BASIC EDUCATION DEPARTMENT

Student No.
S.Y. 2023-2024
PRINCIPLES OF MARKETING
LESSON 5
Name: _____________________________________________________________ Date: _____________________________
Grade and Section: _______________________________________________ Teacher: _________________________

Lesson 5: Marketing Mix: Product and Price

Products: Goods, Services, or Experiences

A product is “anything that can be offered to a market for attention, acquisition, use or consumption that
night satisfy a want or need” (Kotler and Armstrong, 2014). Products can be goods, services, events, persons, places,
organizations, ideas, or a combination of these.
A product is the key element in the overall market offering, which may include both tangible goods and
services. There are products that are pure tangible goods such as salt, sugar or shampoo or products which are not
accompanied by services. There are also products that are pure services such as legal services or products that do
not involve tangible goods. In between pure tangible goods and pure services are good-and-services combinations,
such as restaurants, where goods are accompanied by services in buying the product.

Services are intangible products that involve activities that do not result in ownership, and are provided by
one entity or person for another entity or person. Services have four characteristics: intangibility, perishability,
variability, and inseparability.

Intangibility – services are intangible, which means that they cannot be seen, heard, smelled, touched, or tasted,
and the buyer cannot claim ownership once it has been availed of. When you avail of a haircut, the service is done
with your hair. The hairstylist works on your preferred hairstyle, but you have no ownership of tangible goods
related to the service.

Perishability – services cannot be stored for future use unlike goods that can be inventoried. Goods which are not
sold on a certain day can be sold on the next day, such as remaining stocks of noodles, rugs, or drinks. However,
services that are not availed of on a day are gone forever. For example, if a hotel with a 100-room capacity has only
40 rooms occupied on a certain day, the services for the 60 unoccupied rooms that day were practically gone.

Variability – Services are hard to replicate to all customers. There will always be variatons or differences because
not all customers are the same. In a class, for example, where the teacher is the service provider, each student will
listen to the same lecture, but will have varying understanding of the discussion. Some students may get the lecture
right away, while others may need to supplement their knowledge to understand the lesson better.

Inseparability – The consumer has to be present when the service is being rendered. When availing of a massage
from a spa, the customer has to be in the spa in order to receive the service. This is also referred to as simultaneous
consumption and production.
LEVELS OF A PRODUCT

 Core Benefit is the very reason a customer buys a product.

For example, a person buys a bar soap to cleanse his or her body.

 Generic Product is the no-frills version of the product.

For example, a soap is simply a hard bar that produces bubbles when wet.

 Expected Product is a set of attributes that a buyer normally expects to get when buying the product.
Customers expect soap to have a packaging and some scent.

 Augmented Product includes attributes and characteristics that set the product apart from its competitors.
These attributes can be its competitive advantage or unique selling proposition (USP). Soaps, for examples,
can have whitening or moisturizing benefits.

 Potential Product includes all the possible improvements or transformations that the product may
potentially undergo in the future.

BRANDING
Branding, or the identity of the product, is part of the product’s differentiation. The brand is a name, ter. Sign,
symbol, design, or a combination of these that identifies the maker or seller of a product or service. It can add value
to a consumer’s purchase and can dictate a more premium price. Customers attach, meaning and emotions to brands,
which can then lead to developing brand relationships.

PACKAGING
The packaging is the first thing that a consumer sees in a product. Traditionally, the main purpose of
packaging is to hold and protect the product. Now packaging has become an important marketing tool in
communicating the brand, features, and quality of the product.

LABELING
Labels are a means to identify the product and to communicate the name and other pertinent information
about the product. The label may include information such as name, volume/weight, product description, nutritional
information, ingredients, and contact information of the manufacturer/distributor. The label can communicate the
product’s positioning through the graphics and design on the label.

NEW-PRODUCT DEVELOPMENT PROCESS

Offering a new product to the market requires proper planning. In the new-product development process,
eight steps are needed to bring a new product to the market.

Idea Generation – Companies generate a lot of ideas, which may come from internal or external sources.

Idea Screening – reduces the number of ideas generated in the first step by dropping poor ideas and pursuing good
ones.
Concept Development and testing – comes when a good idea has been found viable. A product concept is a detailed
version of the idea. The marketer develops several product concepts based on an idea and determines how attractive
each concept is to the market.

Marketing Strategy Development – designed to introduce the product to the market.

Business Analysis – evaluates the attractiveness of the proposal based on costs, sales, and profit projections.
Product Development – sees the product concept transform into the physical form of the product. It evaluates if the
concept can indeed be developed into the actual product.

