PRINCIPLES of

MARKETING
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SUBJECT DESCRIPTION:
The course deals with the principles and practices in
marketing goods and services. It also focuses on the
development of integrated marketing programs that will
help grow the business

LEARNING COMPETENCIES
Define a product and differentiates the product,
services, and experiences
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What Is a Product?
Products, Services, and Experiences

Product is anything that can be offered in a market for

attention, acquisition, use, or consumption that might
satisfy a need or want
Experiences represent what buying the product or service
will do for the customer
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SERVICES are form of product that consist of activities ,

benefits, or satisfaction offered for sale that are
essentially intangible and do not result in the ownership
of anything.
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A company's offer to the marketplace often includes both

tangible goods and services. The continuum consists of:

1.pure tangible goods-consist of physical items that can

be touched and seen such as soap, shampoo.
2.tangible goods with accompanying services - such as an
automobile that offers accompanying services.
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3.hybrid offers –consist of equal parts of goods and

services such as restaurant.
4.services with accompanying minor goods- such as
airline trips with accompanying snacks.
5.pure services – such as those offered by doctor’s,
teachers .
6. Product and services
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1.The core product – this is the

benefit offering that satisfies a need
and want.
2.Actual Product- This is the product
that people will buy to get the benefit
that satisfies a need. May have five
characteristics that are combined to
deliver core product benefits.
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3. The Augmented product includes

any additional consumer services
and benefits built around the core
and actual products
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Products may be:

A. Consumer Products
B. Industrial Products
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A. Consumer products are products and services for

personal consumption
Classified by how consumers buy them
1. Convenience products
2. Shopping products
3. Specialty products
4. Unsought products
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Convenience products are consumer products and

services that the customer usually buys frequently,
immediately, and with a minimum comparison and
buying effort
Newspapers
Candy
Fast food
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Shopping products are consumer products and services

that the customer compares carefully on suitability,
quality, price, and style
• Furniture
• Cars
• Appliances
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Unsought products are consumer products that the

consumer does not know about or knows about but does
not normally think of buying
• Life insurance
• Funeral services
• Blood donations
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B. Industrial products are products purchased for further

processing or for use in conducting a business
• Classified by the purpose for which the product is purchased
1. Materials and parts
2. Capital
3. Raw materials
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Capital items are industrial products that aid in the

buyer’s production or operations
Materials and parts include raw materials and
manufactured materials and parts usually sold
directly to industrial users
Supplies and services include operating supplies, repair
and maintenance items, and business services
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Types of Service Industry

• Government
• Private not-for-profit organizations
• Business services
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• Nature and Characteristics of a Service

• 1. Service intangibility- which cannot be stored for
later sale. Services cannot be seen, tasted, felt heard,
or smelled before they are bought.
• 2. Service inseparability- which are produced and
consumed at the same time and cannot be separated
from their providers, whether the providers are people
or machines.
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• 3. Service variability- whose quality may greatly

defending on who provides them and when, where and
how.
• 4. Service perishability- which cannot be stored for
later sale or use.
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Product Mix is defined as the total assortment of products

a company sells.

Let us say Co XYZ has the following products:

Beverages, breakfast cereals, chilled dairy, coffee and
creamer creations
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• Four Dimensions of Product Mix

a. Width - number of product lines that a company offers.
b. Length – number of different products in a product line.
c. Depth – the different variations of a product.
d. Consistency – how closely related the products are in
terms of production, pricing, distribution.
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Boston Consulting Group (BCG) Matrix,

adopted from Henderson’s Product Portfolio in
1970,is relevant for a company whose
objective relates to market share and industry
growth rate.
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Classification of Business Products:

a. Dogs – products of the business with low market share
in a low growth market.
b. Cows – products of the business with high market share
in a mature and slow growing industry.
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Classification of Business Products:

c. Stars – products of the business with large
market share in a fast growing industry.

d. Question Mark – products of the business with

low market share in a high growth market.
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Product Life Cycle

1. Introduction stage – is a new and innovative
product.
2. Growth Stage – this has been in the market for
a time and has gained popularity.
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Product Life Cycle

3. Maturity Stage – this has been in the market for
a long time.
4. Decline Stage – they are not mainstream today.
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LEARNING COMPETENCIES
Identify and describe the factors to consider when
setting prices and new product pricing and its general
pricing approaches
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PRICE

Defined as the value of product attributes expressed in

monetary terms which consumer pays or is expected to pay
in exchange and anticipation of the expected or offered
utility
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IMPORTANCE OF PRICE

Can PRICE indicate the quality of product?

