Chapter 4

LET THE MARKET

KNOW YOU
BETTER
 What is
Marketing?
 In its broadest
Sense, marketing is
about creating and
accumulating
customers.
Marketing plans are
designed to capture
market share and
defeat competitors.
The marketing
function and the
marketing mix serve
the overall business
 SEVEN P’s
1. Positioning
2. Product
3. Packaging
4. Place
5. People
6. Promotion
7. Price
EXPLANATI
ONOF THE
SEVEN P’s
 1.
POSITIONING
 Positioning is the way
the customers perceive the
enterprise and its products
or services in their minds.
(The stronger the overlap is in
these three perspectives, the
more defined the positioning
of an enterprise is in the
marketplace. )
POSITIONIN
G
Positioning, in the
context of a marketing
battle plan, has three
overlapping objectives.
 1. It has an
enterprise
perspective.
Enterprise scans the
market environment and
decides to position itself
with products that
specifically address the
needs of a chosen target
market.
 2. It has a
competitive
perspective.
Enterprise has to
differentiate and
distinguish itself from its
competitors.
3. Takes the
customers'
perspective.
Enterprises can establish
their positioning either
by starting with their
own product creations or
with their customers’
outcome expectations.
 The competitive
landscape of the
enterprise, relative to its
market, can be clearly
mapped out by laying
out both the latitudinal
and longitudinal market
dimensions.
 Latitude
It lays out what's important to
the different customer
segments from their differing
points of view.
 Longitude
Represents the product
features and attributes of
competitors in the
marketplace.
*In determining its positioning,
the enterprise should be
mindful of the main value
proposition (MVP) to its
customers relative to its
competitors.
It must evaluate the other
six P’s of marketing to
find out if they
complement and
reinforce one another.
Each of the P’s of
marketing must
communicate something
 To establish the positioning
of its various products in the
marketplace, the enterprise
endeavors to build the brand
of each product.
3 purposes of
BRANDING:
1. To differentiate the
product from other
products.
2. To avoid a commodity image
for the product.
3. To fill a space in the
consumer’s mind that would
prevent other products from
occupying the same space.
 Branding and brand equity
development should go hand-
in-hand with positioning.

Volvo stresses its safety brand positioning by

crashing their test cars into brick walls to
dramatize the minimal effect on the owner-
driver.
 
Powerful brands have become the generic
name for their product categories.

Example of Powerful brands:

Kleenex, Band-Aid,
Xerox, and Scotch Tape,
Johnson and Johnson,
Procter and Gamble,
Pfizer, Ayala, and SM.
2. PRODUCT
 PRODUCT
A product is the tangible
good or the intangible
service that the enterprise
offers to its customers in order
to satisfy their needs and to
produce their expected results.
4 general types of
products that
are marketed
by enterprises:
1. Breakthrough products
2. Differentiated products
3. Copycat products
4. Niche products
 Breakthrough products
It offers completely new
performance benefits. They
may double the performance
at half the cost. Marketing
breakthrough products need a
higher level of customer
education and orientation.
Common examples of breakthrough
products are borne out of the
biotechnology held particularly in
terms of coming up with new vaccines
to protect people from certain viruses.
 Differentiated products

Tries to claim a new space in the

mind of the customer different
from the spaces occupied by
existing products but there would
be additional benefits on special
aspects of the product.
Example of Differentiated products

There are many different eyeglasses

available in the market today but
Transitions® lenses was able to
differentiate itself from the rest because
the lenses they use adapt to changing light.
With this feature, the wearer gets
additional protection against ultraviolet
rays, glare, and eye fatigue.
 Copycat products
Offering more physical space in
the shelves, lower prices,
easier access, and promotional
freebies.
A classic Philippine example of copycat
product is the Beer na Beer brand of
Asia Brewery pitted against San
Miguel Pale Pilsen. Both have amber
colored bottles with similarly styled
white colored font printed outside the
bottle. N o wonder after Beer na Beer
came out of the market, San Miguel
filed a law suit against Asia Brewery
for trademark infringement. In this
case, San Miguel prevailed.
 Niche products
They are products with lower
reach, lower visibility, low prices,
and lower top of mind. They are
content to play minor roles in
specific and smaller market
segments.
 3.
PACKAGING
There were used to be a time
when products came wrapped
in ordinary packaging that
prominently displayed the
brand name, the main
attributes of the product, the
company's logo, and its place
of business.
5 Packaging purposes:
1. Identifies the product,
describes its features and
benefits, and complies with
government rules on specifying
its contents, weight, chemical
composition, and potency. It
provides easy brand
identification for the
consumers.
 
