able to
sell 4,000 shirts at this price, it stands to lose Php20,000
However, the shirt manufacturer may decide to price its shirt
at 500. At this price, it shall make a profit of Php70 per shirt.
If it sells its entire month’s output at this price, the company
would make a profit of Php280,000.
Service and experience costing are also computed, with unit
variable costs represented by the cost of the service/
experience providers.
Pricing Strategies
The following are strategies that can be used in pricing a
product:
1. Mark-up pricing is a pricning strategy that allows the
seller a fixed mark up everytime the product is sold.
Example: Find out how to compute the markup
price of a product
UC = VC/U+ FC
US
Where:
UC = Unit cost
VC/U = Variable cost per unit
FC = Fixed cost
US = Unit sales
Given:
VC/U = Variable cost per unit
FC = Fixed cost
US = Unit sales
DMU(Desired Markup) = 20%
Markup price (MUP) is P20
UC= VC/U+FC MUP= UC
US (1-DMU)
=P10+ P300,000 = P16
50,000 (1-0.20)
=P16 = P20
2. Target return pricing- is a pricing method that
allows a product manufacturer to recover a certain
portion of his/her investment every year.
The formula for obtaining a product’s target
return price is as follows:
Where:
TRP = target return price
UC = unit cost
DR = desired return
IC = invested capital
US = unit sales
Target return price (TRP) is P21
Given:
UC =P16
DR =25%
IC =P1,000,000
US =50,000 UNITS
=P16 + 0.25xP1,000,000 =
TRP=UC+DRxIC P21
US 50,000
3. Odd pricing or psychological pricing- a pricing method
premised on the theory that consumers will perceive products
with odd price endings at lower in price that they actually are.
4. Loss leader pricing - a pricing strategy frequently utilized
by supermarkets. The mark-up lost on these lost leader items
are recovered from other items where markups are higher.
5. Price lining- a pricing strategy designed to simplify a
consumer’s buying decision.
6. Prestige pricing - a pricing strategy that disregards the
unit cost of a product or service. It charges a price much higher
than its unit cost.
7. Marginal pricing- where a business organization prices its
product at a range below its unit cost but higher than its unit
variable cost.
8. Predatory pricing - a pricing strategy is where the fim
prices its product lower than unit variable cost, initially resulting
in shortterm looses.
9. Going rate pricing - a pricing strategy where a company
prices its product at the same level as or very close to its
competitors’price.
10. Promotional pricing - a pricing strategy involving
temporary deduction in the selling price of a product/service in
order to induce trial or to encourage repeat purchase.
11. Price skimming - where the product’s selling price is way
above its unit cost.
12. Penetration pricing - a pricing strategy where the new
product is priced only marginally above its unit cost.
Pricing Strategy Selection
Pricing Objective Pricing Strategy
Maximum revenue Penetration pricing, Marginal pricing,
Going pricing, Promotional pricing
Maximum market share Penetration pricing, Marginal pricing,
Going rate pricing, Promotional pricing
Maximum profit Price skimming, Prestige pricing
Survival Marginal pricing
PLACE
How can a company deliver its products to its customers
effectively and efficiently?
The need for Marketing intermediaries.
Intermediaries provide access and convenience for
the product’s consssumers.
The following are other key functions of intermediaries:
1. Information collection and dissemination
2. Product storage and movement
3. Operational financing
4. Product promotion
4. Risk taking
Supply Chain
is the network of all individuals, organizations,
resources, activities, and technology involved in the
creation and sale of a product.
Product distribution types:
1. Exclusive distribution
2. Intensive distribution
3. Selective distribution
Wholesaling and Retailing
Two of the most crucial intermediaries.
Wholesaling performs the following functions:
1. Information collection and dissemination
2. Bulk breaking
3. Assortment-building
4. Product storage and transportation
5. Financing
6. Risk-taking
Retailing
The sale of goods and services to the final customer
for his or her personal consumption
Retailing performs the following functions:
1. Information collection and dissemination
2. Product assortment and selection
3. Product storage
4. Product promotion
5. Financing
6. Risk-taking
Promotion
Promotion as used in 4 Ps is general term which
includes the following:
1. Advertising
2. Promotions
3. Personal selling
4. Publicity
5. Public relations
Marketing Communications
The marketing model illustrates how marketing companies
communicate product information and other other
advertising messages to their customers .
