1

Module

1
need them.

Entrepreneurial Concept
30 minutes

Terms to Remember
1. BUSINESS it is an organization that provides goods and services to others who want or

2. BUSINESS PLAN it is a plan that works for a business to look ahead, allocate resources, focus on key points, and prepare for problems and opportunities. 3. ENTREPRENEURSHIP is the process of creating of something new with the value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.

CONCEPT OF BUSINESS1 A business can be defined as an organization that provides goods and services to others who want or need them. When many people think of business careers, they often think of jobs in large wealthy corporations. Many business-related careers, however, exist in small businesses, nonprofit businesses, government agencies, and educational settings. Furthermore, you don't need a degree in business to obtain many of these positions. In short, every sector of our economy needs people with strong overall skills that can be applied to business-type careers.
(Source: http://www.class.umn.edu/business_and_cla_degrees/what_is_business.html) 1

WHY PEOPLE GO INTO BUSINESS? Being entrepreneurial means being able to identify, start, and maintain a practical and profitable business, particularly a small enterprise. That is why, having a business have a tremendous rewards but be sure to weigh prospective returns against risks and losses.

REWARDS: Having unlimited opportunity to make money Being your own boss Tapping your creativity Overcoming challenges and finding fulfilment Helping others and Building an entrepreneurial legacy
(Source: Excerpt from the book of Hisrich, Peters, and Shepherds Copyright, 2008 - Entrepreneurship 7th Edition)

RISKS: Possibility of failure Unpredictable business conditions Long hours of work Unwanted responsibilities

CONCEPT OF ENTREPRENEURSHIP The concept of an entrepreneur is further refined when principle and terms from a business, managerial, and personal perspective are considered. In particular, the concept of entrepreneurship from personal perspective has been thoroughly explores in this century. The exploration is reflected in the following three definitions of an entrepreneur.

In almost all of the definitions of entrepreneurship, there is agreement that we are talking about a kind of behaviour that includes: Initiative talking The organizing and reorganizing of social and economic mechanisms to turn resources and situation to practical account The acceptance of risk or failure

To an economist, an entrepreneur is one who brings resources, labor materials, and other assets into combinations that make their value greater than before, and also one who introduces charges, innovations, and a new order.

To a psychologist, such a person is typically driven to a certain forcesneeded to obtain or attain something, to experiment, to accomplish, or perhaps to escape the authority of others.

To one businessman, an entrepreneur appears as a threat, an aggressive competitor, whereas to another businessman the same entrepreneur may be an ally, a source of supply, a customer, or someone who creates wealth for others, as well as finds better ways to utilize resources, reduces waste, and produce jobs others are glad to get.

Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by individuals who assume the major risks in terms of equity, time, and/or career commitment or provide value for some product or service. The product or service may or may not be new or unique, but value must somehow be infused by the entrepreneur by receiving and locating the necessary skills and resources.

Although each of these definitions views the entrepreneur form a slightly different perspective, they all contain similar notions, such as newness, organizing, creating, wealth and risk taking. Yet each definition is somewhat restrictive, since entrepreneurs are found in all professions education, medicine, research, law, architecture, engineering, social work, distribution, and the government. To include all types of entrepreneurial behaviour, the following definition of entrepreneurship will be foundation of this book.

Entrepreneurship is the process of creating of something new with the value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.

This definition stresses three basic aspects of being entrepreneur: 1. Entrepreneurship involves the creation process creating something new of value. The creation has to have value to the entrepreneur and value to the audience for which it is developed. This audience can be: The market of organizational buyers for business innovations, The hospitals administration for new admitting procedure and software, Prospective students for a new course or even college of entrepreneurship; or The constituency for a new service provided by a non-profit agency.

2. Entrepreneurship requires the devotion of the necessary time and effort Only to those going through the entrepreneurial process appreciate the significant amount of time and effort it takes to create something new and make it operational. As one entrepreneur so briefly, While I may have worked as many hours in the office while I was in industry, as an entrepreneur I never stopper thinking about the business. 3. It involves the rewards of being an entrepreneur. The most important of these rewards is independence, followed by personal satisfaction. For profit entrepreneurs, the monetary reward also comes into play. For some profit entrepreneurs, money becomes the indicator of the degree of success achieved. Assuming the necessary risks is the final aspect of entrepreneurship. Because action takes place over, and the future is unknowable, an action is inherently uncertain. This uncertainty is further enhances by the novelty intrinsic to entrepreneurial actions, Such as the creation of a new product, new services, new ventures, and so on.

Entrepreneurs must decide to act even in the face of uncertainty over the outcome of that action. Therefore, entrepreneurs respond to, and create, change through their entrepreneurial actions, where entrepreneurial action refers to behaviour in response to a judgemental decision under uncertainty about a possible opportunity for profit.

ENTREPRENEURS VERSUS INVENTORS There is great deal of confusion about the nature of entrepreneur versus an inventor. An inventor is an individual who creates something for the first time, is a highly driven individual motivated by his or her own work and personal ideas. Besides being a highly creative, an inventor tends to be: well educated, with college, or most often, post-graduate degrees; has family, education, and occupational experiences that contribute to creative development and free thinking; is problem-solver able to reduce complex problems to simple ones; has a very highly level of self-confidence; is willing to take risks; and has the ability to tolerate ambiguity and uncertainty.

A typical inventor places a high premium on being an achiever and measures achievement by the number of inventions developed and the number of patents granted. An inventor is not likely to view monetary benefits as measure of success.

As indicated in this profile, an inventor differs considerably from an entrepreneur. Whereas as entrepreneur falls in love with the organization (the new venture) and will do almost anything to ensure its survival and growth, an inventor falls in love with the invention and will only reluctantly modify the invention to make it more commercially feasible. The development of a new venture based on an inventors work often requires the expertise of an and a team approach, as many inventors are unable to focus on just one invention long enough to commercialize it. Inventors really enjoy the process of inventing, not implementing.

ENTREPRENEURIAL PROCESS The process of pursuing a new venture is embodied in the entrepreneurial process, which involves more than just problem solving in a typical management position. An entrepreneur must find, evaluate, and develop an opportunity by overcoming the forces that resist the creation of something new. The process has four distinct phases: 1. identification and evaluation of opportunity; 2. development of business plan; 3. determination of the required resources, and 4. management of the resulting enterprise

Although these phases proceed progressively, no one stage is dealt with in isolation or its totally completed before work on other phases occurs. For example, to successfully identify and evaluate an opportunity, an entrepreneur must have in mind the type of business desired.

IDENTIFY AND EVALUATE THE OPPRTUNITY Opportunity identification and evaluation is a very difficult task most good business opportunities do not suddenly appear, but rather result an entrepreneurs alertness to possibilities or, in some cases the establishment of mechanisms that identify potential possibilities. For

example, one entrepreneur asks at every cocktail party whether anyone is using a product that does not adequately fulfil its intended purpose. This person is constantly looking for a need and an opportunity to create a better product. Another entrepreneur always monitors the play habits and toys of her nieces and nephews. This is her way of looking for any unique toy product niche for a new venture.

DEVELOP A BUSINESS PLAN A good business plan must have developed in order to exploit the defined opportunity; this is very time-consuming phase of the entrepreneurial process. An entrepreneur usually has not prepared a business plan before and does not have the resources available to a good job. It is important to understand the basic issues involves as well as the three major sections of the plan. A good business plan is essential to developing the opportunity and determining the resources requires, obtaining those resources, and successfully managing the resulting venture.