Test Marketing – happens after the concept test and product test have been successful. The product and its
proposed marketing program are tested by introducing them to a realistic marketing setting.

Commercialization – introduces the new product to the market and implements the proposed marketing strategies.

PRODUCT LIFE CYCLE

A product undergoes a life cycle in its presence in the market.

Some products stay long and prosper, while others eventually meet the
end after they have served their customers.
During product development, the company finds a new idea
and develops it into a product. Sales are nonexistent and the company
spends on product research and development.

Introduction stage, the product is released in the market but sales are slow. In this stage, the objective of the
company is to create awareness of the product’s existence.

The growth stage is where the product starts picking up sales. The sales increase as the product becomes known in
the market. The market share grows along with the increase in sales.

The maturity stage is where the product has reached its potential, so the sales level off and slow down. Brands in
this stage need to innovate their products in order to keep the interest of the consumers and to defend the brand
against competitors.

In the last stage, decline, sales and profits go down. The product loses its popularity and the company may choose
to maintain, harvest, or drop the product from its portfolio.

PRICING STRATEGIES
Consumers pay a price in exchange for the products they buy. Price is the sum of all values that customers
give up to gain the benefits of having or using a product. (Kotler and Armstrong, 2014).
Money is the most common payment of price exchange for a product. Price is the only element in the
marketing mix that generates revenue, as all the other elements incur costs.

FACTORS AFFECTING PRICING DECISIONS

 Product Cost – The cost involved in manufacturing goods or offering services have a direct impact on the
product’s price. Costs may include product development, research, testing, packaging, raw materials,
promotion, distribution, and others.
  Competitors – Competition also affects a product’s price. Consumers sometimes base their purchase
decision solely on the price of the product. If a competitor offers the same product with the same benefits at
a lower price, the consumer would patronize the competitor’s product.

 Overall Marketing Strategy – Companies must first decide on the overall marketing strategy for their
product. Clarifying the product’s positioning as well as identifying its consumers will easily lay down the
price decisions for the product.

 Economic Conditions – can have a very strong impact on consumer purchases, which may also affect pricing
decisions.

 Government Laws and Regulations – The government may sometimes impose price changes through laws
and regulations.

NEW PRODUCT PRICING STRATEGIES

 Market Skimming Pricing – Some brands with ah established credibility and a huge following opt to
introduce a new product with a high initial price to skim revenue layers from the market. This usually
happens to phone brands with a big number of fans. The phone would be introduced in the market at a high
price, and as the time goes on, the price is reduced gradually.

 Market Penetration – The company decides to offer a new product at a low initial price to quickly penetrate
the market. This attracts a big number of buyers who do not want to take the risk of trying out a new product
at its regular price.

PRODUCT MIX PRICING STRATEGIES

Product mix pricing strategies are used for products that are already part of a product mix. These strategies
include product line pricing, optional product pricing, captive pricing, by-product pricing, and product bundle
pricing.

 Product Line Pricing – involves determining price steps that take into account cost differences between
products in the line.

 Optional Product Pricing – A company may opt to offer accessories or optional products that are
complementary or can be used with the main product. This is called optional product pricing. A laptop brand
may offer a mouse, bag, screen protector, keyboard protector, VGA cable, and laptop sleeve as accessories.

 Captive Product Pricing – companies make consumable products that must be a long with a main product.

 By-product Pricing – In manufacturing main products, companies sometimes generate by-products, too. If
the by-product has no value to the company and is costly to dispose of, the company may seek a market for
this by-product to help offset the additional cost of getting rid of it.

 Product Bundle Pricing – Companies determine products that can be combined and offer the bundle at a
reduced price. This strategy is very popular in the restaurant industry.
PRICE ADJUSTMENT STRATEGIES
 Discount Pricing – involves reducing the price to reward the customers in several forms: cash discount,
quantity discount, or seasonal discount.

 Segmented Pricing – Companies may choose to offer different prices to account for differences in customers,
products, and locations. Segmented pricing involves selling a product at two or more prices, even if the
difference in prices is not based on cost differences.

 Psychological Pricing – Sometimes, companies use the psychology of prices as a pricing strategy. A lot of
retail stores in the Philippines use the 0.75 of 9 ending in their prices.

 Promotional Pricing – Companies can temporarily reduce prices to build demand or create excitement for
their products. With promotional pricing, consumers enjoy lower prices during a short period of time, which
create urgency to buy from the store.