CHAPTER II • Level of consumers’ disposable income

Marketing plan • Interest rates

It is a business’s operational document
• Monetary policies
for outreach and advertising to generate leads
and reach its target market. • Exchange rates
• Fiscal policies
A. Macro-Market Analysis (STEEPLED) • Unemployment trends
• Price fluctuations
STEEPLED
This represents the general environment where • Labor costs
the entrepreneur can identify business • Stock market trends
opportunities from and where the future • Stages of business cycle
business is about to operate.
4. ENVIRONMENTAL FACTORS
1. SOCIO- CULTURAL FACTORS
The scan of these factors will help the
These factors represent a general view
entrepreneur determine if the business he or
of a locality’s traditions, customs, beliefs, norms
she is entering into will comply with environment
and perceptions. These factors affect how a
standards or will just be hazard to people,
person of the locality behaves and reacts to
animals and nature.
marketing and selling activities.
• Weather
• Health consciousness;
• Climate Change
• education level
• Laws regulating environment pollution
• Attitude toward: imported goods and
services, person’s lifestyle, product • Attitudes toward “green” or ecological
quality and customer service, saving and products
investing; emphasis on safety • Air and water pollution
• buying habits • Recycling
• religion and beliefs • Waste management
2. TECHNOLOGICAL FACTORS • Endangered species
These are composed of innovations of • Attitudes toward and support for
an existing technology or an invention of a new renewable energy
one mostly applied science and engineering 5. POLITICAL FACTORS
areas. These factors are mostly induced by
• Basic infrastructure level government policies and administrations, which
• Rate of technological change can have strong effect in the entrepreneur’s
business.
• Spending on research and
• Government stability and likely
development
changes
• Technology incentives
• Bureaucracy
• Legislation regarding technology
• Tax policy (rates and incentives)
• Communication infrastructure
• Freedom of press
• Access to newest technology
• Rule of law
• Internet infrastructure and penetration
• Government effectiveness
3. ECONOMIC FACTORS
• Political rights
These factors include income, expenses,
and resources that can influence the cost of 6. LEGAL FACTORS
doing business and generating income. Related with political factors, these are
• Growth rates government laws and regulations that can
restrict or allow business activities.
• Trade flows and patterns
• Anti-trust Law
• Inflation rates
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 • Discrimination Law
• Copyright, patents/ intellectual property
rights
• Consumer protection
• Employment law
• Health and safety law
• Data protection law
7. ETHICAL FACTORS
These are factors that will serve as an
entrepreneurs guide on how to be ethical in
running the business.
• Ethical advertising and sales practices
• Accepted accounting, management,
and marketing
Attitude toward counterfeiting and
breaking patents
• Attitude toward development and well-
being of employees
8. DEMOGRAPHIC FACTORS
These are the characteristics of the
people in the target market.
• Population growth rate
• Age distribution and life expectancy
rates
• Gender distribution
• Social classes
• Family sizes and structure
• Minorities
B. Micro-market Analysis
1. Customer
1.1. Primary Target Market
1.2. Secondary Target Market
Market size
It is simply the size and the arena where
the entrepreneur’s business will play.
Customers
They said to be the lifeblood of the
business. These are the people who buy the
product or avail the service of the entrepreneur.
Customer Requirements
These are specific features and characteristics
that the customers need from a product or
service.
“Entrepreneurs must know who buys, and
what, when, where, how, and most
importantly why they buy.”
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Entrepreneurship
Market intelligence
It includes customer profiling, drives the
entrepreneur on what correct strategies and
tactics to employ.
Market Segmentation
It is the process of grouping similar or
homogenous customers according to
demographic, psychographic, geographic, and
behavior.
A. Demographic/ Socioeconomic
Segmentation
It is the process of grouping customers
according to relevant socioeconomic variables
for the business venture. These data help the
entrepreneur target customers accurately and
classify their respective needs, wants, and
desires.
1. Income Range and Social Class
These represent the purchasing power
of the market. These are extent to which the
customers can buy or avail of the service.
2. Occupation
It determines the customers’ income and
their daily routine where goods and services can
be properly positioned.
3. Gender and age group
These are data that must be mined
because the life cycle of customers and their
genders influence their buying behavior.
4. Religion and Ethnicity
It also should be taken to account
because these affects the way they products or
avail of services.
B. Psychographic
It is a process of grouping customers
according to their perceptions, way of life,
motivations, and inclinations.
