ENTREPRENEURSHIP II

Quarter Lesson Summary

DEFINITION OF A MARKET
A market serves as a place, space, platform, or mechanism where goods, services, or assets are exchanged for
any monetary value between buyers and sellers. It is the hub of economic activity, where supply and demand
converge to facilitate these exchanges.

BUYER AND SELLER

In entrepreneurship, a buyer is typically a customer or client who purchases products or services from the
entrepreneur's business. A seller, on the other hand, is the entrepreneur or their company, that provides and sells
these products or services to customers.

Roles of A Buyer And Seller

The buyer and seller play complementary roles in a market, essential for the functioning of markets for various
reasons:

1. Meeting Needs and Wants: Buyers have needs and wants, and sellers provide the products or services to
fulfill these requirements.
2. Supply and Demand: Sellers create the supply of products or services, and buyers create the demand for
them. The interplay between supply and demand sets prices and determines market dynamics.
3. Price Discovery: Buyers and sellers negotiate and agree on prices, taking into account factors like market
conditions, competition, and the perceived value of the product or service. This process is essential for
market efficiency.
4. Competition and Innovation: Competition among sellers stimulates innovation, quality improvement, and
cost reduction. This benefits buyers by offering them better products and services at competitive prices.
5. Economic Growth: The interactions between buyers and sellers drive economic activity and growth,
leading to expansion, job creation, and economic development.
6. Mutual Benefits: Both buyers and sellers aim to benefit from the exchange, resulting in a win-win scenario
where both parties gain something of value.
7. Market Feedback: Buyers provide valuable feedback to sellers, enabling them to enhance their offerings
and adapt to changing consumer preferences.

Differentiating Buyers, Consumers, Customers and Clients

1. A "buyer" is a broad term for anyone who purchases goods or services. It doesn't specify whether the
purchase is for personal use or on behalf of a company.
2. A "consumer" is an individual who purchases and uses products or services for personal use or household
consumption.
3. A "customer" is a person or entity that buys products or services from a business, including individual
consumers and businesses or organizations
4. The term "client" typically used in professional services or business-to-business contexts, indicating a long-
term or recurring relationship with a service provider.

INTRODUCTION TO MARKET MIX

“Right product at the right time and place for the right price.”

For an entrepreneur to successfully sell a product to its customers, it is crucial to have a strategic framework to
develop and manage a successful marketing strategy called the Market Mix. These are basic actions and strategies
to build and sell its product/service to customers. It helps to ensure that you can offer your customers the right
product, at the right time and place for the right price.
ELEMENTS OF MARKET MIX
Whereas traditionally the marketing mix was executed through the 4 Ps of marketing, 3 more additional tools have
been added to the mix, making it the 7 Ps of marketing.

 PRODUCT
A product is typically defined as a 'thing produced by labor or effort' or the 'result of an act or a process.'
The term 'product' derives from the Latin verb 'produce,' signifying '(to) lead or bring forth,' and has
historically referred to anything created since 1575.

In the context of marketing, 'product' encompasses the physical goods or intangible services provided by
business owners to address the wants or needs of a specific market. This category includes physical
items, services, and even virtual offerings. These products are created at a certain cost and are
subsequently made available to the appropriate audience at a designated price.

In essence, a product can take the form of tangible items like music players or shoes, as well as intangible
services such as hotels or airlines. They all serve as solutions to fulfill the needs of customers.

NEEDS AND WANTS

In the world of goods and services, there are items that are absolutely essential, and then there are those
that people desire to own or enjoy. People often use the terms 'needs' and 'wants' interchangeably for both
categories.

However, there's more to this story. It's crucial to grasp the distinctions between these terms, whether
you're a customer seeking something or a marketer trying to provide it. Understanding these differences
not only helps in defining needs and wants but also plays a vital role in addressing the concept of 'demand.'
So, let's delve into what sets these terms apart and how they relate to one another.

What Is A Need?
A need is a requirement arising out of a necessity that is essential for an individual to exist or live a healthy
life. Consider it to be an essential element of life whose deficiency may lead to adverse outcomes. Needs
are drivers of people’s actions. Almost all actions can be considered as originating in the quest for
satisfying or actualizing needs. The most basic needs examples include food, water, rest, clothing, shelter,
health, and reproduction. Without them, an individual might not exist.

Characteristics Of Needs
 Needs are essential: They are necessary for survival or to prevent adverse outcomes.
 They’re essentially universal: Usually, needs are common for everyone, like everyone requires
food, water, air, etc.
 They may be stimulated by external or internal factors: External factors like climate change
and internal factors like disability might stimulate a new need within an individual.
 Priorities may be deferred: Needs work in a hierarchy. Higher-level needs only come into play
after lower-level and more important needs are fulfilled.
 Needs are interrelated: Each fulfilled need gives rise to a new need till the individual reaches the
self-actualization level.

