CO QAH + MELC LW

Course Outline & Quality Assured HANDOUT No. 7

Handouts paired with MELC- in ENTREPRENEURSHIP
Based Learner’s Worksheet

MELC: Recognize the importance of marketing mix in the development of marketing strategy
Describe the Marketing Mix (7P’s) in relation to the business opportunity vis-à-vis:
Product; Place; Price; Promotion; People; Packaging; and Positioning
TLE_ICTAN11/12EM-Ia-1

Semester: Second Semester Week No. 7 Day: 1 - 4

LESSON: The Marketing Mix (7P’s) in Relation to the Business Opportunity

Definition of Marketing Mix

Marketing Mix is a set of controllable and connected variables that a company gather to satisfy a customer
better than its competitor. It is also known as the “Ps” in marketing. Originally, there were only 4Ps but the
model has been continually modified until it became 7P’s. The original 4 P’s stands for product, place, price
and promotion. Eventually, three elements have been added, namely: people, packaging and process to
comprise the 7 P’s.

LESSON 1: The Marketing Mix (7P’s) in Relation to the Business Opportunity

The 7 P’s of Marketing Mix

1. PRODUCT
Marketing strategy typically starts with the product. Marketers can’t plan a distribution system or set a
price if they don’t know exactly what the product will be offered to the market.

Product refers to any goods or services that are produced to meet the consumers’ wants, tastes and
preferences. An example of goods includes tires, MP3 players, clothing and etc. Goods can be
categorized into business goods or consumer goods. A buyer of consumer goods may not have thorough
knowledge of the goods he buys and uses. An example of services includes hair salons and accounting
firms. Services can be divided into consumer services, such as hair styling or professional services, such
as engineering and accounting.
 Three-level concept of products or services:
Level 1: Core benefits of the product or service
The core benefits of a product or service are the major factors why a customer buys a product or
avails of a service. For example, a customer buys coffee because he or she wants to feel energetic and
alert the whole day.

Level 2: Physical characteristics of the product or service

Once the core benefit has been satisfied and options are available to the customers, the tendency is
to look for the second layer of selection, i.e., which has better packaging for the products or better
physical evidence or customer experience for services. In the previous example, the customer can
choose a coffee with a more appealing packaging or more aromatic smell.
Level 3: Augmented Benefits of a product or Service
Augmented benefits are only additional benefits; a customer will still get the core benefits of a
products and services even without augmented benefits. However, in the case of common products or
services where there are number of competitors, the differentiator comes from the physical
characteristics or physical evidence, the customer experience, or the augmented benefits. Therefore,
the entrepreneurs must provide customers with augmented benefits that distinguish them from the
competitors. In the previous example, the customer can choose a coffee product that comes with a
loyalty card, so that when he or she accumulates, say 10 coffee drinks, he or she be able to get a
coffee drink.

2. PLACE
Place represents the location where the buyer and seller exchange goods or services. It is also called
as the distribution channel. It can include any physical store as well as virtual stores or online shops on the
Internet.

3. PRICE
The price is a serious component of the marketing mix. In the narrowest sense, price is the value of
money in exchange for a product or service. Generally speaking, the price is the amount or value that a
customer gives up to enjoy the benefits of having or using a product or service.
MOST COMMON PRICING STRATEGIES
a. Bundling - This refers to two or more products or services in one reduced price. (e.g., 3-in-1 coffee
for P8.00, manicure and pedicure for P150).
b. Penetration pricing – This refers to setting low prices to increase market share, but the
entrepreneur will eventually increase the price once the desired market share is achieved (e.g., if you
are going to open a Beauty Salon, you need to set your prices lower than those of your competitors
so that you can penetrate the market. If you already have a good number of market share then you
can slowly increase your price.
 c. Skimming – This is the opposite of penetration pricing where prices are initially high and then they
are lowered to offer the product or service to a wider market (e.g., a real estate company offering top-
tier projects is now offering low-cost housing of same quality to serve the middle market segment).
d. Competitive pricing - This refers to benchmarking prices with the competitors (e.g., milk tea prices
are competitively priced).
e. Product line pricing - This refers to pricing different products or services within a parallel product
array using varying price points (e.g., LED TV is more expensive than the LCD TV even if under the
same brand).
f. Psychological pricing – This considers the psychology and positioning of price in the market (e.g.,
price of haircut service is at P199.00 because consumers tend to think that odd prices are
considerably lower than what they are;in this example, they tend to round off the price to
P100.00 instead of P200.00).
g. Premium pricing – This refers to setting a very high price to reflect elitism and superiority (e.g.,
prices of signature clothes, bags, perfumes).
h. Optional pricing – This refers to adding an extra product or service on top of the original to generate
more revenue (e.g., meals on top of the air fare).
i. Cost-based pricing – The basis of markup is the cost of sales. For example, the entrepreneur will
compute the cost of coconut juice by adding the cost of the coconut uice (P10)and the plastic
container (P4). He or she can set the price at P20 to earn P6 per coconut juice.
j. Cost plus pricing – the markup is based on a certain percentage of cost (e.g., the entrepreneur
wants to set a 50% markup on the coconut juice cost which is P14 x 50%

General Pricing Guidelines to Make the Business Sustainable and Thriving:

 Do not price the product or service below its cost.
 Monitor competitors’ prices, and ensure that your prices are at par with them unless the product or
service is really way superior to the competitors.
 Align prices with other 6Ps (product, place, promotion, people, packaging and processing)
 Implement price strategies that are relevant to your market segment. For example, tingi (sachet)
pricing is more appropriate in the grassroots locality or barangay.
 Align prices with your business objectives.