1. Perception
It is a process wherein an individual
receives external stimuli using the five senses.
The customers’ way of life will give an
entrepreneur an overview of what products or
services can best suit the problems that
happening on the daily basis.
2. Motivation
  Physiological motivations involve the
needs of the person; they seek to avoid
pain and give pleasure.
 Psychological motivations involve
customer’s preferences.
 Aspirations are what the customers want
to achieve.
 Deprivation involves the customer’s
recognition of certain voids to fill.
3. Customer’s inclinationIt involves preferring
one product over another as a result of gaining
a refreshing experience when using the product,
possibly due to the product’s unique features or
due to it giving more value than the other
product.
C. Geographic
It is simply grouping customers
according to their location. This is critical in the
analysis of the target market as this
encompasses the cultures, beliefs, preference,
politics, and lifestyle of a certain geography.
D. Behavioral
It is the process of grouping the
customers according to their actions.
1. Occasions drastically affect the customers’
buying behavior.
Example:
• Christmas season
• Valentines
• summer season
2. Desired benefits determines the exact needs
of the customers and offer the most suited
product or service for them.
Example:
• Offering 3-in-1 coffee for budget
conscious customers
3. Loyalty is the result of maintaining satisfied
customers.
4. Usage of products or availment of service
describes how often a product is being used or
the service is being availed. Entrepreneurs can
group customers as light users, medium users,
or heavy users.
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Entrepreneurship
Market Aggregation
This happens when an entrepreneur
wants to target a broader market as possible
because the product or service that the
business offers is suited for an undifferentiated
market.
C. Supplier
It is a person, company, or organization
that sells or supplies something such as goods
and equipment to customer. (business) –
www.globalnegotiator.com
It is an entity that supplies goods and
services to another organization. It is a part of
the supply chain of a business, which may
provide the bulk of the value contained with its
products. –www.accountingtools.com
 Who will be the main supplier? Why?
 Where is the supplier located at?
 Who will be the alternative supplier?
D. Competition
It is identifying your competitors and
evaluating their strategies to determine their
strengths and weaknesses relative to those of
your own products or service. –
www.entrepreneur.com
“It is any person or entity which is a rival
against another. In business, it is a company in
the same industry or a similar industry which
offers a similar product or service. Competition
also requires companies to become more
efficient in order to reduce costs.”
Direct Competition
It is a situation in which two or more
businesses offer products or services that are
essentially the same; as such, the business are
competing for the same potential market.
Indirect Competition
“Indirect competition is competition
between companies that make slightly different
products but target the same customers. We can Refer to favorable external factors that an
also use the term for providers of services. Apart organization can use to give it a competitive
from targeting the same group of customers, they advantage.
also aim to satisfy the same needs.”
 Social Media
E. SWOT ANALYSIS  Customer
 Few Competitors
» Its purpose is to present routes for a
 Location
company.
THREATS
» A company can use a SWOT for overall
business-strategy sessions or for a Refer to factors that have the potential to
specific segment like marketing, harm an organization.
production or sales.
 Cost of Inputs
» It is a foundational assessment model  Competition
that measures what an organization can  Economy
and cannot do, and its potential  New Technology
opportunities and threats.
STRENGTHS
Describe what an organization excels at
and separates it from the competition; a strong
brand, loyal customer base, a strong balance
sheet, unique technology.
Examples:
 Production
 Staff
 Products
 Branding
 Profit F. MARKETING MIX (7P’s)
WEAKNESSES It is a widely accepted strategic
Stop an organization from performing at marketing tool that combines original 4P’s with
its optimum level. They are areas where the the additional 3P’s in formulating marketing
business needs to improve to remain competitive: tactics for a product or service.
high level of debt, an inadequate supply chain or Purpose of creating 7Ps model:
lack of capital.
• for conducting situation analysis
Example:
• for setting objectives
 Marketing
 Cash Flow • for conducting a strength,
 Fund weakness, opportunity and threat
 Cost SWOT or competitive analysis
 Financial 1. Product
OPPORTUNITIES

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Entrepreneurship
 What product or service is the most
appropriate for the opportunity, and why will
customers buy or avail them?
2. Place
What location is best suited for the
business where there are more potential
customers? Can they conveniently transact on-
site or online? How is the process of distribution
of products or performance of services?
3. Price
What is the most appropriate price, and
what pricing strategies will be used to the target
markets?