DETERMINE THE RESOURCE REQUIRED The entrepreneur must determine the resources needed for addressing the opportunity. This process starts with an appraisal of the entrepreneurs present resources. Any resources that are critical need to be differentiated from those that are just helpful. Care must be taken not to underestimate the amount and variety of resource needed. The entrepreneur should also assess the downsize risks associated with insufficient or inappropriate resources.

The next step in the entrepreneurial process is acquiring the needed resources in a timely manner while giving up as little control as possible. An entrepreneur should strive to maintain as large an ownership position as possible, particularly in the start-up stage. As the business develops, more funds will probably be needed to finance the growth of the venture, requiring more ownership to be relinquished. The entrepreneur also needs to identify alternative suppliers or these resources, along with their needs and desires. By understanding resource supplier needs, the entrepreneur can structure a deal that enables the resources to be acquired at the lowest possible cost and with the least loss of control.

MANAGE THE ENTERPRISE After the resources are acquired, the entrepreneur must use them to implements the business plan. The operational problems of the growing enterprise must also be examined. This involves implementing a management style and structure, as well as determining the key variables for success. A control system must be established, so that any problem areas be quickly identified and resolved. Some entrepreneurs have difficulty managing and growing venture they created.

Module

2
Terms to Remember

What to Produce? Product Concept

30 minutes

1. ADVANTAGES - these are what these features can do. 2. BENEFITS - these are the advantages that meet the explicit needs and wants of the customers. 3. CUSTOMER VALUE it is the difference between the values the customer gains from owing and using the product and the costs of obtaining the product. 4. FEATURES these are the product attributes offered by a company. They are proof of a benefit. 5. NEED it is a state of felt deprivation; basic reason or minimum requirement consumers look for in a product or service; they are called the qualifying gatekeeper dimensions in a purchase. 6. PRODUCT anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, people, places, organizations and ideas. 7. WANTS it is the form taken by a human need as shaped by culture and individual personality; determining dimensions among many choices. 8. MARKETING is process of continuously and profitably satisfying the needs, wants and expectations of the target market superior than competition. 9. CORE PRODUCT it is the core benefit that a buyer gets from purchasing the product. 10. ACTUAL PRODUCT it is the actual product refers to the products brand name, quality level, packaging, design and features. 11. BRAND it is a name, term, sign, symbol, design, or combination of theses, intended to identify the goods and services of one seller or group of sellers and to differentiate them form those competitors. 12. PACKAGING the activities of designing and producing the container or wrapper for a product.

13. AUGMENTED PRODUCT it is the additional consumer services and benefits. These include post-sales services, warranties, repair services and toll-free number to call in case of problems.

(Source: Excerpt from the book of Suplico, Garcia & Esguerra, Copyright, 2008- International Marketing)

THE PRODUCT

CORE PRODUCT Kotler et al. (2005) define core product, in reality, as the core benefit that a buyer gets from purchasing the product. Thus, the core benefit answers the question What the buyer is really buying? In designing a product, it is important to know the core benefit that the consumer is looking for. Thus, a consumer purchasing a suitable and good-quality face powder is not really buying cosmetic but hope of becoming beautiful.

ACTUAL PRODUCT According to Kotler et al. (2005), the actual product refers to the products brand name, quality level, packaging, design and features.

1. Brand Profit can be gained form branding. If a consumer is impressed by a product, it will easier for him/her top purchase it because of a simple name he/she cab associate the product with. It is less likely for him/her be swayed by an alternative. Brand is a name, term, sign, symbol, design, or combination of theses, intended to identify the goods and services of one seller or group of sellers and to differentiate them form those competitors. 2. Quality level Efforts should always be made to give the customer the best quality at any given price. 3. Packaging Packaging plays two roles to protect the product and to promote the product. Packaging is very vital in establishing perceived quality. It is crucial in building the

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image of the product. Moreover, the package protects their product from hazards along its journey to the final customer. 4. Design and Features The product must be developed or improved continuously to suit the customers need. Its design and features must be used to create competitive advantage.

AUGMENTED PRODUCT Kotler et al. (2005) define augmented product as the additional consumer services and benefits. These include post-sales services, warranties, repair services and toll-free number to call in case of problems.
(Source: Excerpt from the book of Josiah Go Copyright, 1992 - Marketing Mix: Strategy in the Philippine Setting)

IMPORTANCE OF KNOWING THE NEEDS & WANTS OF THE PEOPLE IN PRODUCING A PRODUCT Marketing is no longer the satisfaction of needs only. Since needs are only basic requirements, they are non-motivating reasons for consumers to purchase. The challenge is in the satisfaction of wants and expectations which are motivating factors for consumers to purchase. This becomes more relevant when wants become merely the basic minimum requirements of product or service over time.

Remote control for coloured television for instance, was a want when it was newly introduced in the market. It is now a basic need or a minimum requirement in buying coloured television among the class AB households.

Some entrepreneurs would even go beyond satisfying customers. They would aim to delight and surprise customers with services they never expected. TYPES OF PRODUCTS 1. 2. 3. 4. Goods Services Places Ideas 5. 6. 7. Events Persons Properties

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WHAT PRODUCT SHOULD HAVE? 1. FEATURE, ADVANTAGES & BENEFITS Entrepreneurs must convert consumer needs and wants into product or service feature that will provide benefits sought by their consumers. Features are product attributes offered by a company. They are proof of a benefit. Advertising agencies call these reasons why. Advantages are what these features can do. Benefits are advantages that meet the explicit needs and wants of the customers. They are what the customers will get when they use the product or service. Benefits therefore provide a favourable result in the future when the customer uses the product or service. Benefits answer the question: Whats in it for me?

A businessman suffering from colds and nasal congestion while about to leave for an important foreign trip may be served by a saleslady of a nearby Mercury Drug outlet this way: Vicks Inhaler is a pocket-size inhalation device with soothing vapours (features/ which provide immediate relief (advantage) of nasal congestion, thus, removing distraction from your work (benefit) while you are abroad.

Benefits differ to different customers. Benefits not desired by a customer are of doubtful value. Entrepreneurs must understand his customers needs and wants so that the proper benefits can be offered. Benefits must be emphasized more than the features, especially when the prices are higher.

2. CUSTOMER VALUE It is the difference between the values the customer gains from owing and using the product and the costs of obtaining the product.

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For example, FedEx customers gain a number of benefits. The most obvious are fast and reliable package delivery. However, when using FedEx, customers also may receive some status and image values. Using FedEx usually makes both the package sender and the receiver feel more important. When deciding whether to send a package via FedEx, customers will weigh these and other values against the money, effort and psychic costs of using the service. Moreover, they will compare the value of using FedEx against the value of other shippers DHL, etc. and select the one that give them the greatest delivered value.

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Concept Check
1. Identify the product features, advantage and benefits of Nokia Cell phone unit as shown in figure 1.0. Dimensions

Form: slide Dimensions: 95.2 x 46.1 x 15.9 mm Weight (with battery): 110 g Volume: 52 cc

Display and User Interface

Figure 1.0

Size: 2.2" Resolution: 320 x 240 pixels (QVGA) 16 million colours Ambient light sensor (ALS)

Colours Available colours: o Petrol Blue o Purple o Pink o Red o Lime o Raw Aluminium Personalisation

Customisable profiles Video ringtones Ringtones: mp3, .mid, AAC, eAAC, eAAC+, WMA Themes o wallpapers o screensavers o ringtones o pre-installed themes o changeable colour themes

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Messaging
1. Faster data connections mean you can quickly transfer files, enjoy chat, and update your status and stay in constant touch with your friends. 2. Sync your existing email and access it from your phone the most common protocols are supported, such as SMTP, IMAP4 and POP3. 3. Use Nokia Messaging to set up your own email account, or get a free account from Ovi Mail. 4. You can also access other 3rd party email services, like Hotmail, directly from your phone. 5. Send instant messages and chat with your friends with Ovi Contacts.