What Is A Want?
A want is a requirement arising out of the desire, aspiration, or motivation of an individual to get
satisfaction. These are elements that an individual desires but could live without. Furthermore, these
requirements might change frequently depending upon several factors like surroundings, perception,
environment, culture, and even age. Some examples of wants include entertainment, travel, electronic
devices, fashion, etc.

Characteristics Of Wants
 Wants are unlimited: Wants arise from experience and the available choices. Hence, they can be
unlimited.
 They arise from needs: Wants usually stem from basic needs. For example, a want to buy a
specific brand of shoe arises from the need to have shoes.
 Wants compete with each other: Unlike needs, wants don’t work in a hierarchy. They compete
with each other over the limited resources of the individual.
 Wants are not universal: Different individuals may have different wants depending upon their
experiences, available choices, and other factors.

Needs vs Wants

Needs Wants

Needs are requirements that needs Wants are requirements arising out of
Meaning to be fulfilled in order to exist or desires that are not necessary for survival
thrive. or thriving.

Nature Limited Unlimited

Represents Necessity Desire, aspiration, or motivation.

Flexibility May remain constant over time May change with time

Non- May result in extreme events like May result in sadness, regret, or
fulfilment disease, death, or extinction. disappointment.

PRODUCT CLASSIFICATION
In the world of business, products are the building blocks of trade. They come in different types, and we
can classify them into three main categories: tangible things you can touch, intangible things like ideas, and
services that people provide. Within these categories, we'll also look at products for businesses and
products for consumers, helping us understand the diverse world of commerce.

Tangible, Intangible Goods and Services

All products can be broadly classified into 3 main categories. These are:

1. Tangible Products
 Physical Properties: Tangible products are physical items that can be seen, touched, and felt.
They have a physical presence and can be held or stored. These products are typically concrete
and have a physical form.
 Ownership: Ownership of tangible products involves possessing the physical object or asset.
 Examples:
o Clothing: Clothing items like shirts, shoes, and pants are tangible products.
o Electronics: Items like smartphones, laptops, and televisions are tangible products.

2. Intangible Products
 Physical Properties: Intangible products lack a physical presence. They cannot be touched,
seen, or held because they are abstract in nature.
 Ownership: Ownership of intangible products is often in the form of rights, licenses, or access to
certain benefits or information.
  Examples:
o Software: Software applications, like Microsoft Office or Adobe Photoshop, are intangible
products. Users have a license to use the software but don't possess a physical copy.
o Intellectual Property: Copyrights, patents, trademarks, and other intellectual property
rights are intangible products.
3. Service Products
 Physical Properties: Service products are intangible and often involve the performance of an
activity, task, or work rather than the production of a physical object. Services may have physical
components (e.g., a haircut involves the use of physical scissors), but the primary value lies in
the service itself.
 Ownership: Ownership of service products pertains to the right to receive a particular service or
the experience associated with it.
 Examples:
o Haircut Services: When you go to a salon for a haircut, you are receiving a service, not a
physical product. You don't own the haircut but have paid for the experience.
o Consulting Services: Management consultants provide expertise and advice, which are
service products. Clients pay for the consultancy services and knowledge.
o Hospitality Services: Staying at a hotel, receiving room service, or dining at a restaurant
all involve service products. Customers pay for the experience and service provided.

THE COMPONENTS OF PRODUCTS

A product, in all its forms, is like a puzzle with pieces that come together to make it complete. These
individual parts are the components of a product. Understanding these components is like seeing the
building blocks of the things we use every day. Let's take a closer look at what makes up a product.

a. Core Functionality
 Definition: Core Functionality refers to the primary purpose or function that a product is designed
to fulfill. It is the essential reason why customers purchase the product
 Example: For a smartphone, the core functionality is communication, including making calls,
sending texts, and accessing the internet.

b. Physical Attributes
 Definition: Physical Attributes encompass the tangible characteristics of a product, such as its
size, shape, weight, color, and material composition.
 Example: In the case of a laptop, physical attributes include its screen size, keyboard design,
aluminum casing, and weight.

c. Variety
 Definition: Variety refers to the different options or versions of a product that cater to diverse
customer preferences or needs.
 Example: An automobile manufacturer offers various models, colors, and configurations to suit
customers' tastes and requirements.

d. Features
 Definition: Features are additional functions or capabilities beyond the core functionality that
enhance the product's appeal and utility.
 Example: A high-end camera may offer features like image stabilization, various shooting modes,
and manual controls in addition to taking photos.
e. Design and Aesthetics
 Definition: Design and Aesthetics pertain to the overall visual appeal and style of the product,
influencing customer perception.
 Example: Sleek and modern design elements in the latest smartphone models to attract fashion-
conscious consumers.