2. Differentiates the
product from its
competitors and even
from its other brand
offerings .
3. Lengthens the
lifespan,
physically
protects, and
extends the
usefulness of the
product.
4. Packaging has become
an environmental issue
by itself. Recyclability
and biodegradability are
now a major concern of
packagers and
consumers alike.
5. The aforementioned
purposes of packaging
have increased the
cost of packaging and,
therefore. the price of
the product.
 Packaging does not refer
only to the wrapper or
container of the product. It
can mean the bundle of
products or services that are
put together to attract and
delight customers and also
mean the terms and
conditions attached to the
sale or after-sale servicing of
the product.
4. PLACE
Initial Location
Screening
 ln 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 comforts,
and the like.
In a similar way, the
entrepreneur must be able
to determine the price that
comes with the location
because it will spell out the
success or failure of the
business. The entrepreneur
has to consider the
following:
1. The cost of buying or renting, renovating,
and operating the location.
 
2. Customer volume, drop-in rates (what
percentage of customer traffic would stop by
the store) and sales conversion ratios (what
percentage of drop-ins would actually
purchase something from the store).
 
3. Revenues based-on the volume and mix of
goods and services expected to be sold at
certain prices.
 
4. Profits.
 
 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,
etc.
 2. Exact lit to target
customers.
Is the location traffic
generally composed
of  your target
customers?
 
 3. Clustering of
competitor
establishments.
This oftentimes results
in drawing a 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
a central business hub
within the next five years.
 5.Fiscal and
regulatory
requirements.
An entrepreneur would
want to set up shop in a
town or city with low tax
rates, good governance,
excellent ,
infrastructures and great
public services.
 Relevant
Location Drivers
It would benefit the
entrepreneur to do an in-
depth location analysis.
These are the 'musts' in
choosing the location for your
business:
 1. Physical Proximity
to Target Market
Locations are chosen based
on how close it is to the
target market. Ideally, the
best locations should be
easily accessible from home
or the workplace.
 2. Customer Traffic
Flow
Refers to the people
that regularly come into
contact with your
business establishment.
3. Industry Clustering
A lot of competitors
clustered in one location
usually draw in a bigger
market to the area, some
entrepreneurs prefer to
establish a monopoly far
away from competitors.
4. Convergence of
Multiple Industries

Locations where
multiple industries
converge.
 5. Population
Concentrations

The more populous the

location is, the greater
is the opportunity for
business and profit.
 6. Activity Hubs
Activity hubs such as large
schools, high-rise buildings,
public parks, transport
terminals, and entertainment
centers provide good location
potentials for food
establishments and client-
specific services.
 
 7. Growth Potential
The new development site
will be the natural greener
pasture for early locators.
The early locators will
catch the early customers.
 8. Business Climate
Enterprises prefer locations that are
conducive in doing business. This
includes areas with:
 
high economic growth efficient transportation and
  logistics
stable political situation  
  availability of skilled labor force
effective social services  
  low crime rates
good infrastructures  
  a good fiscal incentives
cheap Utilities  
  trusted public officials
 Comparative Location
Analysis
A potential location is
through comparing it with
other locations with more
or less the same features
and tenant mix or clusters
of competitors.
 Geography and
Atmosphere
Determinants

For the geography

determinant, there are six
decision tensions:
1.Concentration versus
Destination
2.Access versus Abundance
3.Clustered versus Dispersed
4.Developed versus
Underdeveloped
5.Physical versus Virtual
6.Upscale versus Downscale
For the atmosphere
determinant, there are five
decision tensions:
1.Formal versus Informal
 
