Grade11-ABM

Principles of Marketing
Module 1
1 Quarter (2nd Semester)
Week 3-4

Lesson 3: Marketing Origins, Exchange, and

Value
Lesson 4: Contemporary Approaches to
Marketing

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the module. Use a NOTEBOOK
answering the exercises.
2. Read the instruction carefully before doing each task.
3. Observe honesty and integrity in doing the tasks and checking your answers.
4. Finish the task at hand before proceeding to the next.
If you encounter any difficulty in answering the tasks in this module, do not hesitate to consult your teacher or facilitator.
Always bear in mind that you are not alone.

We hope that through this material, you will experience meaningful learning and gain deep understanding of the relevant
competencies. You can do it!
LESSON 3: MARKETING ORIGINS, EXCHANGE, AND VALUE
At the end of this topic, the student will;

1. Understand the evolution behind the principles of marketing; and

2. Know the difference between marketing and non-marketing-based sales techniques.

PRELIMINARY DISCUSSION

Using your own words, define “value”. Try to really go as deep into its meaning as you can.

2. Give three examples of what you believe to be valuable products and explain why you think these are valuable.

a.

b.

c.

The Origins of Marketing

Marketing as we know it today (or as you will know it through this course) is a fairly recent development in the
world of business. To fully appreciate how it came to being, it will be useful to see how the stage in a market's maturity
affect, how businesses can best sell to the market.

Stage 1. Supply < Demand

When supply is less than demand, manufacturers generally have no problems selling whatever they produce. This
is what is typically called a sellers’ market and the sellers have the upper hand in these situations. The market is hungry
for the product and has the disposable income to pay for it.
If your objective was to be the biggest and market dominant force, then you would want to take advantage of such
situation by scaling up your production as quickly as possible in order to take as much of the market ag you can. You will
want an emphasis on capacity maximization, whether it is through your own manufacturing or through strategic
partnerships, along with an emphasis on expanding your distribution as swiftly as possible. The mindset behind this is that
the demand is there, so you just have to produce as much of your product as you can in order to meet it. This mindset is
called production orientation.
Brands like Lucky Me! Instant Noodles and CD-R King began by aggressively rolling out affordable products as
widely as possible. Low price and wide availability were seen to be the keys to dominating the market.

Stage 2. Supply < Demand, Competition Growing

The entry of competitors in a potentially huge market space generally leads to innovations as challengers strive to
make their offerings different enough. Improved quality, new and better features, better comfort, and better design-all of
which are undertaken with the hope that the product will speak for itself and that consumers will choose your products
based on the merits of your wares. This mindset is called product orientation and it is often colloquially referred to as
“building a better mousetrap.”
Many passionate entrepreneurs operate this way, sincerely believing that if they can make the best product out
there, then the market will come storming into their doors. It does not always work but when it does, it is often driven by a
strong word of mouth. In today’s climate of pervasive social media utilization, well thought-out products that receive a lot
of online endorsements can do very well. It does not always happen though.
The phenomenon of Maginhawa street, situated near the University of the Philippines in Quezon City, becoming
an oasis of must-try food places was largely built on a strong word of mouth. It is mostly shared via social media sites
such as Facebook and Instagram. Food places here strive to be interesting. In return, social media netizens get something
to share on their timelines when they visit.

Stage 3 Supply > Demand

When businesses begin to crowd into a limited market space, then competition can get quite fierce. Especially if
the businesses are not particularly savvy in either offering least cost options or in differentiating their products. In such
cases, it is the sales force that may best come to rescue. The sales force becomes the front liners who take matters into
their hands and push the products directly to the consumers. Using sales organizations to push your product is called sales
orientation.
When it works, it can work for the benefit of all parties. Insurance, for instance, is sold this way. Consumers do
not normally look for insurance (it is an example of what is referred to as an unsought good, which is why the industry
behaves as if supply was greater than demand) and typically avoid thinking about it. But a sales person who can properly
explain the advantages of a good insurance policy can effectively make the life of the consumer better.
On the other hand, when it does not work, a sales orientation can quickly turn into hard selling, which can be
annoying to customers,