______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________

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Module

Who is my Market? The Concept of Market Segmentation and Targeting

30 minutes

Terms to Remember
1. DIFFERENTIATION SEGMENT segment of the market which requires superior product or service. 2. LOW-COST SEGMENT segment of the market which has lesser needs and is more particular to price. 3. MARKET it is the set of all actual and potential buyers of a product or service. 4. MARKET POSITIONING it is the arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of the target consumers. 5. MARKET SEGMENTATION dividing a market into smaller groups of buyers with distinct needs, characteristic, or behaviours who might require separate products or marketing mixes. 6. MARKET TARGETING it is the process of evaluating each market segments attractiveness and selecting one or more segments to enter. 7. PRIMARY TARGET MARKET (PTM) it is a segment of the market which is the logical volume customers. 8. TARGET MARKET- it is a set of buyers sharing common needs or characteristics that the company decides to serve. 9. DEMOGRAPHIC SEGMENTATION dividing the market into groups based on demographic variables such as age, sex, family life-cycle, income, occupation, education, religion, race, and nationality.

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(Source: Excerpt from the book of Armstrong and Kotler Copyright, 2003 - Introduction to Marketing, 6th Edition)

REASON FOR SEGMENTING THE MARKET Businesses today recognize that they cannot appeal to all buyers in the marketplace or at least not all the buyers in the same way. Buyers are too numerous, too widely scattered, and too varied in their needs and buying practices. Moreover, the businesses themselves vary widely in their abilities to serve different segments of the market. Rather than trying to compete in an entire market, sometimes against superior competitors, each company must identify the parts of the market that can be served best and most profitably.

Thus, businesses are being more choosy about the customers with whom they wish to connect. Most have moved away from mass marketing toward market segmentation and targeting identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each. Instead of scattering their marketing efforts, businesses are focusing on the buyers who have greater interest in the values they create best.

There are three major steps in target marketing: 1. Market Segmentation dividing a market into smaller groups of buyers with distinct needs, characteristic, or behaviours who might require separate products or marketing mixes. 2. Market Targeting the process of evaluating each market segments attractiveness and selecting one or more segments to enter. 3. Market Positioning arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of the target consumers.

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(Source: Excerpt from the book of Josiah Go, Copyright, June 1997 Marketing Plan: Building the Profitable Preferred Brand)

WHAT IS A VALID MARKET SEGMENT? Market segmentation is partitioning of a market into a smaller parts. By identifying different groups of people with similar needs, a firm can try to satisfy their customers better and more profitably thru assembling a marketing mix effort for arch market segment. Since 1972, regular worldwide studies by Profit Impact on Market Strategies (PIMS) of the Strategic Planning Institute of the US have proven that the higher level of market shares held by a firm (given a profit maximizing marketing mix). This is because both the executive time and resources are better allocated to a focus group in the marketplace. The secret therefore, is in spotting and promptly acting on consumer needs as well as differences in consumer needs.

Philippine Life, in the life insurance arm of the Metrobank group, attained the number 1 in first year premiums position in group insurance in 1995 after focusing for three years on that segment providing employee benefit. Johnson and Johnson chose the toiletry segment instead of the cosmetic segment for their face powder. Instead of coming with many powder shades as in cosmetics, they came up with basic natural colour powder that can be used daily. Mansmith and Fielders, Inc. have always focused on the marketing executives as their target segment and have resisted offering non-marketing training courses. This enables them to have almost ten times better direct mail efficiency rate to their prospects relative to some of the jack-of-all-trades competition.

Nestle has identified two segments of the ice cream market as Bulk (or those traditionally in the one gallon as well as half gallon containers consumed at home which accounts for about 80 % of the market), and Impulse (or the frozen delights consumed at the point of purchase accounting for the 20 % balance). In 1995, magnolia, revitalized with their tie-up with Nestle, re-launched their Best Seller line with four new flavours in the bulk segment and launched three new ice cream bars in the fast growing impulse segment.

Del Monte, in launching the Del Monte 202 lines in 1993, was targeting a market segment different from their traditional in-home users to their large cans. With the introduction of individual 202 sized cans, consumption can take place even outside of the homes like

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restaurants, picnics, etc., thereby enabling them to serve the same segment as the soft drink consumers, who are, this time, looking for a healthier alternative. Instead of the housewives, the 202 targets yuppies and teenagers and with these changes in target customers, the whole personality also changes to younger, upbeat type.

Colgate, on the other hand, while dominant in the therapeutic segment Colgate Mint rinse, a semi-cosmetic brand to eat up some shares of Close-Up, specially known that the cosmetic segment is growing segment of the toothpaste market. French Baker has upscale consumers as their prime segment but also caters to the price sensitive shoppers with their 50 % discounts offered every 8:45 pm daily.

Before a market can be segmentized, it is important to strike a meaningful balance between a broad market definition and manageable market definition (McDonald, 1995). For instance, the television broadcasting companies are in the entertainment market, which also consists of theatres, cinemas and the theme parks. This is a fairly broad definition. A mere manageable definition for the television broadcasters is to define their market being the home entertainment market. This could then be further refined into preschool, child, teenager, family, or adult home entertainment market.

There are four ways to segmentize a consumer market: 1. By Needs or Benefits (example: Close-Up gives fresh breath) 2. By Demographics (example: Promil as follow-on formula for infants) 3. By Psychographics (example: Benetton are clothes worn by the socially conscious) 4. By Behaviouristic (example: San Miguel Grande for heavy drinkers or for groups)

There is one way to segmentize a market so entrepreneurs need to segmentize according to all methods of segmentation. It is possible that there is no relevance in segmenting some products according to, say lifestyle. As an example, a basic product like hotdogs generally does not address a certain lifestyle. Markets should only be segmentized if it is relevant. Profitability and ROI, not sales, is the strong basis of market segmentation. It can be noted that while many segments can give much higher sales volume, especially in the heavy users category, the

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profitability of these segments are always not as good as other segments given more competitive activities and consumer choices. Medium-size banks like Asiatrust, for instance, would have their own suki business loan clients where they can charge a little higher interest rates compared to blue chip businesses targeted by all major banks.

Industrial or Business-to-Business markets are segmentized differently. The various variables for market segmentation are presented in Exhibit 1 for your detailed study and analysis. Exhibit 1: I. Consumer a. Needs Benefits desired b. Demographics Age Gender Civil status Income Education Profession c. Geographic Country Region Example, Asia Pacific d. Psychographics Social Issues Religion Politics Work drugs Womens right Sex Personal Interest Family Home Food Health Friends Shopping e. Behavioural Purchase frequency User status

Location Family size Religion Nationality Climate

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User rate Loyalty status Readiness

II. Industrial or Business-to-Business Demographics Operating Variables Purchasing Approaches Situation factors Personal Characteristics

Common market segmentation by customers needs, utilizes product type as basis since a product exists to satisfy customers needs and wants. Two common alternatives are available:

1. Differentiation segment or that segment of the market which requires superior product or service, and; 2. Low-Cost segment or that segment of the market which has lesser needs and is more particular to price.

After market segments are identifies, target markets must be chosen as its possible firm may not want to compete in all segments as most starting businesses would normally do before they expand. Firms must take into consideration the market trend within each segment as a segment with existing big market may have declining sales while a market with a small r medium size sales may have an increasing demand trends and may be considered as a future, gold mine . For instance, while bulk ice cream accounts for about 80% of the market in the Philippines, it is growing at a modest 6% annually. The Impulse segment that accounts for only 20%, on the other hand, is growing at a significant 40% annually.