In the context of advertising, the advertiser is the party that
intends to send a commercial message to the consumer.
Advertising
• any paid and public presentation of products, services, or
ideas, by an identified sponsor through a medium.
Objectives:
1. to build awareness
2. to inform
3. to persuade
4. to remind
Advertisements are found in media where business
companies cooperate with advertising agencies to
promote their product to the consumers for sale.
Brand awareness
• Achieving a high level of awareness provides the brand the
following advantages:
Learning advantages- “brand’s image”
Consideration advantages - “consideration set”
Choice adavantages- “can affect choices among brands”
Advertising campaign
Steps:
1. identifying the target market
2. establishing advertsing objectives
3. determining advertising message
Examples of advertsing message style:
Functional- solution to a current consumption problem.
Ex. Skinwhite deodorant
Symbolic - associate brand ownership with an aspirational
group. Ex. San Miguel beer
Experimental- promote brands using high sensory value.
Ex. Myra-E
4. Selecting media
5. Managing and coordinating the marketing communication
process.
Types of Media and techniques used in Advertising
1. Radio- the most accessible media. Philippine
radio stations broadcast- AM or FM bands.
Advantages Disadvantages
Relatively inexpensive audio only
target marketing possible frequency required for
effectiveness
passive medium
2. Print- newspaper still consider by the advertisers due to:
their national circulation, population penetration, pass-on
readership.
Newspaper
Advantages Disadvantages
credible spillage
pass-on readership obsolescence
target marketing possible poor image quality
Magazine
Advantages Disadvantages
good image quality long lead time
target marketing possible difficult to time advertising
pass-on readership
not subject to obsolescence
3. Television- has a vey strong influence in society
Advantages Disadvantages
audio, video, and expensive
movement
target marketing possible frequency necessary for
effectiveness
Alternative media techniques
Cinema
Advantages Disadvantages
audio, video, and not cost efficient
movement
larger than life limited to reminder advertising
captive audience short attention span
relatively inexpensive
Billboard
Advantages Disadvantages
relatively inexpensive short messages only
larger than life oreminder advertising only
exposed to many potential may damaged by elements
customers
legal restrictions
Websites
Advantages Disadvantages
low cost must be upgraded regularly
high level of detail clutter
customized
interactive
Social Networking Sites
Advantages Disadvantages
low cost may be ignored
high level of detail
well-segmented audience
Directory Advertising
Advantages Disadvantages
pinpointed advertising accompanies declining technology
timely
Product placement
Advantages Disadvantages
unique exposure little stand-alone value
well-segmented audience sometimes used abusively
E-mail advertising
Advantages Disadvantages
no cost clutter
highly targeted messages sometimes classified as
“spam”
Transit advertising
Advantages Disadvantages
mobile short messages only
relative inexpensive reminder advertising only
consistent daily audience maybe damaged by thye elements
Onlind ads
Advantages Disadvantages
well segmented audience easy to ignore
low cost
Direct response advertising - usually presented in
telemarketing programs and mostly showcases
products not available through conventional
retailers.
Advantages Disadvantages
high information content clutter
measurable poor image
Point of purchase, Signs, Posters, and leaflets
Advantages Disadvantages
last ditch reminder short messges
close proximity to physical reminder advertising only
product
Promotions
• series of activities that are intended to boost the sales of a
product or service, usually short term.
There are essentially two types of promotions:
1. Trade promotions- intended for marketing intermediaries
such as retailers.
-”push” products to the retailer or trade outlet
2. Consumer promotions- to induce product trial, to
encourage brand switching, or to reward consumer
patronage.
-”pull” consumers to brand retailers or trade outlets
to see, try, and/or purchase the product.
Personal selling
occurs when an individual salesperson sells a product, service
or solution to a client.
Pulic Relations
creating and maintaining goodwill of an organization’s
various publics through publicity and other nonpaid forms of
communication.
Publicity
is a communication written and produced by public relations
professionals intended to create a favorable public image for
a client
Task
[Link] an item that you frequently use: Example,
cellphone, eyeglasses, perfume, lipstick, ballpen etc.
B. Study the product and its packaging, consider also the
manner by which you use the product.
C. Identify and describe in detail how you would innovate
this product to satisfy your needs and wants better. D.
Determine also the effective promotional tool.
E. By partner, video presentation for 2 mins. only
F. To be presented next week, April 12, 2021