4. Promotion
What is the most effective advertisement
or combination of advertisements, and which
advertising tool should be used to drive
awareness and increase sales?
5. People
What type of people need to be hired?
What are the basic skills needed for the job?
What leadership style will be applied by the
entrepreneur?
6. Packaging
What is the best packaging for the
product that is attractive enough to customers
and cost-efficient at the same time? What
physical evidence does the entrepreneur need
to set up so as to ell the service?
7. Process
What is the most compelling feature of
the product or the business that will make a
difference in the lives of the customers? What
sets the product or service from the rest?
1. PRODUCT
It is any physical good, service, or idea
that is created by an entrepreneur or an
innovator in serving the needs of costumers and
addressing their existing problem.
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Entrepreneurship
Three Level-Concept
Level 1: Core Benefits of the Product or
Service
▫ These are NOT tangible physical
products.
▫ These are the major factors why a
costumer buys a product or avails of a
service.
Level 2: Physical Characteristics of a
Product or Service
It is the second layer of selection once
the core benefit has been satisfied and opinions
are available to the costumers
i.e. better packaging for products or a better
physical evidence or costumer experience for
services.
Level 3: Augmented Benefits of a Product or
Service
These are only additional benefits; a
costumer will still get the core benefits of a
product or service even without the augmented
benefits.
2. PLACE
Refers to a location or the medium of
transaction.
STRATEGIC LOCATION
1. strategic location
2. primary target market
Physical Location
 Area’s Population
 The Traffic
 The People’s Common Paths
 Their Buying Behavior
 Their Preferences for the Location
Cyber Location
The entrepreneur must use Web
analytics data to understand Web site
performances.
Logistics of Products
 Production
 Ordering and Receiving Raw materials
or Finished Goods from the Suppliers
 Storage
 Reorder Points
 Transportation System
Logistics of Service
 Physical Evidence/ Servicescape
 Service Providers and Service Delivery
Process
 Policies and Procedures of the Business
Major Objective
To provide customers with pleasant
experience in buying the product or availing of
the service so that they will keep on coming
back whether on – site or online.
Characteristics of PLACE
 Presentable
 Appealing
 Catchy
CRITERIA/ OBJECTIVES IN CHOOSING
RIGHT LOCATION
√ Suitability to the target market
√ Condition of the neighborhood
√ Potential area for future developments
√ Laws and Regulations in the area
√ Direct and indirect competitors
√ Foot traffic
√ Cost of doing business
3. PRICE
Price is the peso value that the
entrepreneur assigns to a certain product or
service after considering its costs, competition,
objectives, positioning, and target market.
It is the only P in the 7Ps that generates
revenue for the business.
Most Common Pricing Strategies
1. Bundling
This refers to two or more products or
services in one reduced price.
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Entrepreneurship
2. Penetration Pricing
This refers to setting low prices to
increase market share, but the entrepreneur will
eventually increase the price once the desired
market share is achieved.
3. Skimming
This is the opposite of penetration
pricing where prices are initially high and then
they are lowered to offer the product or service
to a wider market.
4. Competitive Pricing
This refers to benchmarking prices with
the competitors.
5. Product Line Pricing
This refers to pricing different products
or services within a parallel product array using
varying price points.
6. Psychological Pricing
This considers the psychology and
positioning of price in the market.
7. Premium Pricing
This refers to setting a very high price to
reflect elitism and superiority.
8. Optional Pricing
This refers to adding an extra product or
service on top of the original to generate more
revenue.
9. Cost-based Pricing
The basis of markup is the cost of sales.
10. Cost Plus Pricing
The markup is based on a certain
percentage of cost.
The profit of an entrepreneur can be
determined only if there is a proper computation
of costs associated with the product or service.
Two Classification of Costs
Variable Costs or Controllable Costs
These costs are directly proportional to
the number of products manufactured or to the
number of services performed.
Fixed Costs or Uncontrollable Costs
• These are costs not directly proportional
to the manufacturing of a product or to
the performance of the service.
 • There are usually the cost of equipment,
employee remuneration, rental cost, and
utilities.
• These are considered fixed costs
because the business will still incur
these costs whether or not they provide
more or less.
• Therefore, if the entrepreneur produces
more products and perform more
services, his or her fixed cost per unit will
be lover because the fixed cost will be
allocated to the number of units
produced or number of services
performed (Sim, 2009).