While trends need to be taken into consideration, the underlying assumptions must also be noted as it is possible that a firm can be able to create new life into the product similar to Johnson and Johnson refocusing their baby powder market to include the bigger babies. Profile of the market is then defined to guide the firm in its marketing efforts.

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CONCEPT OF TARGET MARKET The Primary Target Market (PTM) is a segment of the market which is the logical volume customers. By choosing the PTM, a firm has also chosen who to compete with to win the same customers. Gilette, for instance, sell Ruby to the masa pushing Sensor to the yuppies. Pernexin used to position as multivitamins for all but has now focused on the sedentary patients who are old, weak and convalescing. Au Bon Pain targets business people and their support staff looking for a healthier sandwich alternative. The increasing popularity of generic drugs has made pharmaceutical businesses redefine their target market priority from doctors to consumers given the wide choice consumers have at correctly identify their target customers, less their resourced not be optimized. Pacific Sun natural iced tea by Nugget Food targets the 18 to 24 years old as their PTM while Seasons iced tea by Dole prefers the old segment. What is the right segment?

While market trend must be carefully analyzed, choosing existing target market in lieu of potential targets must be constantly challenged. SEARCA in Los Baos, which has meeting and room facilities for small to medium groups, used to rely on their existing training participants based on scholarship grants. With the de3cline in grants expected, they have consciously refocused their attention to large and other training businesses as a target market and changing their mindset from a support group to an independent profit centre.

Some examples of target marketing are presented in exhibit 2 and 3. Exhibit 2: Logical PTM of Pampers Uni diapers Demographics of buyers Age Sex Income Civil Status Education Profession 30-38 Female AB Married College-up Supervisorial / Managerial and others with similar jobs who cannot afford to rest during daytime. Location Psychographics Urban Working mothers, outgoing, quality-conscious

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Exhibit 3: Logical PTM of Close-Up Demographics of buyers Age Sex Income Civil Status Education Profession Location Psychographics Benefits Desired: 16-21 Male / Female C+ / C Single High School (upperclassmen) / College Student Urban, Rural Free spirit, outgoing, playful, active, hygienic Fresh Breath

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Exhibit 4: Example Market Segment of Baby oil Market: Socio Economics Class (SEC) Based Segmentation on the Baby Oil Market (Base = Total of 100 Interviewed Mothers from Each SEC Segment) Percent of Each Segments Relevant Base with Profiler Characteristics Selected UAI Profiler Variables 1. % of total using baby oil on babies 2. % of category using/buying 75 ml. Bottle 125 ml. Bottle 200-300 ml. Bottle 3. % of category users currently using Johnsons Zwitsal Mamas Love 4. % of category using from buying from: Supermarket Drugstore Neighbourhood store 5. % of category who consider as very important that baby oil: Readily cleanses babys skin Prevents cuffing Is reasonably/affordably priced Selected Socio-Demo Profiler Variables 1. % of category users in age group: Less than 20 years old 20-29 years old 30-39 ears old 2. % of category users with: One child Two children Three or more children 3. % of category users who read newspapers: Everyday 2-6 times a week Once a week 4. % of category users who usually watch TV in the: Mornings and noon times Afternoons Evenings Source: User-Friendly Marketing Research by Net Roberto Identifier SEC Variable Upper Upper Lower Class Middle Middle 99 14 42 38 86 8 2 81 12 7 83 18 39 37 82 13 1 77 14 9 68 29 35 27 71 6 18 72 17 11

79 72 63

82 75 74

80 73 77

14 41 33 17 46 37 67 20 6 17 46 37

22 39 36 25 31 44 61 22 7 25 31 44

19 44 23 25 28 47 49 33 14 25 28 47

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A most common question asked is that Should businesses target and compete in the segment with the largest sales potential? Remember that firms must compete based on their relative strengths. They choose to compete in the segment that can maximize their profit and return on their investment, not on sales volume. Therefore, marketers must first identify as many potential target markets within the market segment before making the final choice. Since target market must be evaluated based on profit and not sales potential, the following criteria can be considered.

1. Growth trend Is it increasing? 2. Market Niche Size Is it sufficiently large enough for you? 3. Homogeneity Are the consumer needs clearly identified with common characteristics? 4. Responsiveness - Can the consumers be influenced easily? 5. Purchase Authority Are they the decision makers or key influencers? 6. Awareness Creation Cost Are consumers reachable in a cost-efficient manner? 7. Loyalty Level Can we have a high retention level?

Firms can use a 3-points scale to evaluate each criterion for every potential segment. The interpretation for each criterion would vary. For instance, for the first criterion growth trend, entrepreneurs can use the following loyalty level, it could be 3 high retention, 2 average retention, 1 low retention. A minimum score (example 14 out of 21 maximum) should be adapted to shortlist potential segments.

A word of caution about choosing your target market. Some firms, in an attempt to increase sales, would convince non-users to try their product or services. Researchers have shown that unless the product category is brand new and growing rapidly, a new product will not attract many non-users to the category, typically limited to between 5 to 10% of sales volume. An example locally is when a popular drive-in-hotel chain tries to add party package to expand users and usage.

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Module

How Much to Sell my Product? Pricing Strategy

40 minutes

Terms to Remember

1. PRICING STRATEGY it is a reasoned choice from a set of alternative prices (or price schedules) that aim at maximization within a planning period in response to a given scenario. 2. MARK-UP it is where a standard percentage based on cost is adopted. 3. PRICE it is the amount of money charged for a product or service. 4. TARGET PROFIT it is where prices are set towards attaining a satisfactory rate on return. 5. FIXED-PRICE POLICIES setting one price for all buyers. 6. COST is the amount of expenditures incurred on, or attributable to a specified thing or activity. It is the pesos that must be paid for goods and services. 7. MARGINAL COST is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. 8. VARIABLE COST are expenses that change in proportion to the activity of a business. In other words, variable cost is the sum of marginal costs. It can also be considered normal costs. Along with fixed costs, variable costs make up the two components of total cost. Direct Costs, however, are costs that can easily be associated with a particular cost object. Not all variable costs are direct costs, however; for example, variable manufacturing overhead costs are variable costs that are not a direct costs, but costs. Variable costs are sometimes called unit-level costs as they vary with the number of units produced.

9. FIXED COST are business expenses that are not dependent on the activities of the
business. They tend to be time-related, such as salaries or rents being paid per month.

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(Source: Excerpt from the book of Suplico, Garcia and Esguerra, Copyright, 2008 - International Marketing)

Setting the price of a product is one of the critical decisions that you have to make in the export arena. More often, if your price is too high, your buyers get turned off, and thus, seek other products. On the other hand, if your price is too low, customers may grab your offer and you end up working hard for nothing.

At this point, you may ask, What is the right price for an item? This question is difficult to answer because as many factors, bothy internal and external, are involved in setting the right price. The analysis of these factors, including application of techniques and strategies, will be the core of discussion in this sub-section.