Stage 4. Supply > Demand, Customer-centric Strategies Emerge

As competition becomes fierce, firms soon realize that a better way to compete would be by prioritizing customer
needs more than their own, When the mindset moves to this sphere, then this is the starting point for a marketing
orientation.
The marketing orientation begins with identifying and understanding a particular target market because, to put it
plainly, you cannot please everyone. Are you targeting men or women? A particular age group? A particular income
segment? What are their interests, attitudes, and lifestyles? What do they really need?
Products are then designed according to what could best fit the needs of the target market, priced according to
their typical budgets, sold where it is most convenient for them, and promoted in a way that best catches their attention.
A well-thought-out marketing strategy could (hopefully) lead to products that delight customers, leading them to
become loyal patrons who will buy products from your company again and again. Happy customers are an asset because
they will tell an average of five people about their delightful experience. (Gitomer 2011)
Take note then, this objective of making customers loyal and tung them to be satisfied repeat buyers is the end
result that marketing seeks to, accomplish. If a customer buys from you just once, then you may attain you, short-term
sales targets, but then you still have the problem of searching ty (and fighting for) your next customer. On the other hand,
if you focus your, efforts on building a loyal customer base, then you will have a market that practically assures you of
regular sales for the long term. This leads to a more predictable sales and less anxiety about achieving sales goals in the
future.
However, it is a two-way street. In return for their loyalty, customer, expect your product quality to be consistent,
predictable, and reliable. They need to be assured that you will always provide them with the same (or better) level of
experience as they have come to expect from the start.
Exchange
If you and your seatmates both have identical-looking apples, would it make sense for you to swap these with one
another? Probably not, mainly because neither of you would gain anything out of such a move. Both of you will neither be
better off nor worse off after such a swap and you would only have exerted effort for naught.
But think about it. What this implies is that the only reason you would want to exchange one thing for another is if
that other thing offers more value to you than the item that you currently have.
The same principle lies at the heart of marketing transactions. Let us say that you have one hundred pesos in your
pocket. Then you find out that the canteen, that is a few steps away, is offering a food for one hundred pesos. If you are
not hungry, then you will not even consider exchanging your hundred-peso bill for their food. But as the day goes on and
as you get hungrier and hungrier, the
canteen food also gradually increases its perceived value. Eventually, you may become so hungry that in your mind the
canteen food will already be worth more than one hundred pesos, At. that point, it finally makes sense for you to hand
over your hundred-peso bill in exchange for the food.
Because you receive something that in your mind (and we always emphasize this point) is worth more than what
you handed out in exchange, then in principle you are better off after the exchange. Meanwhile, the canteen loo is better
off after the exchange because they were able to move their food and make a profit out of it.
Marketing is all about fostering such positive exchanges. It is imperative that the customers feel better off after a
transaction because otherwise they may feel that they should have spent their money elsewhere-a feeling which will
prevent them from becoming loyal customers.
What can make customers feel like they are not getting their money’s worth?
To successfully make such marketing-oriented exchanges happen, it is essential that companies know what the
market really needs. Knowing what the market truly needs will come from gaining useful insights into what consumers
are really looking for.

Value
What is value? There is of course the literal value that refers to, say, the suggested retail price of goods and
services in the market. But as you would have seen from our example earlier, value is also a very personal thing. It can be
very subjective or a function of your personal condition (such as hunger), experiences, personal history, social
interactions, perceptions, education, and so much more.
So what gives value to a product?
Consumers generally value a product or service when it provides them with utility. There are five kinds of
economic utility that can be offered by products and services:

1. Form Utility. A product, by its very form, saves the consumer from the effort of having to make the product
himself. A person will value vegetables sold in a market because it saves her the effort of having to grow the
vegetables herself.
2. Place Utility. The convenience offered by making a product available around the proximity of the customer is
also valued. Between buying Product X from Store Y, that is located 1 kilometer away, and from Store Z, that is
located just next door, a customer will perceive more value in the service of Store Z and will be willing to pay a
little bit more for this convenience.
3. Time Utility. If a firm can offer a product or service far quicker than alternative providers, the customer will also
value this speed of service. This is why express couriers such as DHL or Federal Express are able to charge
delivery rates that are several times more expensive than regular mail.
4. Possession Utility. For some products, mere ownership is already valued .by the customer. This is especially true
for branded items that command a premium over commodity substitutes. This is also most evident in auctions
where bids are raised based on how valuable ownership is deemed to be by the respective bidders.
5. Information Utility. Knowing certain things about the product can already imbue it with value. For instance, a
recognized brand can instantly generate trust while advertising helps build the assurance of the product. On the
other hand, quality packaging can also generate information or inferences among consumers about the quality of
the product inside.