Peter Ramsden
“Often price creates a first impression of the quality of the
products/services and other value-based judgements”
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PRICE
• This is the only element in the marketing mix that brings
in the revenues. All the rest are costs
• Price communicates the value positioning of the product.
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Company
Lower
Higher misses
perceived
price potential
value
profits
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Company
Lower fails to
Lower price perceived harvest
value potential
profits
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Factors to Consider When Pricing

• Marketing Objectives
• Fixed and Variable Costs (Fixed- cost that does
not change with an increase or decrease in the
amount of goods or services produced; variable
– cost that is dependent on the number of
units produced or rendered)
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Factors to Consider When Pricing

• Target Group and Willingness to Pay – consider
the value attached by the target market to the
product offering.
• Competition
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PRICING OBJECTIVE
The company first decides where it wants to position its
market offering. The objective could be :-
• Survival
• Maximize current profit
• Maximize market share
• Maximize market skimming
• Product - quality leadership
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DETERMINING DEMAND
Each price will lead to a different level of demand and
have a different impact on a company’s marketing
objectives.
Demand and price are inversely related i.e.
Higher the price, lower the demand
Company needs to consider :-
• Price sensitivity
• Price elasticity of demand
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PRICING STRATEGY
1. Product mix Pricing Strategy
• Product line pricing is a strategy used when a company has ore
than one product in a line and would like to create different
value levels in the minds of the consumers.
• Optional Product pricing is a strategy used when a company
sells a base product at a low price but sells complementary
accessories at a higher price.
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• Captive product pricing is a strategy used when a

company sells products that must be used with the
main product.
• By-product pricing is a strategy used when a
company prices by products that have no value for
the company so that disposal and storage will not
add to the cost of the product.
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• Product Bundle pricing is a strategy used when a

company sells several products into one combined
product at a reduced price.
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2. NEW PRODUCT PRICING

a. Market-skimming pricing
b. Market- penetration pricing
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Market-skimming pricing
is a strategy with high initial prices to “skim” revenue
layers from the market

Market Penetration
sets a low initial price in order to penetrate the market
quickly and deeply to attract a large number of buyers
quickly to gain market share
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3. General Pricing Approaches

1. Cost-based pricing -this pricing approach is based on

the cost of producing, distributing, and promoting the
product.
There are two cost-based pricing approaches:
1. Cost plus pricing is pricing a product by
determining the cost and then adding a mark-up.
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Mark-up Price = Unit Product Cost
Desired Return on Sale
Example: Cost of producing 10 pcs. Of sugar cookies
• Php200.00 worth of ingredients
• Php2.00 for a zip bag
• Php25.00 for 30 mins. Labor
• Cost of Distributing: Php8.00 per 10 pcs (cost of jeepney
ride)
• Desired return of sale is 20%
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Unit Product Cost = 200 + 2 + 25 + 9
----------------------- = 23.50
10
Mark Up Price = 23.5 = 29.37
.80
The Mark-up price is P29.37 per unit has been
computed. We need to consider our peso denominations
when tagging a price. Thus, it will be better to price it at
Php29.50
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2. Break-even pricing is pricing a product where there is
no loss or gain.
Break-even price = unit product cost = Php23.50.

b. Competition-based pricing - this pricing approach

benchmarks on competitor’s price.
c. Value-base pricing – is setting a price based on the
perceived value of the product. Another term for this is
opportunity pricing
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3. Price Adjustment Strategies
a. Discount and allowance pricing is a straight
reduction in price on purchase.
b. Segmented pricing – companies set different
prices for a product to consider behavioral and
psychological factors even if there is no significant
difference in production and distribution cost.
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3. Price Adjustment Strategies
b. Segmented pricing
• market segments – students, senior citizens
• different locations – seats on a concert
• different time` - time of showing
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3. Price Adjustment Strategies
c. Psychological Pricing is defined as setting prices
using the customer’s emotional response to encourage
sales.
• Reference pricing refers to how much
consumers anticipate paying for a product in
relation to competition and advertisement.
• Odd-even pricing – pricing method that considers
the belief that certain prices are more attractive
to buyers.
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3. Price Adjustment Strategies
d. Promotional pricing is adjusting prices to entice
customers to buy during the discounted price offering
period.
• Special event pricing
• Low- interest financing
e. Geographical pricing- based on location.
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c. Captive-product pricing
involves products that must be used along with the main
product
d. Two-part pricing
In a two-part pricing system firms charge a fixed fee for
the right to use their goods and then charge a per unit
fee for each unit purchased
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e. By-product pricing refers to products with little or no

value produced as a result of the main product.
Producers will seek little or no profit other than the cost
to cover storage and delivery.
f.