DEFINITION AND SIGNIFICANCE OF PRICE What is price? From the businessmans point of view, it is the monetary figure for which he/she sells his/her product to his/her customers. Price provides for the recovery of costs of the elements of the marketing mix. In addition, it generates revenue for the business. Price as the value placed by consumers for the amount they pay for goods and services must be considered. It is, after all, what the customer is willing to pay and not what the businessperson is willing to charge. The definition suggests that the two basic concepts associated with price are: Profit maximization for the business Satisfaction for the customers

Pricing is not purely mathematical formula and cost calculation because, if this so, it may give rise to an extremely limited view of the concept. The market and the potential ion the market should be the starting point for pricing decision, and the cost information should only be used to determine whether that market could be satisfied at a profit.
(Source: Excerpt from the book of Armstrong and Kotler Copyright, 2003- Introduction to Marketing 6th Edition)

All profit businesses and many non-profit businesses must set prices on their products or services. In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is the sum of all the values that consumers exchange for the benefits of

27

having or using the product or service. Throughout most of history, prices were set by negotiation between buyers and sellers. Fixed-price policies setting one price for all buyers relatively modern idea that arose with the development of large-scale retailing at the end of the nineteenth century.

Now, some one hundred years later, the Internet promises to reserve the fixed pricing trend and take us back to an era of dynamic pricing charging different prices depending on individual customers and situations. The Internet, corporate networks, and wireless communications are connecting sellers and buyers as never before. Web sites such as CompareNet and PriceSCAN allow buyers to compare products and prices quickly and easily. Online auction sites such as eBay.com and Amazon.com Auctions make it easy for buyers and sellers to negotiate prices on thousands of items from refurbished computers to antique tin trains. At the same time, new technologies allow sellers to collect detailed data about customers buying habits, preferences even spending limits so they can tailor their products and prices.

A price is the only element in the marketing mix that produces revenue; all other elements represent costs. Price is also on e of the most flexible elements of the marketing mix. Unlike product features and channel commitments, price can be changed quickly. At the same time, pricing and price competition is the number-one problem facing many entrepreneurs. Yet, as the chapter-opening Kellogg example illustrates, many businesses do not handle pricing well. The most common mistakes are pricing that is too cost oriented rather than customer-value oriented; prices that are not revised often enough to reflect market changes; pricing that does not varied enough for different products, market segments, and purchase occasions.
(Source: Excerpt from the book of Josiah Go, Copyright, 1992 - Marketing Mix: Strategy in the Philippine Setting)

Price is the amount of money charged for something. It comes in different names. A lessor calls it rent, schools call it tuition, employees call it wages, bank call it interest, lawyers and doctors call it professional fees. Pricing is the twin element of sales volume which when combined make up sales revenues.

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Exhibit 1: The Role of Price in Sales Revenue Sales Revenues = Sales Volume x Selling Prices Pricing has the dual marketing function of making products affordable to its target market and at the same time, reflecting the value of the product. The price charged for a product or service, therefore, should be no more than the sum of the values of the benefits it provides to customers. Take coffee as a common example. A cup of coffee in a canteen may only cost P5.00 but may cost ten items as much if ordered in a 5-star hotel as it reflects the value of the product given the ambience of the hotel.

Pricing strategy can be defined as a reasoned choice from a set of alternative prices (or price schedules) that aim at maximization within a planning period in response to a given scenario (Tellis, 1986). Both internal and external factors must be considered in pricing. In internal factors, you have the business cost as well as the business objectives. On the other hand, market demand and competition are external factors that will influence pricing of products or services.

For the purpose simplicity of this lecture, we will only discuss the three factors of setting price. These are product cost, the role of target market and the competition. Exhibit 2: Factors to Consider in Pricing 1. Product cost 2. Target Market 3. Competition

Factor 1: PRODUCT COST Product cost must be broken down to fixed and variable cost as most businesses sell more than one item and the fixed cost must be allocated to different products in a sensible way. Anticipated product cost must also be taken into consideration as the new cost may be much more than the existing level once inflation is imputed or when expansion is inevitable and new machineries and equipments are purchased. This non-anticipation of cost structure may require a disastrous price increase which may unduly affect profit and market shares gained during the pre-expansion period.

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Most cost-based pricing are used when there is relatively little, if any, direct competition (which is rare) or when buyers are not price-sensitive. It is commonly used when there is an absolute necessity as when there are just too many items involved, such as in supermarket or when it has become an industry practise, such as the standard 15% professional service fee charged by advertising agencies. Caution must be done in using cost-based pricing. It may be wise to consider this as a gatekeeper policy and consider other types of pricing techniques before arriving at the final price.

Under cost-based pricing strategy, there are two common types of setting prices: a. Mark-up, where a standard percentage based on cost is adopted. For example, a retail price of $1, 000 having a standard 10% mark-up on sales will have cost of $900. b. Target Profit, where prices are set towards attaining a satisfactory rate on return. A manufacturer who wishes to make a 35% return on investment (ROI) on an invested capital of two millions and having a cost base of $20 a unit with forecasted sales volume of 100,000 units may compute for specific price level. Exhibit 3 provides the formula.

Exhibit 3: Target Profit Pricing Formula Target Profit = Pricing = = Unit Cost $20 $27 + + Target ROI x Investment Unit Sales 35% x $2, 000,000 100,000

There is however the big disadvantage of too much dependence on projected sales in target profit pricing. Both the unit costs and the target selling price will be inaccurate when sales volume is short of target. The unit product cost after all is a combination of both unit variable cost and unit fixed cost, with the latter spread over a projected sales volume. Exhibit 4 provides the formula.

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Exhibit 4: How to compute for the Unit Cost? Unit Cost Pricing = = = = Variable Cost* $10 $10 $20 + + + Fixed Cost Expected Unit Sales $1, 000,000 100,000 10

* Note: Variable Costs - Include raw materials, labor, and factory overhead/expenses

While small businesses have a lower amount of fixed expenses versus big businesses, the reality is that because of the bigger sales volume of the big businesses, small businesses generally have bigger fixed expense, if expressed as a percentage of total sales while big businesses have a lower fixed percentage of total sales.

Factor 2: TARGET MARKET In pricing product, an entrepreneur should always look into the perception and nature of its target market. There is type of market that any adjustments in price may result to decrease in market demand. Consider the Class D&E market for our local commodities like rice and sugar, any impending increase of price may result to decrease in consumptions or market may look for substitute product that may also affect the marketability of your own product.

Factor 3: COMPETITION: Cost Vs. Expense Structure Your main competitor has just lowered his price. Should you also lower your price or will it risk an expensive price war? Entrepreneurs should always analyse whether the price reduction is a result of competitors own deficiencies, product deficiencies, or an indicator that overall prices in the industry are too high for customer demand. They should also consider the different product cost and corporate expense structure of competition. The Securities and Exchange Commission has public records, including financial statements of corporations which can be obtained for analysis. Selling Price Total Expense = + 2% You = - 2% Competition

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Application Exercise ABC store is planning to sell a ready to wear (RTW) dress. Using the following information, compute the right price of the new product of ABC store. Variable Cost
Fabric buttons Labour Total Variable Cost Cost $ 15/RTW $2/RTW $5/RTW $22/RTW

Fixed Cost
Rent Expense office Salary Total Fixed Cost Expected Sales/year Investment Target Return on Investment (ROI) Your answer: $ 2,000 $5,000 $ 7,000 3,000 RTW $8,000 25%

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Module

Where to Distribute the Product? Place Strategy

30 minutes

Terms to Remember
1. DISTRIBUTION CHANNEL a set of independent organizations involved in the process of making product or service available for use or consumption by the consumer or business user. 2. CHANNEL LEVEL each layer of marketing intermediaries that performs some work in bringing the product and its ownership closer to the final buyer. 3. DIRECT MARKETING CHANNEL has no intermediary levels. It consists of a business selling directly to consumers.

(Source: Excerpt from the book of Armstrong and Kotler, Copyright, 2003 - Introduction to Marketing 6th Edition)

Marketing channel decisions are among the most important decisions that management faces. A business channel decisions are linked with every other marketing decision. The business pricing depends on whether it uses mass merchandisers or high-quality specialty stores. The firms sales force and advertising decisions depend on how much persuasion, training, motivation and support the dealers need. Whether a company develops or acquires certain new products may depend on how well those products fit the capabilities of its channel members.