When you buy a tube of toothpaste, you may be paying for the values of (a) someone having to put together the
cleaning agents in a convenient and timesaving package for your consumption, (b) the convenience of buying it in a
nearby store, (c) the convenience of its easy-to-open flip-top cover, (d) the fact that it is just there on your bathroom shelf
when you need it, and (e) the peace of mind from the trustworthiness that you associate with its brand.
Of course, you would only buy this tube of toothpaste if in your mind its total value to you is worth more than the
actual cash that you shell out for it.
Exercises
I. Discussion
1. Identify a brand, product, or service that currently operates under the production orientation. Describe the
average buyer of this product as well as his or her typical profile.

Brand/Product’s production orientation

 Who do you think the typical buyer is?

Why?

2. Recall a time when you were not happy with a purchase. Analyze exactly what made you unhappy about
it. Was it the price? The quality? The reality versus the expectations? Frame your analysis using the
concepts explained in this section.

Product that you were not happy

with

Reason/s for dissatisfaction

Explain your dissatisfaction

analytically

3. Explain the concept of sentimental value. What type of utility is at play here?

II. Application and Advancements

1. Assess what it takes for a product or service to become worthy of a word-of-mouth promotion. What does
it take for you to share something to your peers? List down the requirements.

2. If you are a condominium developer, can you think of a better way of selling your developments other
than just fielding sales teams to try searching for potential buyers?

3. Give an example of a popular product that you believe to be is marketing oriented. Explain why you
believe this to be so and note down all the indicators that seem to prove your point.

LESSON 4: CONTEMPORARY APPROACHES TO MARKETING

At the end of this topic, the student will:

1. have a better understanding on how marketing is applied in business; and

2. have gathered insights about how to use the principles of marketing.

PRELIMINARY DISCUSSION

1. How does a television network make money? Describe what you imagine the process to be. Who should a TV
station be negotiating with and what do you think is most important in such a negotiation process?
 2. What makes a soft drink or similar beverage attractive to you? List down four attributes that you would
consider and then rank them (with 1 being the most important).

Beverage Attribute Rank

a. ___________________________ _______________________
b. ___________________________ _______________________
c. ___________________________ _______________________
d. ___________________________ _______________________

The following are two Philippine businesses success stories that will help illustrate what the marketing process is
all about. As you read these two stories, take note how these companies apply marketing strategy to eventually resolve
their respective challenges.

Marketing Strategy in Action: Story 1

The case of ABS CRN network.

ABS-CBN is a dominant player among the Philippine television network, today. But it was not always this way.
In fact, once upon a time, it started life as the least watched television network in the country! This is a brief account on
how the least-popular television network transformed into a media powerhouse and how they used marketing strategy to
get there.
In 1986, after the People Power revolution, ABS-CBN was practically reborn TV network having finally been
freed from nearly 14 years of government control under Martial Law. Immediately, they put together a pool of local and
international television shows and began broadcasting.
But by the end of 1986, ABS-CBN was the last placer among the five Ty networks back then. It was a severe
blow to the company’s pride and they vowed to turn the tables from then on. In fact, they wanted nothing less than to be
the number one network in the country.
To better understand their circumstances back in 1986, it would help to understand the environment then. For one
thing, cable TV was nearly unheard of. It would be years before the advent of VCDs, much less DVD players. There were
no mobile phones and home computers were a rarity. Everybody went to the movies if they wanted a treat (and air
conditioning). Home video was a luxury that was only available to the upper-income earners (via videotape players). For
much of the country, home entertainment options were limited to TV, radio, and reading materials.
It will also help to know who the key players were in the television industry. These were:

● GMA-7. This television network was the acknowledged darling of the upper and middle class. It provided them
with quality TV shows especially top-rated programs from Hollywood. By all intents and purposes, GMA-7 was
the market leader for the middle and upper middle classes.
● RPN-9. This television was the runner-up for the middle-class viewership. They also provided local and
international programming that was similar to that of GMA-7.
● PTV-4. The government networks. People joke that nobody watches its public service programming and that it
only gains viewers whenever there is a basketball game or a boxing match. It is because they have broadcast
rights to the games of the Philippine Basketball Association and regularly bid for the rights to broadcast popular
boxing matches.
● IBC-14 The undisputed market leader. While GMA-7 dominated the upper-class viewership, IBC-13 dominated
the mass market. It was the popular channel among the so-called “masa” thanks to its predominantly local TV
shows that featured the most popular actors and actresses.

So ABS-CBN entered an industry that was essentially dominated by two networks: GMA-7 for the upper end and
{BC-13 for the broad market. The problem was that ABS-CBN had no clear identity and no clear message to tell TV
viewers that could answer the question of “Why should I watch you in the first place?” To get out of this rut, the network
needed to formulate a marketing strategy.
The first step for them was to do a SWOT Analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and
Threats. It is a way of cataloging the environment that will allow you to spot potential avenues for strategy formulation.
ABS-CBN first drew up a list of their strengths, which included:

● Nationwide reach
● Huge financial resources, courtesy of its parent company
Of course, they would also draw up a list of their weaknesses, which included:

● Lack of clear position or identity in the market

● No loyal advertisers

The basic framework for any marketing strategy is summarized by the mnemonic of STP: Segment, Target, and
Position. First, identify the available market segments. Next, select or target the most promising market segment among
the available options. Finally, position your product to that best suit the needs of the targeted market.
Because ABS-CBN wanted nothing less than market leadership, they really had only two possible courses of action:
compete directly with GMA-7 for the higher income class segments or compete directly with IBC-13 for the broad
market. This was the segmentation phase.
A quick scan of the strengths and weaknesses of these two competitors revealed that:

● GMA-7 was well managed and cash-rich, which means that any attempt to compete with them would be a long
and arduous battle.
● On the other hand, while IBC-13 was very popular with the viewing public, things were not so good behind the
scenes: artists were unhappy because they were not being paid enough or even on time, a lot of complaints versus
the management and the production quality, so the shows were pathetic.

Therefore, in terms of which network to target, it became clear that ABS. CBN would have a better chance if it
competed directly with IBC-13. This was the targeting phase.
Finally, with a clear market segment to target, ABS-CBN addressed the key question: What does the broad market,
the “masa,” want?
The answer came through market research which quickly revealed a key insight: the broad market watched IBC-13
simply because their favorite stars were all there. In fact, this market did not even care whether or not the TV shows were
good or not, so long as their favorite stars were there. It was a star-oriented behavior. This led to the final peg in the
marketing cycle, the position. ABS-CBN realized that they had to position themselves as the network of stars.
Now that the core marketing strategy was in place, it was time to plan the details and the tactics that would flesh it all
out.
By matching their strengths with the opportunities that the competitor scan revealed, ABS-CBN soon came up with a
strategy for competing against IBC-13:

● Use its key strength, namely its huge financial resources, to lure the unhappy stars of IBC-13 toward its own camp
with very attractive compensation packages.
● Use its financial resources to build better quality programming.
● Relaunch itself as “The Star Network,” the network that you go to in order to see your favorite stars.

The strategy worked. Through shrewd negotiations and promises that they would become stars in their own shows,
ABS-CBN managed to practically siphon all of the most important TV stars of IBC-13. Soon, almost literally, there was
nobody left in the once-popular network.
As the revamped channel rebuilt itself, it also took advantage of an opportunity that it had: the ability to ride on the
success of its sister radio station, DZMM, which was a popular medium for getting news. By turning 1ts popular radio
newscasters into TV news personalities, they transformed TV news-which used to be a stodgy and droll affair among all
the TV channels into a popular infotainment medium. Viewers finally got to see what their favorite radio newscasters
actually looked like. These newscasters too became TV stars in their own right.
In 1986, ABS-CBN finished the year in last place. By 1987, they became the number two network in the country and
by 1988, they became the number one TV network. From last place to number one in just two short years. This was a truly
amazing turnaround and it was made possible through the shrewd use of the principles of marketing.