f. Packaging
 Definition: Packaging involves the materials and design used to contain, protect, and present the
product. It can also serve as a marketing tool.
 Example: The attractive packaging of a luxury perfume bottle enhances the product's perceived
value.

g. Documentation
 Definition: Documentation includes user manuals, instructions, warranties, and other written
materials that accompany the product to guide users and provide information.
 Example: The instruction manual that comes with a new appliance, explaining how to operate and
maintain it.

h. Accessories
 Definition: Accessories are additional items or components that can be used with the product to
enhance its functionality or convenience.
 Example: Accessories for a gaming console, such as controllers, charging docks, and headsets.

i. Software and Firmware

 Definition: Software and Firmware refer to the digital components of a product, including the
operating system, applications, and embedded code.
 Example: The operating system and software apps on a smartphone that enable various functions
and features.

j. Quality and Durability

 Definition: Quality pertains to the overall excellence of a product, while durability refers to its ability
to withstand wear and tear over time.
 Example: A well-built, long-lasting stainless steel kitchen appliance that is known for its quality and
durability.

k. Branding
 Definition: Branding includes elements like logos, labels, and trademarks that help customers
identify and differentiate the product from competitors.
 Example: The iconic Apple logo on Apple products, signifying a brand associated with innovation
and quality.

l. Safety Features
 Definition: Safety Features are design elements or mechanisms integrated into the product to
ensure safe use and reduce potential hazards.
 Example: Airbags and antilock brakes in automobiles that enhance driver and passenger safety.

m. Environmental Considerations
  Definition: Environmental Considerations involve features or materials aimed at reducing the
product's environmental impact, such as energy efficiency or recyclability.
 Example: Energy-efficient LED light bulbs designed to consume less electricity and reduce carbon
emissions.

n. Regulatory Compliance
 Definition: Regulatory Compliance refers to adherence to laws and standards governing product
safety, quality, and labeling in a particular industry or region.
 Example: Medical devices comply with strict FDA regulations to ensure patient safety.

o. Customer Support and Service

 Definition: Customer Support and Service encompass the assistance and resources provided to
customers after purchasing the product, including warranty support and technical assistance.
 Example: A computer manufacturer offering a 24/7 customer support hotline and a comprehensive
warranty policy.

INVENTION VS INNOVATION
Invention and innovation are the driving forces behind progress and change. Invention sparks entirely new
ideas and creations, while innovation refines and transforms existing ones. Together, they shape our world.
In this discussion, we'll explore the differences and real-world impact of invention and innovation.

What is Invention?
Invention is the creation of entirely new devices, methods, or processes, often emerging from study and
experimentation. Inventions can be the result of intentional development or, sometimes, they occur
accidentally.

Examples of Inventions
 Efficascent Oil: Efficascent Oil is a liniment used for relieving minor aches and pains in the
muscles and joints. It was invented by Dr. Tiburcio Carino, a Filipino physician, and it has been a
well-known and widely used product in the Philippines for decades.
 Erythromycin (Iloson-E): Erythromycin, originally discovered and developed by Dr. Abelardo
Aguilar, is still in use today as an antibiotic to treat various bacterial infections. In the Philippines,
the brand "Iloson-E" is one example of this product that remains available.
 Banana Catsup (Mafran and UFC): Maria Ylagan Orosa, a Filipino food technologist, invented the
process for making banana catsup during World War II when tomato catsup was scarce. Brands
like Mafran and UFC still produce and sell this unique Filipino condiment.

What is Innovation?
Innovation, in contrast, involves improving upon existing technologies, products, or services. Innovations
can take various forms, from enhancing methods or ingredients used in production to introducing new
variations. Examples of innovation include:

Examples of Innovation
 Philippine Jeepney: The iconic Philippine Jeepney, originally inspired by surplus military jeeps left
by American forces after World War II, has undergone continuous innovation. Today, modern
Jeepneys feature colorful designs, improved seating arrangements, and more environmentally
friendly engines.
 Buko Pie Variations: The traditional Filipino coconut pie, known as Buko Pie, has seen innovative
variations, including sugar-free and vegan versions. These cater to health-conscious consumers
while retaining the delicious coconut flavor.
 PRODUCT LIFE CYCLE
It can be recalled that during the last stage of Product Development, the product is launched to the entire
population, and as soon as it does, the product life cycle then starts.

Definition
The term refers to the length of time a product
is introduced to consumers into the market until
it's removed from the shelves. The life cycle of
a product is broken into four stages —
introduction, growth, maturity, and decline. It
describes the stages a new product goes
through from beginning to end. The product life
cycle begins as soon as the product enters the
market. It is also commonly used by large business owners in understanding the market and planning the
market mix.