Businesses often pay too little attention to their distribution channels, however, sometimes with damaging results. In contrast, many businesses have used imaginative distribution systems to gain a competitive advantage. FedExs creative and imposing distribution system made it the leader in the small-package delivery industry. General Electric gained a strong advantage in selling its major appliances by supporting it dealers with a sophisticated computerized orderprocessing and delivery system. Dell Computer revolutionized its industry by selling personal computers directly to consumers rather than through retail stores. And Charles Schwab & Company pioneered the delivery of financial services via internet.

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Distribution channel decisions often involve long-term commitments to other businesses. For example, companies such as Ford, IBM, or McDonalds can easily change their advertising, pricing, or promotion programs. They can scrap old products and introduce new ones as market a taste demands. But when they set up distribution channels through contacts with franchisees independent dealers, or large retailers, they cannot readily replace these channels with companyowned stores or Web sites if conditions change. Therefore, management must design its channels carefully, with an eye on tomorrows likely selling environment as well as todays.

This topic examines four major questions concerning distribution channels: What is the nature of distribution channels? How do channel firms interact and organize to do the work of channels? What problems do businesses face in designing and managing channels? What role do physical distribution and supply chain management play in attracting and satisfying customers?

Most producers use intermediaries to bring their products to market. Then try to forge a distribution channel a set of independent organizations involved in the process of making product or service available for use or consumption by the consumer or business user.

Why do producers give some of the selling job to intermediaries? After all, doing so means giving up some control over how and to whom, the products are sold. The use of intermediaries results from their greater efficiency in making goods available to target markets. Through their contacts, experience, specialization, and scale of operation, intermediaries usually offer firm more than it can achieve on its own.

Figure 1 shows how using intermediaries can provide economies. Figure 1A shows three manufacturers, each are using direct marketing to reach customers. This system requires nine different contacts. Figure 1B shows the three manufacturers working through one distributor, which contacts the three customers. This system requires only six contacts. In this way, intermediaries reduce the amount of work that must be done by both producers and consumers.

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From the economic systems point of view, the role of marketing intermediaries is to transform the assortments of products made by producers into the assortments wanted by consumers. Producers make narrow assortments or products in large quantities, but consumers want broad assortments of products in small quantities. In the distribution channels, intermediaries buy large quantities from many producers and break them down into the smaller quantities and broader assortments wanted by consumers. Thus, intermediaries play an important role in matching supply and demand.

DISTRIBUTION CHANNEL FUNCTIONS

The distribution channel moves goods and services from producers to consumers. It overcomes the major time, place, and possession gaps that separate goods and services from those who would use them. Members of the marketing channel perform many key functions. Some help to complete transactions: Information: Gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange. Promotion: Developing and spreading persuasive communications about an offer. Contact: Finding and communicating with prospective buyers.
1 2 3 4 5 6 7 8 9 3 6 2 5 1 4

A. Number of contacts without a distributor MxC=3x3=9

B. Number of contacts with a distributor M+C=3+3=6

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= Manufacturer

= Customer

= Distributor

Figure 1: How a distributor reduces the number of channel transactions

Matching: Shaping and fitting the offer to the buyers needs, including activities such as manufacturing, grading, assembling, and packaging. Negotiation: Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred.

Other help to fulfil the completed transactions: Physical distribution: Transporting and storing goods. Financing: Acquiring and using funds to cover the costs of the channel work. Risk taking: Assuming the risks of carrying out the channel work.

The question is not whether these functions need to be performed they must be but rather who will perform them. To the extent that the manufacturer performs these functions, its cost goes up and its prices have to be higher. When some of these functions are shifted to intermediaries, the producers costs and prices may be lower, but the intermediaries must charge more to cover the costs of their work. In dividing the work of the channel, the various functions should be assigned to the channel members who can perform them most efficiently and effectively to provide satisfactory assortments of goods to target consumers.

Distribution channels can be described by the number of channel levels involves. Each layer of marketing intermediaries that performs some work in bringing the product and its ownership closer to the final buyer is channel level. Because the producer and the final consumer both perform some work, they are part of every channel. We use the number of intermediary levels to indicate the length of a channel. Figure 2, part A, shows several consumer distribution channels of different lengths.

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Channel 1, called a direct marketing channel, has no intermediary levels. It consists of a business selling directly to consumers. For example, Avon, Amyway, and Tupperware sell their products door to door or through home and offices sales parties. Singer sells its sewing machines through its own stores; and Dell sells computers direct through telephone selling and its Web site. The remaining channels in Figure 2A are indirect marketing channels.

Channel 2 contains one intermediary level. In consumer markets, this level is typically a retailer. For example, the makers of televisions, cameras, tires, furniture, major appliances, and many other products sell their goods directly to large retailers such as Wal-Mart and Sears, which then sell the goods to final consumers.

Channel 3 contains two intermediary levels, a wholesaler and a retailer. This channel is often used by small manufactures of food, drugs, hardware, and other products.

Channel 4 contains three intermediary levels. In the meatpacking industry, for example, jobbers buy from wholesalers and sell to smaller retailers who generally are not served by larger wholesalers. Distribution channels with even more levels are sometimes found, but not less often. From the producers point of view, a greater number of levels mean less control greater channel complexity.

Figure 2, part B, shows some common business distribution channels. The business marketer can use its own sales force to sell directly to business consumers. It can also sell to industrial distributors, who in turn sell to business customers. It can sell through manufacturers representatives or its own sales branched to business customers, or it can use these representatives and branches to sell through industrial distributors. Thus, business markets commonly include multilevel distribution channels.

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All the institutions in the channel are connected by several types of flows. These flows can make even channels with only one or few levels very complex. These are the following: physical flow of products, flow of ownership, payment flow, information flow, and promotion flow

Channel 1 Channel 2 Channel 3 Channel 4

Manufacturer Manufacturer Manufacturer Manufacturer Wholesaler Wholesaler Jobber Retailer Retailer Retailer

Customer Customer Customer Customer

A. Customer Marketing Channels

Channel 1

Manufacturer

Business Customer

Channel 2

Manufacturer

Business distributor Manufacturers representatives of sales branch

Business Customer

Channel 3

Manufacturer

Business Customer Business Customer

Channel 4

Manufacturer

Manufacturers representatives of sales branch

Business distributor

B. Customer Marketing Channels Figure 2: Consumer and business marketing channels

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Module

6
Terms to Remember

Where to Promote? Promotion Strategy

30 minutes

1. ADVERTISING this consists of visual and oral messages that aim to inform and persuade consumers to buy products or services. 2. PUBLIC RELATIONS simply called PR, this planned program of policies and conduct aimed at building public confidence in an organization, and creating public understanding of what it is trying to do. 3. SALES PROMOTIONS this is the most widely used method of promoting products for export. It takes varied forms and includes many activities all aimed at influencing trade buyers to stock up and carry your product, and thus, persuading end-consumers to buy it. 4. DIRECT MAIL this will allow you to build a base of potential buyers and clients on whom you can direct your companys message. It includes news about your company, such as a new product/service or a successful project bid, to introduce your campaign. 5. MEDIA it is a good way to establish public awareness of your companys profile and credibility. Using the media wisely can be highly economical and profitable. 6. PERSONAL VISIT it is a personal contact with the potential clients is perhaps the best mean of promotion. 7. TRADE MISSIONS/TRADE SHOWS it allows you to check out the competition and conduct market research. 8. BROCHURES it is an effective means of communication both for small and mediumsized businesses, as these are considered relatively cheap. They contain detailed specifications of products offered as well as the company profile. They are usually given to prospective customers. 9. MAILSHOTS /LEAFLETS these are considered the simplest forms of brochure, much shorter and used to explore new markets and to refine your target list of potential customers.