f. Product bundle pricing combines several products at a

reduced price
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Price Adjustment Strategies

Discount and
Segmented Psychological
allowance
pricing pricing
pricing

Promotional Geographicp Dynamic International

pricing ricing pricing pricing
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a. Discount and allowance pricing reduces prices to reward

customer responses such as paying early or promoting
the product
• Discounts
• Allowances
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a. Discount and allowance pricing reduces prices to reward

customer responses such as paying early or promoting
the product
• Discounts
• Allowances
b. Segmented pricing is used when a company sells a
product at two or more prices even though the
difference is not based on cost
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c. Psychological pricing occurs when sellers consider the

psychology of prices and not simply the economics
d. Reference prices are prices that buyers carry in their
minds and refer to when looking at a given product
• Noting current prices
• Remembering past prices
• Assessing the buying situations
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e. Promotional pricing is when prices are temporarily

priced below list price or cost to increase demand
• Loss leaders
• Special event pricing
• Cash rebates
• Low-interest financing
• Longer warrantees
• Free maintenance
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LEARNING COMPETENCIES
Discuss the structure of distribution channels, its
functions, and the nature of supply chain management
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MARKETING CHANNEL
A marketing channel helps by getting the right products to
the right consumer in time for purchase. This channel
terminology falls under the P of physical distribution in
the four P's of the marketing mix.
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TYPES OF CHANNEL AND DISTRIBUTION

I. Distribution of channel goods:-
There are five channels are used for distribution of
tangible goods to ultimate consumer.
a) Producer---->Consumer:
The shortest, simplest channels of distribution for
distributing gods are from producer to consumer. It
involves no middle man. The producer may sell from
door to door or by mail.
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Door to Door:-
In these channels companies use their representatives to
sell their gods from door to door such as insurance
magazines, newspapers, milk etc.
By Mail:-
Some companies also sell their products by mails. A
farmer sells their fruit and vegetables directly to
consumer at road is also using this method. It is short
and direct method
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b) Producer --> Retailer --> Consumer:-

Many large retailers buy directly from manufacturers and
agricultures’ large no. of our purchases are mad through
this channel such as automobiles, clothing, gasoline etc.
In this case manufacturers keep contact with retailers,
take purchase orders. The retailers then sell to ultimate
consumers.
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c. Producer --> Wholesaler --> Retailer --> Consumer:-

This type of channel mostly used by small manufacturers
and small retailers to distribute such things that have a
large market need. The products such as drugs, lumber,
hardware and many food items are distributed in such
channel process.
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d) Producer --> Agents --> Retailers --> Consumers:-

Instead of using wholesaler many producers prefer to use
manufacturer’s agents, a broker or some other agent’s
middleman to reach the retail market. A glass marker
selected a food broker to reach store market.
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e) Producer --> Agent --> Wholesaler --> Retailer -->

Consumer:-
To reach small retailers, the producers often use agent
middleman, who in turn call on with wholesales that sell
to small stores. Agent can be especially useful for
making contacts and bringing buyers and sellers
together. They are common in food industry, where they
are called “food brokers”.
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2. Channels for Distribution of Business Gods:-

a. Producers --> Industrial Users:-

This direct channel is used for most expensive products.
Manufacturers of large installations such as air planes,
generators etc. use this channel.
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b. Producer --> Industrial Distribution --> Users:-

Producers of operating supplies and small accessory
equipment frequently use industrial distributors to reach
their market.
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c. Producer --> Agent --> User:-

Firms without their own marketing department find this
channel. Also a company that wants to introduce a new
product or enter a new market may prefer to use agents
rather than its own sales force.
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d) Producer --> Agent --> Industrial Distributers --> Users:-

This channel to similar to previous one. It is used when it
is not possible to sell through agents directly to business
users.
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3. Distribution of Services:-
The intangible nature of services creates special
distribution requirements. There are only two common
channels.
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a. Producer --> Consumer

As service is intangible so it requires direct contact b/w
consumer and producer. Thus direct channel is used, as
for many professional services such as health, care, legal
advice and personal services as hair cutting etc.
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b. Producer --> Agent --> Consumer:-

While direct distribution is often necessary for a service
to be performed, producer consumer contact may not be
required for key distribution activities; Agents frequently
assist a service without producer. Many services as
travel, loading, advertising media and insurance use
agents.
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b. Producer --> Agent --> Consumer:-

While direct distribution is often necessary for a service
to be performed, producer consumer contact may not be
required for key distribution activities; Agents frequently
assist a service without producer. Many services as
travel, loading, advertising media and insurance use
agents.
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b. Producer --> Agent --> Consumer:-

