Lesson 7: Product Strategy

Learning Objectives
At the end of this module, you should be able to:
• Explain the components of product;
• Identify the characteristics of a good product or service.

• Activity

Choose one and give features/characteristics that will make it unique. Make a one minute
advertisement for about your chosen product.

Detergent Camera Donut

Soap Popcorn Pizza

Product Strategy

A product is the tangible good or intangible service that the enterprise offers to its
customers in order to satisfy their needs and to produce their expected result. Product refers
to the actual item/product/service being sold. Products are often identified with their brand
names to distinguish them from other products in the market.

Four general types of Products that are marketed by enterprises:

• Breakthrough products are offer completely new performance benefits.
• Differentiated products try to claim ne space in the mind of the customers
different from the spaces occupied by existing products.
• Copycat products will not make much impression on the consumer’s mind.

Three components of Product:

a. Core Value. The core value is the end benefit of the product to the customers.
For example, a customer will purchase insurance for security and peace of mind.
Another example would be a customer purchasing tennis shoes for comfort when
playing tennis sports, or a customer buying mobile phones for communication.

b. Formal Product. Formal product refers to the actual physical or perceived

characteristics of the product which offer a differential advantage over the
competitors. For example, a customer will buy a mobile phone. In purchasing, he
would consider the style, features, specification, packaging and brand of the
mobile phones.

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 c. Augmented Product. An augmented product refers to the additional non-
tangible offer of the firm. Consider the example above. The firm may offer-after
sale service and warranty just in case some faulty issues happen to the mobile
phone. Firms offering appliances could include free of charge delivery and
installations to their service.

In purchasing or availing goods/services, costumers would want the following

characteristics to be incorporated on the product:

a. Quality level and quality consistency. Customers would look at the quality
attribute of the product/service based on how it is made and the way it performs
when used.

b. Feature. As mentioned in the components of product, features refer to the

physical attribute of the product.

c. Design. Most customers would consider the design attribute of the product which
refers to the look and performance of the product.

d. Brand name. Brand name refers to the name, term, sign, symbol or a
combination of these elements. It has the power to generate instant sales, conveys
a message of confidence, quality and reliability of the product. The logo itself
affects the brand in a way that the customers can easily recognize the brand or
product based on drawing.

e. Labeling of the product. One important attribute of the product is the label
placed on goods. This can be in the form of a sticker, written information about
the product or tag. Labeling of the product is vital nowadays that people are
becoming health conscious in buying food products since they would look and
consider the information at the label.

f. Packaging. Packaging also confirms the personality of the brand of the product.
This is important since this also conveys quality, safety and legal information of
the product. Packaging can be in the form of boxes, cans, cartons, paper bags, etc.

Self-Evaluation
A. Write inside the circle the components of your product or service.

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 B. Write a complete description of your product/service.

Test Yourself

Identification. Write your answers on the space provided.

______________1. Product refers to the additional non-tangible offer of the firm.

______________2. This can be in the form of a sticker, written information about the
product or tag.
______________3. The end benefit of the product to the customers.
______________4. Refers to the name, term, sign, symbol or a combination of these
elements.
______________5. Refers to the actual physical or perceived characteristics of the
product which offer a differential advantage over the competitors.

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Lesson 8: Price Strategy

Learning Objectives
At the end of this module, you should be able to:
• Explain the importance of setting the price for the product;
• Identify the steps in setting price for the product.

• Activity

Science of Pricing!
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GoSHARES&SHOP and Networks. P99/7days
GoWatch&PLAY apps.
P90/7 days

1. Which strategy would you recommend here? ___________________________

2. What makes you decide to go with that promo? _________________________

Pricing Strategy

Pricing is an important element in the marketing mix since it generates income for the
company. In setting price to the product, it is important to consider fixed and variable costs,
competition, objectives of the company, positioning strategies and the willingness of the
target market to pay.

Here are ways to compute firm’s pricing:

• Cost-plus Pricing. In this method the entrepreneur considers the cost of the
product then adds the desired profit in setting the selling price.

Cost-plus pricing = cost + intended profit

Steps in setting the price:
1. Calculate the total cost. Total cost includes the direct cost (materials
labor), indirect cost (shipping, packaging, storage), and fixed cost (rent,
electricity, water)
2. Determine the profit to be added on the cost. Two ways can be used in
determining the profit. A percentage of the cost can be used. Example:
total cost of the product is 150 pesos. The owner wants 20% minimum
profit on the product (150 x 0.20 =30 pesos). The retail price of the
product based on cost-plus pricing is (150 + 30 = 180) 180 pesos. Another
method can be used where the entrepreneur could simply add fixed amount
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 on selling price. Assuming total cost is 150 pesos and he desires to add a
fixed amount of 30 pesos, then the retail price would be 180 pesos.

• Target-return Pricing. In target-pricing, the selling price of the product is based

on the target return on investment (ROI). Consider the example above. Assuming
the total investment is 30,000 pesos, expected sales volume is 200 units and the
required profit is 20%. To recover the investment on the first year, the firm
should determine the price per unit of the item that includes the expected profit.

Steps in setting the price:

1. Multiply the total investment to the requires profit (30,000 x 0.2 = 6,0000)
2. Compute for the total required revenue which is the total investment plus
the required profit (30,000 + 6,000 = 36,000)
3. Compute for the unit price based on the total required revenue and the
number of units (36,000/200 units = 180 pesos)

• Value –based Pricing. In this pricing strategy, the entrepreneur can base the price
on the value created for the customer. Usually, value-based is the most profitable
form of pricing.
For example, a customer would want to have a cup of brewed coffee. He
could go to convenience store to purchase his coffee for a cost of 40 pesos or
he could go to Starbucks and pay 110 pesos for his coffee. In this situation, he
decided to go to Starbucks. In this aspect, value-based pricing depends on the
true-willingness of the customer to pay for the product.

• Competitor based Pricing. In this strategy, the entrepreneur can set the price in
comparison with his competitors and he could choose from three options – lower
the price, offer the same price or increase the price.

Self-Evaluation

A. What pricing strategy will you use in setting the price of your product? Explain.

B. How much is the cost of your product or service? What did you consider in
setting the selling price?

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