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(Source: Excerpt from the book of Suplico, Garcia and Esguerra, Copyright, 2008- International Marketing)

Many Filipino entrepreneurs indulge in promotional activities as a means of making their product and companies known and, consequently, accepted in the market. Gone are the days when they would not even consider product promotion since it is perceived to be very expensive especially at the global level. At present, most exporters are conscious of the importance and benefits of product promotion which for them outweigh the cost to be incurred.

This sub-section underlines the importance of product promotion. It aims to discuss the various promotional methods and to outline the strategies most appropriate and cost-effective in the international market.

PROMOTIONAL METHODS

The International Trade Centres Handbook on Prompting and Responding for Sales Inquiries: A Task of the Business Management System (2005) lists the following as effective promotional methods in attracting foreign buyers.

1. ADVERTISING This consists of visual and oral messages that aim to inform and persuade consumers to buy products or services. Advertising comes in various forms and means categorized as suitable for reaching either the end-consumers or trade buyers.

Advertising Tools for Reaching Consumers

(Source: International Trade Centres Enterprise Management Development Series (2005). Handbook on prompting and responding to sales inquiries: A task of the business management system. Switzerland.)

Television Radio Daily Newspapers Consumer Magazines Posters

Outdoor billboards Road and railway transportations Programmes (sports, theatre, etc.)

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It is important to bear in mind that advertising is totally useless unless it is targeted properly. One must be sure of the market segment he/she is aiming at. Consequently, a seller must place advertisement media through which this market segment can be reached.

2. PUBLIC RELATIONS Simply called PR, this planned program of policies and conduct aimed at building public confidence in an organization, and creating public understanding of what it is trying to do. This is for more different from product publicity because PR is used to build the image of a company, although certain aspects of it are used to promote products and services.

3. SALES PROMOTIONS This is the most widely used method of promoting products for export. It takes varied forms and includes many activities all aimed at influencing trade buyers to stock up and carry your product, and thus, persuading end-consumers to buy it. The types of sales promotion undertaken mostly by Filipin export entrepreneurs come in different forms such as: promotional materials like brochures, leaflets, catalogs, price lists, etc.; visual merchandising like showrooms, store and window displays; and special events like trade fairs, selling missions, etc.; product samples

4. DIRECT MAIL A targeted direct mail campaign can also be very effective. Research and experiences in your target market will allow you to build a base of potential buyers and clients ton whom you can direct your companys message. Include news about your company, such as a new product/service or a successful project bid, to introduce your campaign.

5. MEDIA Publicity is a good way to establish public awareness of your companys profile and credibility. Using the media wisely can be highly economical and profitable. Prepare a

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media kit that introduces your company, new products/services or newsworthy activities, and include copies of any articles published about your company.

6. PERSONAL VISIT Personal contact with the potential clients is perhaps the best mean of promotion. Many cultures value personal contact in their business relationships and attention to cultural issues often impresses foreign business contacts.

7. TRADE MISSIONS/TRADE SHOWS Attending or participating in international trade shows is an excellent way to promote your product or service. It allows you to check out the competition and conduct market research. If it is difficult for your company to take part in trade event, consider teaming up with other companies or joining a group delegation or exhibit.

PROMOTIONAL MATERIALS Promotional materials refer to printed materials that describe goods or services provided by your company. It is specifically geared to the sales or promotion of the products or services you offer. Well-designed promotional materials are effective means of creating strong product identity and profitable businesses.

Such materials include the following: Brochures Catalogs Leaflets/mailshots Visual aids like slide kits and demonstration kits Drawings and other specifications Price lists

These promotional materials aim to: Obtain buyer reaction to your product range Promote existing sales of your product in the market

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Obtain orders Target potential customers and other foreign buyers Introduce additional product range to buyers Help your agents/salespeople introduce your products to the market.

PREPARATION OF PROMOTIONAL MATERIALS Production of promotional materials is not an easy task. It requires a detailed understanding of your company, your product and other task at hand. The tabulated data are critical in attaining the promotional materials main objective which to present you product in an informative, interesting and professional manner leading to its acceptance and sales in the market. Of course, the type of product you produce and the size of your company will dictate the kind of promotional material you will need whether a simple one-page leaflet or an expensive full-colour brochure.

TABLE 1.1 SUGGESTED INFORMATION IN PROMOTIONAL MATERIALS Product Is it the main product you offer? Is it the right product fort your selected target market? Why should customers buy your product? Are you happy with your present mix of product? If not, how can you offer this mix? Market Is your market local, national or international? How big is your market? How can you broaden your market base? Company How do others see you? What are your best known for? Any specialization? Is your image staid or progressive and reliable? Does your image accord with reality? Companys strengths What are your strong at? Weak at? Do you have the right products to promote? Are your products acceptable in the market?

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Do you have the financial and human resources to continuously supply the market? Do you have the technical expertise?

TYPES OF PROMOTIONAL MATERIALS Promotional materials may include the following: 1. BROCHURES They are an effective means of communication both for small and medium-seized businesses, as these are considered relatively cheap. They contain detailed specifications of products offered as well as the company profile. They are usually given to prospective customers. Brochures can come in different forms ranging from simple to complex. These various formats allow flexibility for altering or updating the text and other contents.

Brochures can be designed as: Loose-leaf inserts either spiral-bound or glued systems Folders with pockets can come in ordinary bond paper size or customized size. Fold-out brochures can be made of paper or card I the following formats: 4page landscape, 6-page concertina, or 6-page landscape. Stapled/Booklet type

2. MAILSHOTS /LEAFLETS These are considered the simplest forms of brochure, much shorter and used to explore new markets and to refine your target lists of potential customers. They contain much of the information printed in the full brochure but in a more condensed form.

Other promotional materials include CDs, catalogues, photo offers, price lists, sales literature, drawings, specifications and actual product samples.

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Whatever type of promotional materials you choose, here are few pointers: 1. The promotional material should describe your business and product in a clean and concise manner. 2. It should be printed in the language of the country where you plan to sell. 3. The paper used should be of high quality because the image of your business will be associated with it. 4. If you plan an illustrated material, use high standard and quality photos to show your product as its very best. If possible, hire a professional photographer. Do not accept and use the pictures unless you are happy that they show your product to the best advantage.

TABLE 1.2: INFORMATION CHECKLIST BUSINESS INFORMATION Business name Full business address (including the country) Telephone number and mobile number Facsimile number E-mail address Contact person and designation Business profile Profile of the founders, owners, and senior partners Business clients by name or by country Detailed listings of product lines and merchandise handled Services the business can offer Business code of practice and terms and conditions of business Membership in different associations Conditions of sale Packing specification Terms of payment PRODUCT INFORMATION Product description or range name Style/Code No. Size/Dimension Colour Finishes available Raw materials used Accessories used Price list Packaging Delivery

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Module

What is my Projected Income? Making a Simple Financial Analysis

40 minutes

Terms to Remember

1. INCOME STATEMENT also referred as profit and loss statement (P&L), earnings statement, operating statement or statement of operations, is a company's financial statement that indicates how the revenue (money received from the sale of products and services before expenses are taken out, also known as the "top line") is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as the "bottom line"). It displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues. The purpose of the income statement is to show Entrepreneurs and investors whether the business made or lost money during the period being reported. 2. COST OF GOODS SOLD abbreviated COGS, is a financial accounting term which describes the direct costs attributable to the production of goods sold by a company. This includes material cost and direct labor cost. 3. GROSS PROFIT -is the difference between revenue or income and the cost of making a product or providing a service. 4. OPERATING EXPENSES is an ongoing cost for running a product, business, or system. Its counterpart, a capital expenditure (CAPEX), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of a photocopier is the CAPEX, and the annual paper, toner, power and maintenance cost is the OPEX. For larger systems like businesses, OPEX may also include the cost of workers and facility expenses such as rent and utilities. 5. REVENUE OR BUSINESS INCOME is the total earnings or revenue of the business after deducting all relevant expenses.