Marketing Strategy in Action: Story 2

The case of C2 green tea bottled drink

The year 2004 saw the rise of a new kind of beverage in the consumer market, Produced by Universal Robina
Corporation (URC), C2 Green Tea drink was a product that was unlike anything that the Philippine market, which was
weaned on cola drinks and fruit juice beverages, had seen until then.
URC had wanted to penetrate the country’s huge cola drink market. However, it quickly realized that there was no
way they would be able to compete with mighty Coca-Cola or Coke, which was the dominant consumer beverage of the
time. After all, so many others have tried to challenge the market supremacy of Coke and nobody has ever come close to
even threatening their huge market share.
 The insight that the company came up with: instead of trying to compete head-on versus Coke, why not build up a
different beverage category altogether? Essentially, they would compete with Coke by not competing directly with it.
They quickly spotted an opportunity in the form of bottled tea drinks, which were gaining popularity in China at the time.
While there were already ready-to-drink tea products in the Philippine market, these were either in the form of powdered
beverages or expensive bottled teas.
URC positioned C2 to be a healthy alternative to cola drinks. This was a timely message as consumers were
becoming more health conscious, particularly with what they eat and drink. C2 was brewed from natural green tea leaves
that the company says contain antioxidants-micronutrient aids for better health. The beverage came in 355ml, 500ml, and
1-liter plastic bottles. But what was very important, C2 was initially priced lower than Coca Cola’s beverages.
In its first month, URC quickly sold a hundred thousand bottles of C2. It rapidly built up a loyal following,
especially among a surprisingly large market segment: people who have stopped drinking cola beverages for health
reasons. What is more, cola drinkers who discovered the health premise of C2 became eager to let go of their cola habits,
especially upon realizing that C2 also happened to be cheaper as well.
C2 rapidly became a success, often being sold out in stores and much of this success could be attributed to its key
strategy points which could be summarized as follows:

● deciding not to compete directly with Coke and instead make competition irrelevant by producing a
totally different beverage concept;
● targeting a market that was already weary of cola beverages, a market that turned out to be huge;
● building the product’s position around the message of better health; and
● offering a product that happened to be cheaper than cola drinks, without necessarily communicating that
it was “cheap”.

C2's success was eventually responsible for giving Coke its first real challenge in the country for years. In fact.
the impact of (2 on cola sales was so significant that it led Coca-Cola to aggressively push a new product into the market,
Coke Zero which was positioned to be a health-oriented beverage. By then, however, C2 had already built up the new
product category of ready-to-drink green tea beverages and dominated it with a 75 percent market share.

GROUP ASSIGNMENT

This is an account of how C2 Ready to Drink Tea entered the Indonesian market, with in-depth discussion of the
marketing environment in Indonesia as well as the competition that it was up against.

Group Assignment
The Radio Station

FM Radio is still very much alive and well in the Philippines, driven primarily by urban areas and a growing interest.
by middle-class markets in talk shows and curated music programming. It is no surprise that FM radio’s “primetime”
happens to be during rush hours in the morning and in the evening when people are trapped in their vehicles as they
brave the traffic.

Your group is hired to rebrand, relaunch, and to create a concept for a new FM radio station that is meant to compete
with other stations in the market.

You are tasked to do the following:

1. Identify key competitors that you would be going against.

2. Identify who your typical target audience will be.
3. Present your station concept, complete with station ID (the radio slogan) and what will set it apart from other
stations.

Presentation time: an estimate of 5 to 10 minutes per group.

Post Assessment

How well did your group resolve a market need?

Criteria Details Total Pts. Your Pts.

Creativity How innovative is the product proposal 20

 Differentiation How different is the proposed station from the identified competitors? 15

Market
How well did the group understand the profile of its target audience? 15
understanding

Total 50

Self-Assessment

How well did you comprehend the stories?

YES NO

1. Do you now know why ABS-CBN had to segment its possible markets? [ ] [ ]
2. Do you now know why it was important for ABS-CBN
to get an insight about its target market? [ ] [ ]
3. Do you now understand how you can compete
by not directly competing as seen in the case of C2? [ ] [ ]