2.Exclusive versus Public
 
3.Conservative Versus
Adventurous 
 
4.Aesthetics versus
Functionality
 
5.Minimalist versus Maximalist
5. PEOPLE
 PEOPLE
-are the ultimate
marketing strategy.
The marketing efforts of people
are organized at four levels:
(1) to create customer
awareness;
(2) to arouse customer interest;
(3) to educate customers as
they evaluate their buying
choices; and
(4) to close the sale and deliver
the products.
To arouse the interest of
customers, the enterprise
can use several people
or organizational
modalities.
 1. To outsource the people
from advertising agencies,
events management outfits,
call centers, and
telemarketers.
 2. To build in house
capabilities by hiring market
researchers, brand managers,
salespeople, public relations
officers, website writers,
orchestrators, etc.
2. To collaborate or enter
into partnerships with
principals, distributors,
dealers, and industry
associations.
Educating customers in
their evaluation process
requires the enterprise
to know the customer’s
decision making process.
1. What and who are involved in the buying process?
 
2. Where are the customers in the buying process?
Are they still canvassing and “shopping around"? Are
they currently focusing on a few candidates? Are they
seriously evaluating the company’s product?
 
3. What are the next steps of the customers and how
can the company facilitate their next steps? What
else do the customers need to know and what issues
must be addressed by the marketer? The customer
evaluation process may follow something similar to
Table 4.1.
Table 4.1
• Availability means that the enterprise
has the goods or services on hand.

• Accessible means that the customers

can easily get the product from their
usual buying places or the products
can be conveniently delivered to
them.

• Adequate means the product meets

the quality and delivery specifications
of the customer.
• Acceptable means that the
customer is convinced by the
selling points of the product, finds
very little or no objectionable
features in the product, and
accepts the conditionality,
warranties, and amenities given
by the seller.

• Affordable means the price and

payment terms are right.
The organizational modality
to educate the customers, to
help them in their decision-
making process, and to
close the sale would depend
on four variables.
1. Is there a need for high contact (face to face)
or will low contact (internet) be sufficient?
 
2. ls there a need for high accessibility? If so, the
company requires distributors, dealers, branches,
and franchisees to expand their reach.
Alternatively, they need a very fast, reliable, and
economical delivery system.
 
3. How heavy or light is the transaction cost?
High transaction cost products need new
competent people to sell them.
 
4. Does the customer need a lot of sale servicing
and after-sales servicing?
 
 6.
PROMOTION
 PROMOTION
-is the explicit communication
strategy adopted by an
enterprise to elicit
the patronage, loyalty, and
support not only from its
customers but also from its
other significant stakeholders.
 PROMOTION
-is the explicit communication
strategy adopted by an
enterprise to elicit
the patronage, loyalty, and
support not only from its
customers but also from its
other significant stakeholders.
Promotion encompasses all
the direct communication
efforts of the enterprise, such
as advertising, public relation
campaigns, promotional
tours, product offerings,
point-ofsale displays,
websites, flyers, emails,
letters, telemarketing, and
Effective promotion depends on
three critical factors:
1. the credibility of the
communicator
2. the message and the
medium of the message
3. the receptiveness of the
audience to all that is
being communicated.
The idea is to match the
size of the market with
the medium used and
the resources of the
enterprise.
Case Example : Ayala
Group’s Credibility as
Communication Strategy
 
