OBJECTIVES

At the end the lesson I will be able to:

1. have understanding on marketing mix and

2. describe the components of 7P’s of marketing.

Marketing Mix 4P’s Marketing Mix 7P’s
PLACE
PEOPLE
PRODUCT

TARGET
MARKET PROMOTION
POSITIONING

PRICE
PACKAGING
OBJECTIVES
At the end the lesson I will be able to Describe the Marketing Mix (7Ps)
in relation to the business opportunity vis-à-vis:
Product;
Packaging;
Price;
Promotion;
People;
Place; and
Positioning
 How can you create and accumulate customers?

PRICE
• The price must be one that the customer thinks is good
value for money.

• Prices have a great psychological effect on customers.

3. PRICE

The value that is put on

the exchange process.

List price
Discount
Allowances
Payment period
Credit terms
 3. PRICE
Pricing depends on:
the business objectives set by the business enterprise.
Price is a major factor for the customer in buying a product.
However, it is not the only factor such as in the case of buying
premium products.
Non-Price factor outweigh the price factor whenever a
customer is buying a premium item because
he or she is more particular about:
 the “premium-ness” in terms of quality,
 the status or image that the product brings,
 shorter waiting time or immediate delivery, and
 other such decision criteria.
 3. PRICE
How to find a product? Finding a right price for a product is not a simple matter of
adding a mark-up on the cost of a product or service as
some companies do.
The enterprise should set the prices of its products or services
based on its business objectives such as:
 Profit maximization.
 Revenue maximization.
 Market share maximization.
 Attainment of the desired prestige or quality leadership
 Penetration, Survival, or Liquidation
 Scarcity pricing or Market Skimming
 Cost Recovery
 Subsidy Pricing
 Marginal Pricing
 3. PRICE
How to find a right Finding a right price for a product is not a simple matter of
price for a product? adding a mark-up on the cost of a product or service as
some companies do.
The first three pricing
The enterprise should set the prices of its products or services
Strategies pertain to the based on its business objectives such as:
related dynamics of the  Profit maximization.
different price ranges applied  Revenue maximization.
across different product  Market share maximization.
 Attainment of the desired prestige or quality leadership
volumes or quantities while
 Penetration, Survival, or Liquidation
considering the product cost  Scarcity pricing or Market Skimming
incurred as these product  Cost Recovery
bought or sold.  Subsidy Pricing
 Marginal Pricing
 3. PRICE
Example: Table. 3 Profit, Revenue, and Share Maximization
Price Volume Total Revenues Total Costs Total Profits Unit Cost
P10 100 P1,000 P800 P200 P8.00
P12 90 P1,080 P750 P330 P8.33
P14 75 P1,050 P675 P375 P9.00
P16 60 P960 P600 P360 P10.00
P18 50 P900 P550 P350 P11.00
 3. PRICE
Example: Table. 3 Profit, Revenue, and Share Maximization
Table 3. shows an example
Price Volume Total Revenues Total Costs Total Profits Unit Cost of profit, revenue, and
P10 P1,000 market share maximization
100 P800 P200 P8.00
pricing strategies.
P12 90 P1,080 P750 P330 P8.33
P14 P1,050 Prices ranging from P10 to 18
75 P675 P375 P9.00
per unit have been market
P16 60 P960 P600 P360 P10.00 tested as shown in the first
P18 50 P900 P550 P350 P11.00 column.

The total revenue are computed by multiplying price with quantity These prices have resulted in
volumes (Second Column)
The total costs are computed in the fourth column ranging from 50 units at the
The fifth column calculates the total profits. price of P18 per unit to 100
units at the price of 10 pesos
per unit.
 3. PRICE
Example: Table. 3 Profit, Revenue, and Share Maximization
Price Volume Total Revenues Total Costs Total Profits Unit Cost
P10 100 P1,000 P800 P200 P8.00
P12 90 P1,080 P750 P330 P8.33
P14 75 P1,050 P675 P375 P9.00
P16 60 P960 P600 P360 P10.00
P18 50 P900 P550 P350 P11.00
At the price of P14 per unit, the profits are maximized at P375,
compared to the other price levels which yield to lower profits.

Unit cost is computed at the last column to illustrate its decline as volume goes up.
 3. PRICE
Example: Table. 3 Profit, Revenue, and Share Maximization
Price Volume Total Revenues Total Costs Total Profits Unit Cost
P10 100 P1,000 P800 P200 P8.00
P12 90 P1,080 P750 P330 P8.33
P14 75 P1,050 P675 P375 P9.00
P16 60 P960 P600 P360 P10.00
P18 50 P900 P550 P350 P11.00
The Revenue-maximizing price is derived by multiplying the different prices by their expected
demand volumes.
As shown in the table, the revenue-maximizing price is P12, generating total revenue of P1,080.
This revenue-maximizing price model is easier to derived than the profit-maximizing price.
 3. PRICE
Example: Table. 3 Profit, Revenue, and Share Maximization
Price Volume Total Revenues Total Costs Total Profits Unit Cost
P10 100 P1,000 P800 P200 P8.00
P12 90 P1,080 P750 P330 P8.33
P14 75 P1,050 P675 P375 P9.00
P16 60 P960 P600 P360 P10.00
P18 50 P900 P550 P350 P11.00
Market share maximization is achieved by the price that obtains the
highest volume of sales possible without sacrificing too much profitability.
As shown in the table, this market share-maximizing price is P10,
with a volume of 100 units.
At this low price, profits still realized.
 3. PRICE
Price Tolerance Survey
Market research approach in estimating the demand, given the different price level,
is to conduct a price tolerance survey of randomly selected respondents.
Assuming that 100 respondents are chosen (at 90% confidence level),
the respondents should be asked whether they would buy a product at, say, P10 a piece.
After securing their answers, the respondents should be queried if they would still buy at P12 a piece.
The surveyor should, subsequently, move up to the higher price levels.
There would be less and less respondents answering “yes” to the question.
The percentage of the respondents answering “yes” at a different price levels could be multiplied by
the estimated population of the target market to obtain the size of the demand.
Prices could be set at a premium to project a quality image and to distance the product from its
inferior competitors.
The idea is to attract customers who are willing to pay extra for the quality difference.
 3. PRICE
Price Tolerance Survey
Market research approach in estimating the demand, given the different price level,
is to conduct a price tolerance survey of randomly selected respondents.

At the other end, prices can be set very low to survive in a competitive market or to get rid of the of
mounting inventories and convert into cash.

The other objective of a low pricing strategy is to penetrate the market fully and overtake the
competition.

PRODUCTS that are very scarce or rare would appeal to wealthier customers who wish to belong to
an exclusive club of owners.
 3. PRICE
Pricing
 Premium Pricing
 Low Pricing
 Cost recovery pricing
charges a price that allows the organization to merely recover its full costs.
The purpose is to reinvest the sales proceeds to produce additional products
and reach out to more people.

 Marginal Pricing
sets the price higher than the variable costs of a product but lower than the
full costs in order to increase overall profitability.
This practice is done to utilize excess production capacity that would
otherwise be unused.
 3. PRICE
Pricing
There are other pricing objectives which the enterprise may have,
it may offer introductory or promotional pricing to launch a new product.

It may charge different prices in different geographical areas to take care

of additional logistic costs in farther locations or to accommodate the
lower purchasing power in poorer geographical areas.

Discount pricing may be given to loyal and regular customers to maintain

their patronage.