While direct distribution is often necessary for a service
to be performed, producer consumer contact may not be
required for key distribution activities; Agents frequently
assist a service without producer. Many services as
travel, loading, advertising media and insurance use
agents.
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LEARNING COMPETENCIES
Define and identify relevant promotional tools, namely,
advertising, sales promotion, personal selling, public
relations, and direct marketing to create awareness and
persuade the target market to buy the product or
patronize the service
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and Consumer Analysis
PROMOTION MIX
1. Advertising
2. Sales Promotion
3. Sales Promotion
4. Publicity
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PROMOTION

From a market perspective, promotion serves three

essential roles-it informs, persuades and reminds
prospective and current customers and other selected
audience about a company and its products.
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1. To Inform:
note: A producer must inform middleman as well as business
users and ultimate consumers about a product.
Wholesalers in turn must inform retailers and retailers
must inform consumers.
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2. To Persuade:
note: In our economy of a abundance, we need strong
persuasive
promotion, because consumers have many alternatives to
choose from.
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3. To remind:
Consumer also must be reminded about products
availability and its potential to satisfy
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PROMOTION MIX
Determining the promotional mix:-

A promotional mix is an organization’s combination of

personal selling, advertising sales promotion and public
relation.
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The main purpose of promotion is to attract customers and

stimulate them to act in the desired manner
Four Basic Elements of Promotional Mix
1. Advertising is the dissemination of information by non-
personal means through paid media where the source is
the sponsoring organization.
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2. Personal selling is the dissemination of information by

non-personal methods, like face-to-face, contacts
between audience and employees of the sponsoring
organization. The source of information is the sponsoring
organization.
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3. Sales promotion is the dissemination of information

through a wide variety of activities other than personal
selling, advertising and publicity which stimulate
consumer purchasing and dealer effectiveness.
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4. Publicity is the disseminating of information by personal

or non-personal means and is not directly paid by the
organization and the organization is not the source.
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The elements of advertising are:

1. It is a mass communication reaching a large group of
consumers.
2. It makes mass production possible.
3. It is non-personal communication, for it is not delivered
by an actual person, nor is it addressed to a specific
person.
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The elements of advertising are: (Cont..)

4. It is a commercial communication because it is used to
help assure the advertiser of a long business life with
profitable sales.
5. Advertising can be economical, for it reaches large
groups of people. This keeps the cost per message low.
6. The communication is speedy, permitting an advertiser to
speak to millions of buyers in a matter of a few hours.
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The elements of advertising are: (Cont..)

7. Advertising is identified communication. The advertiser
signs his name to his advertisement for the purpose of
publicizing his identity.
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Newspapers and magazines;

a. On radio and television broadcasts;
b. Circular of all kinds, (whether distributed by mail, by
person, thorough tradesmen, or by inserts in packages);
c. Dealer help materials,
d. Window display and counter – display materials and
efforts;
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Newspapers and magazines; (cont..)

e. Store signs, motion pictures used for advertising,
f. Novelties bearing advertising messages and Signature of
the advertiser,
g. Label stags and other literature accompanying the
merchandise
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The basic objectives of an advertising programme may be

listed as below:
1. To stimulate sales amongst present, former and future
consumers.
2. To communicate with consumers.
3. To retain the loyalty of present and former consumers.
4. To increase support.
5. To project an image.
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CLASSIFICATION AND TYPES OF ADVERTISING

1. Product – Related Advertising
It is concerned with conveying information about and
selling a product or service
A. Pioneering Advertising
B. Competitive Advertising
C. Retentive Advertising
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2. Public Service Advertising

This is directed at the social welfare of a community or a
nation.
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3. Functional Classification Based on the following:

I. Advertising Based on Demand Influence Level.
A. Primary Demand (Stimulation)
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B. Selective Demand (Stimulation)

II. Institutional Advertising
III. Product Advertising 10
A. Informative Product Advertising
B. Persuasive Product Advertising
C. Reminder-Oriented Product Advertising
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4. Advertising based on Product Life Cycle

A. Consumer Advertising
B. Industrial Advertising
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5. Trade Advertising
A. Retail Advertising
That sell services to the public, such as beauty shops,
petrol pumps and banks.”
B. Wholesale Advertising
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6. Advertising Based on Area of operation

A. National advertising
B. Local advertising
C. Regional advertising
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7. Advertising According to Medium Utilized

The most common classification of advertising is by the
medium used. For
example: TV, radio, magazine, outdoor, business
periodical, newspaper and direct mail advertising.