The Ayala Group has been able to
build tremendous credibility in
over a century of service to the
Filipino people. Their bank, the
Bank of the Philippine islands, is
a conservative, safe but growing
financial institution with a
tremendous following from
corporations, high net worth
individuals, and ordinary
depositors.
Its Ayala Land offerings sell upscale lots
and condominiums like hot cakes.
Buyers know that Ayala can deliver
quality properties and that these
properties would be able to gain market
value easily. Ayala’s reputation in
building Makati City has spilled over to
its numerous commercial centers and
high-class Subdivisions in many key
locations. All Ayala has to do in its
promotion campaign is to announce
that it is ‘Ayala‘ building the property
and the people will buy.
7. PRICE
 PRICE
Pricing depends on the
business objectives set by
the enterprise.
Major factor for the customer
in buying a product, it is not
the only factor such as in the
case of buying premium
products.
Non-price factors outweigh the
price factor whenever a
customer is buying a premium
item because he or she is more
particular about the
'premiumness' in terms of
quality, the status or image that
the product brings, shorter
waiting time or immediate
delivery, and other such decision
criteria.
Finding the right price for a
product is, therefore, not a
simple matter of adding a
mark-up on the cost of a
product or service, as some
companies do.
The enterprise should set the
prices of its products or services
based on its business objectives
such as the following:
 1. Profit maximization
 
2. Revenue maximization
 
3. Market share maximization
 
4: Attainment of the desired
prestige or quality leadership
 
5.Penetration, survival, or
liquidation
 
6.Scarcity pricing or market
skimming
 
7. Cost recovery
 
8. Subsidy pricing
 
9. Marginal pricing
The first three pricing strategies
pertain to the related dynamics
of the different price ranges
applied across different product
volumes or quantities while
considering the product costs
incurred as these products are
bought or sold. For a better
appreciation let us take a look at
Table 4.2.
Table 4.2
*Assumes the following: Fixed
Costs equal 300; Variable
Costs equal 5 per unit
Table 4.2 shows an example
of a profit, revenue, and
market share maximization
pricing strategies. Prices
ranging from 10 to 18 per unit
have been market tested as
shown in the first column.
 The total revenues are
computed by multiplying price
with quantity as provided in the
third column. The total costs
are computed in the fourth
column,assuming fixed costs of
300, irrespective of the volume
level, and variable costs of 5
per unit. The fifth column
calculates the total profits.
 At the price of 14 per unit, the profits
are maximized at 375, compared to
the other price levels which yield lower
profits. Unit cost is computed in
column six in order to illustrate its
decline as volume goes up. As shown
in the table, the revenue-maximizing
price is 12, generating total revenues
of 1,080. This revenuemaximizing
price model is easier to derive than
the profit-maximizing price. it should
be used when the total costs are
mainly fixed (little change over a wide
 Market share maximization is
achieved by the price that obtains
the highest volume of sales possible
without sacrificing too much
profitability. In the same table, this
market share-maximizing price is 10,
with a volume of 100 units.
 One market research approach in
estimating the demand, given the
different price levels, is to conduct a
price tolerance survey of randomly
selected respondents.
Assuming that 100 respondents are chosen
(at 90% confidence level), the respondents
should be asked whether they would buy a
product at, say, ?10 a piece. After securing
their answers, the respondents should be
queried if they would still buy at 12 pesos
per piece. The surveyor should,
subsequently, move up to the higher price
levels. There would be less and less
respondents answering "yes” to the
question. The percentage of respondents
answering "yes" at the different price
levels could be multiplied by the estimated
population of the target market to obtain
the size of the demand.
  
At the other end, prices can be set very
low to survive in a competitive market or
to get rid of mounting inventories and
convert them into cash. The other
objective of a low pricing strategy is to
penetrate the market fully and overtake
the competition.
 Take note:

Products that are very scarce

or rare would appeal to
wealthier customers who wish
to belong to an exclusive club
of owners.
 Take note:

Cost recovery pricing charges

a price that allows the
organization to merely
recover its full costs. The
purpose is to reinvest the
sales proceeds to produce
additional products and reach
out to more people.
 Take note:

Marginal pricing sets the price

higher than the variable costs
of a product but lower than
the full costs in order to
increase overall profitability.
 Other pricing objectives which
the enterprise may have.
• Offer introductory or promotional
pricing to launch a new product.
• Different prices in different
geographical areas to take care of
additional logistics costs in farther
• locations
Discount pricing may be . given to loyal
and regular customers to maintain their
patronage.