4. PROMOTION
 Involves presenting the products or services to the public’s needs, wants, problems or desires.
 The primary target market should be identified because it will become the main audience.
 Main goal of promotion is to gain attention.

Key Marketing Messages of Promotion:

 Value proposition or unique selling proposition of the product or service
  Product or service image
 Business image
 Business values and philosophy

Promotional Tools:
A. Advertising
Type of communication that influences the behavior of a customer to choose the product or service of
the entrepreneur over the competitors.
Objectives:
 Informing, educating, and familiarizing the public with the product and service offerings;
 Building a trustworthy image
 Increasing sales
Different Ways of Advertisement:
 Television- regular channels, cable TV
 Radio- AM and FM radio
 Internet- e-mails, Web sites, blogs, social media, search
engine, podcasts
 Mobile phones- text messages, mobile applications, mobile Internet
 Print- newspapers, magazines, flyers, directories, signages, posters
 Out -of-Home – billboards, buses, bus stops, trains, train stations, taxis, street advertisement

B.Selling
Is the act of trading a product or service for a piece or a fee. The
entrepreneur must identify the target customers who will likely buy the
product or service.

C. Sales Promotions
Short term promotional gimmicks wherein practical incentives and appealing activities are
incorporated to entice the customers to buy the product or avail the service.

Common Examples of Sales Promotion in the Philippines:

 Sales discounts or discount coupons
 Raffles *Contests and games
 Promo items *Product or service bundles
 Trade fairs or exhibits (e.g., wedding expo)
 Sample distributions or free taste/free trials
 Premiums (e.g., free toys for fast food meals)
 Point-of-purchase promotions (e.g., display stands in grocery stores)
 Advertising specialties (e.g., pens, notebooks, umbrellas, bags, calendars)
 Rewards (e.g., reward cards)

D. Public Relations
These are image building initiatives of the entrepreneur to make the name of the business reputable to
stakeholders, such as the target customers, government agencies, business partners, media, and the public.
PR strategies affect customers indirectly, but they do influence the stakeholders to build more trust to the
business.
Examples of PR strategies:
 Press conferences
  Launching events
 Strong media relations through press kits
 Social responsibility events (e.g., charitable or community events)
 Lobbying (e.g., good relationships with government officials)
 Web public relations (e.g., blogs, social media, e-mails, word-of- mouth)
5. PEOPLE
 People refer to the staff and salespeople who work for your business, including yourself.
 People really are the core of your success, so treat them as such. 
 People are not numbers and should be treated as individuals. Nevertheless, individuals should also
have responsibility for their behaviour in the company, and providing clear understanding of
expectations from the outset is important.
 Give your business a competitive advantage by recruiting the right people, training your staff to
develop their skills and retaining good staff.

6. PACKAGING
 Packaging is a silent hero in the marketing world. Packaging refers to the outside appearance of a
product and how it is presented to the customers. The best packaging should be attractive enough
and cost efficient for the customers. Packaging is highly functional. It is for protection, containment,
information, utility of use and promotion.
 It establishes the brand’s identity as well as its unique selling proposition
 In selling service, the term servicescape was used to refer to the overall ambiance of the place where
the service is performed.
 e.g., Of packaging in a Spa Business, the servicescape should be cozy, service staff should be
friendly, the massage bed should be comfortable and clean, and relaxing music and the aromatic
smell should be evident.

7. PROCESS
• Process is defined as step-by-step procedure or
activity workflow that the entrepreneur or
employees follow to effectively and
efficiently serve customer

REFERENCES

https://www.sagefrog.com/blog/infographic-4-steps-to-creating-a-great-brand-name/
https://www.business.com/articles/5-tips-for-creating-an-effective-brand-name/
DIWA Senior High School Series, Entrepreneurship
https://images.app.goo.gl/fRnJmU3JpF9M8Ui8
https://www.google.com/search+and+mcdonald+pictures&tbm
https://www.google.com/search?sxsrf=ALekKk01149xXkUTqjdvh28Qp2ge0xKjLA
Improve your Business (IYB) Marketing), Copyright © International Labour Organization 2015, First published 2015
https://images.app.goo.gl/EwaEeWp6WCkXemb26
https://study.sagepub.com/masterson4e/student-resources/chapter-11/weblinks