The entrepreneur must follow these general
pricing guidelines to make the business
sustainable and thriving:
1. Do not price the product or service below its
cost.
2. Monitor competitors’ prices, and ensure that
your prices are at par with them unless the
product or service is really way superior to the
competitors’.
3. Align prices with the other 6Ps (product,
place, promotion, people, packaging, and
processing).
4. Implement price strategies that are relevant to
your market segment.
5. Align prices with your business objectives.
4. PROMOTION
It involves presenting the product or
services to the public and how these can
address the public needs, wants, problems, or
desires.
Main Goal: gain attention
Key Marketing Messages for Promotion
 value proposition or unique selling
proposition of the product or service
 Product or service image
 business image
 business values and philosophy
Promotional Tools
A. Advertising
This type of communication influences
the behavior of a customer to choose the
product or service of the entrepreneur over the
competitors.
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Entrepreneurship
Objectives of Advertising
1. Informing, educating, and familiarizing
the public with the product and service
offerings
2. Building a trustworthy image
3. Increasing sales
Advertising Channel
 Television- regular channels, cable TV
 Radio- AM and FM radio
 Internet- e-mails, websites, blogs, social
media
 Mobile phones- text messages, mobile
applications, mobile Internet
 Print- newspapers, magazines, flyers,
signages, posters
 Out-of-home- billboards, buses, bus
stops, trains, taxis, street advertisements
B. Selling
It is an act of trading a product or service
for a price or a fee. The entrepreneur must
identify the target customers who will likely buy
the product or service. He or she must monitor
the customer’s satisfaction, which is called the
after sales.
C. Sales Promotions
These are short- term promotional
gimmicks wherein practical incentives and
appealing activities are incorporated to entice
the customers to buy the product or avail of the
service. These are also called “below-the-line”
promotions.
Common examples of sales promotions in the
Philippines:
 Sales discounts or discount coupons
 Raffles
 Contests and games
 Promo items
 Product or service bundles
 Trade fairs or exhibits
 Sample distributions or free taste/free
trials
 Premiums
 Point-of-purchase promotions
 Advertising specialties
 Rewards
D. Public relations
These are image-building initiatives of the
entrepreneur to make the name of the business
reputable to stakeholders, such as the target
customers, government agencies, business
partners, media, and the public. Unlike
advertisements, public relations (PR) do not
directly promote products or services.
Examples of PR strategies
 Press conferences
 Launching events
 Lobbying
 Web public relations
 Social responsibility events
5. PEOPLE
 What type of people need to be hired?
 What are the basic skills needed for the
job?
 What leadership style will be applied by
the entrepreneur?
People
 One of the 3 additional Ps in the
marketing mix.
 Plays a vital role in servicing customers.
 Have a major influence in the customer’s
buying behavior.
ENTREPRENEURS ROLE:
 Hire people or employees because it is a
core job as strategy implementation.
 Identify the specific, necessary job roles
of employees and their descriptions to
know the precise purpose and serve
customers glowing.
 List the criteria of the following job offers
and requirements.
Employees Benefits:
 SSS
 GSIS
 Pag-Ibig Fund
 Withhold taxes from employees’
paychecks and providing employees with
retirement and disability benefits.
 Comply with the Federal and Medical
Leave.
6. PACKAGING
It is how the product or service is
presented to customers. It is the overall
identification (look and feel) of the product or
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Entrepreneurship
service. This will determine the uniqueness of the
product from competitors. This is the first element
that customers see because they don’t know
what’s inside yet. Aside from this, packaging
preserves the shelf life of the product or service.
Packaging is very important in selling
physical products or goods, as it establishes the
brand’s identity, as well as its unique selling
proposition. Therefore, elements such as color
(which has different meanings on the customer
segment and culture), shape,size, materials,
product must be put into several test , such as
packaging, and graphics tests ,to ensure that
the packaging is attractive and of high quality.
In selling services, the term
servicescape was used to refer to the overall
ambiance of the place where the service is
performed
Example: in spa business, the
servicescape should be cozy, service staff should
be friendly, the massage bed should be
comfortable and clean, and relaxing music and
the aromatic smell of nature should be evident.
Packaging services often involve bundling to
make them look attractive.
7. PROCESS
Process is the last addition in the
marketing mix as marketers began to realize the
importance of the internal and external
operations of the business to serve customers
better.
Process is defined as a step by step
procedure or activity workflow that the
entrepreneur or employees follow to effectively
and efficiently serve customers.