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It's at the end of your business plan, but the financial plan section is the section that determines whether or not your business idea is viable, and is a key component in determining whether or not your business plan is going to be able to attract any investment in your business idea.

Basically, the financial plan section of the business plan consists of three financial statements, the income statement, the cash flow projection and the balance sheet and a brief explanation/analysis of these three statements.

For the purpose of simplicity, we will only discuss the concept of income statement and how to make a projected income statement

In making a pro-forma income statement (Projected) you need to forecast your estimated sales for a period of 12 months. You can base your estimate on the market study-typically a forecast on how many customers who will buy your product.

Normally, a sales forecast includes not just sales as well. You need to present the business expenses that your business will incur in the future. Typically, there are two (2) types of cost and expenses that are included in the income statement, first is the cost of sales- is a financial accounting term which describes the direct costs attributable to the production of goods sold by a company. This includes material cost and direct labor cost. The result of computation after deducting the Companys Sales from the Cost of Goods Sold is the Gross profit

Another financial concept that is relevant in the preparation of income statement is the operating expenses-is an ongoing cost for running a product, business, or system. Its counterpart, a capital expenditure (CAPEX), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of a photocopier is the CAPEX, and the annual paper, toner, power and maintenance cost is the OPEX. For larger systems like businesses, OPEX may also include the cost of workers and facility expenses such as rent, advertising expenses, and transportation expenses. It is important to note that expenses in the business must be accounted for to determine the profitability of the business. Here is the example of pro-forma income statement that you be included in the business plan

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Bench T Shirt Projected Income Statement December 2010

Sales Less: Cost of Goods Sold GROSS PROFIT $ 100,000.00 25,000.00 75,000.00

Less: Operating Expenses

Rent Salary of Employees Transportation Expenses Advertising expenses Office supplies Website development Total Operating Expenses

12,000.00 10,000.00 3,000.00 5,000.00 2,000.00 3,000.00 $ 35,000.00

Net Income

$ 40,000.00

Remember this Formula Net Income = SALES - COST OF GOODS SOLD = GROSS PROFIT - OPERATING

EXPENSES

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Module

Putting It All Together

Congratulations!
Youve been familiarized with the Basic Business Planning.

Business planning serves as both a structural outline for future businesses and a compass that will definitely navigate each and every aspect of a business. This compass will direct the path your venture may tread in the near future. Therefore, its a necessity for aspiring entrepreneurs to create a market entry or business plan since it will not only help you save money and time but it will also preclude any predicament that may come at any stage of a business.

Business planning may consume most of your time and energy but always remember that in the end, it will be well worth every minute expended just to make every future minute of our business done right.

Start now and create your own market-entry strategy plan or business plan.
Below is the corresponding format that will guide you in creating your own business plan.

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MARKET-ENTRY STRATEGY PLAN FORMAT

I. Executive Summary

II. Business Objectives 2.1 Short-term Objectives 2.2 Long-term Objectives

III. Product Overview

IV. Target Market 4.1 Demographic Profile of the Target Market 4.2 Market Needs 4.3 Market Population

V. Competitor Analysis

VI. Marketing Mix 6.1 Product Strategy : Product Features, Advantage & Benefits 6.2 Pricing Strategy 6.3 Product Distribution 6.4 Product Promotion 6.4.1 6.4.2 Sales Promotion Strategy Product Awareness Campaign

VII.

Financial Analysis: Projected Income Statement

VIII.

Bibliography/List of Reference Materials

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Let us discuss briefly each part of the market-entry strategy plan.

1.

EXECUTIVE SUMMARY (see Worksheet No. 10)

(Source: Excerpt from the book of Hisrich, Peters, and Shepherds Copyright, 2008 - Entrepreneurship 7th Edition)

This section of the business plan is prepared after the total plan is written. It is about one page overview of the entire market-strategy plan.

Usually it is limited to the specific objectives to be achieved. It should provide a clear, concise executive overview of the business that would be effective as an overview of your business plan. Your executive summary should include a brief description of the business concept; the purpose of the plan; an overview of the market potential; and an overview of financial forecasts and expected returns for the business.

2.

BUSINESS OBJECTIVES (see Worksheet No. 1)

Defines specific quantifiable business objectives and goals of your business plan. Specifically, on how you will satisfy your customers and how will you reach your target market. There are two types of objectives, first is the short-term objective, which is setting your objectives in a short period of time usually one (1) year; and long-term goal, setting your objectives for the next five (5) years. These objectives should be specific, measurable, attainable, realistic, and timebound.

3.

PRODUCT OVERVIEW (see Worksheet No. 2)

This part is about the brief technical description of your product(s) and/or service(s) with some illustrations of you product/service, which is subject to your business plan.

4.

TARGET MARKET (see Worksheet No. 3)

You need to know exactly what the people who might be interested in buying your product or service, and how many of them there are. It includes their demographic profile and other market profile of your target customers. Knowledge of the target market provides a basis for determining the appropriate marketing action strategy that will effectively meet its needs.

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5.

COMPETITOR ANALYSIS (see Worksheet No. 4)

Competitor analysis is to determine who your competitors are. This isn't the hard part. If you're planning to start a small business that's going to operate locally, you can identify your competitors just by driving around or looking in your local place. You need to gather the information about your competition that you need for the competitive analysis. You need to know what markets or market segments your competitors serve; what benefits your competitor offers; why customers buy from them; and as much as possible about their products and/or services, pricing, and promotion.

6.

MARKETING MIX

Essentially your business plan needs to discuss your marketing mix - how the 4 P's of marketing will be implemented in your small business and what roles each will play.
(Source: Excerpt from the book of Armstrong and Kotler Copyright, 2003- Introduction to Marketing 6th Edition)

Product these includes the physical attributes of your products or services, what they do, how they differ from your competitors and what benefits they provide to your potential customers. (see Worksheet No. 5)

Price the amount of money customers have to pay to obtain the product. (see Worksheet No. 6) Place includes the business activities that make the product available to target customers and the use of marketing channels for your products distribution. (see Worksheet No. 7)

Promotion means activities that communicate the qualities of the product and convince target customers to buy it. (promotional tools) (see Worksheet No. 8)

An effective marketing program blends all of the marketing mix into a coordinated program designed to achieve the business objectives by delivering value to customers.

7.

FINANCIAL ANALYSIS (see Worksheet No. 9)

Enumerates the detail of investment needed to attain your objectives and to implement the strategies and tactics. You are required to make a projected income statement to forecast your estimated sales for a period of 12 months.

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8.

BIBLIOGRAPHY / LIST OF REFERENCE MATERIALS

You have to list down all the reference used in your market-entry strategy plan.It is a systematic list of books and other works such as journal articles; and other source from the internet.

FORMAT: Last Name, First Name. Title. City: Publisher, Year. EXAMPLE: Casey, Terrence. The Social Context of Economic Change in Britain. Manchester, UK: Manchester University Press, 2002.