How Product Life Cycles Work

Products, like people, have life cycles. A product begins with an idea, and within the confines of modern
business, it isn't likely to go further until it undergoes research and is found to be feasible, doable and
potentially profitable. At that point, the product is produced, marketed, and rolled out.

Product life cycles (PLCs) describe the stages that a product typically goes through from its introduction to
the market until its eventual decline and discontinuation. Understanding these stages is crucial for
businesses to make informed decisions regarding product development, marketing, and resource
allocation. Here's how product life cycles work:

 PRICE
Pricing stands as a vital pillar within the marketing mix, as it has the power to influence what customers are
willing to pay for your product or service. It's a determining factor in shaping your profits, but finding the
right pricing balance can be a challenge. Set your prices too high, and you might witness a decrease in
sales, yet pricing them too low can result in missed revenue opportunities.

KEY CONCEPTS: COST, MARGIN, MARKUP, REVENUE, PROFIT

To navigate the pricing landscape effectively, it's essential to understand key concepts related to pricing,
specifically the interplay of cost, margin, markup, revenue, and profit:

 Cost refers to the fees or expenses incurred from manufacturing, sourcing, or creating the product.
This includes raw materials, labor costs, supplier fees, and production losses. It’s essential to note
that cost doesn’t include overhead and operational expenses such as marketing, advertising and
maintenance.
 Margin, particularly gross margin, refers to what remains after subtracting manufacturing costs
from your earnings.
 Markup refers to the additional amount charged for your product beyond the production and
manufacturing costs. It contributes to your revenue and profit.
 Revenue is the total income generated by selling your products or services.
 Profit is the amount that remains after subtracting all costs, including manufacturing, overhead,
and other expenses, from your total revenue. It's the primary financial goal of any business.
 PLACE
Place, in the context of marketing, refers to the process of how customers discover, select, purchase, and
utilize a business's products or services. It encompasses making your products or services easily
accessible to customers. This can mean different things depending on the nature of your business, whether
it's primarily physical or digital.

PHYSICAL VS. DIGITAL BUSINESS

Businesses can be categorized as physical, digital, or a hybrid of both based on their primary mode of
operation:

1. Physical Business:
 This category includes traditional brick-and-mortar businesses that operate from physical locations
such as stores, offices, or manufacturing facilities.
 Most of their transactions occur face-to-face, with customers visiting their physical establishments
to buy goods or services.
 Examples of physical businesses encompass retail stores, restaurants, manufacturing plants, and
service providers like hair salons and car repair shops.

2. Digital/Virtual Business:
 Digital businesses primarily operate on the internet, with a limited physical presence, if any. They
rely on digital tools and technologies to reach and serve customers.
 This category includes online retailers and marketplaces, where products are sold and delivered
virtually, as well as digital service providers like consultants, software developers, and digital
marketers.
 Examples of digital businesses include e-commerce websites (e.g., Shopee), software as a service
(SaaS) companies, online educational platforms, and freelance services websites (e.g., Upwork)

DISTRIBUTION CHANNELS
Distribution channels, also known as marketing channels, are the pathways through which products and
services move from the manufacturer to the end consumer. The choice of distribution channel can
significantly impact a business's reach, customer experience, and overall success.

a. Direct Distribution Channel: In a direct distribution channel, the manufacturer or producer sells their
products or services directly to the end consumer without intermediaries.
 Examples:
o E-commerce: Online retailers like Amazon or the manufacturer's own website, where
consumers can purchase products directly from the producer.
o Company-Owned Stores: Manufacturers may operate physical stores, such as Apple
Stores, where they sell their products directly to consumers.
o Direct Sales: Companies like Avon or Tupperware use direct sales representatives to reach
consumers and make sales through in-person demonstrations or parties.
o Artisan Markets: Individual artisans selling their handmade goods directly to customers at
craft fairs or local markets.
 Advantages: Direct distribution allows manufacturers to have greater control over pricing,
branding, and the customer experience. They can collect direct feedback from consumers and
build a closer relationship.
 Challenges: Manufacturers need to invest in marketing and sales efforts, manage their own supply
chain, and may have limited reach compared to indirect channels.
 b. Indirect Distribution Channel: In an indirect distribution channel, manufacturers use intermediaries
like wholesalers, retailers, dealerships, or agents to facilitate the sale of their products to consumers.
 Examples:
o Wholesalers and Retailers: Consumer electronics manufacturers sell their products to
wholesalers, who then distribute them to retail stores. Consumers buy these products from
the retailers.
o Automotive Industry: Car manufacturers sell their vehicles to authorized dealerships, which
sell cars to consumers.
o Pharmaceuticals: Pharmaceutical companies sell their drugs to distributors, who then
supply them to pharmacies. Consumers obtain medications from the pharmacies.
o Grocery Stores: Food manufacturers sell their products to grocery store chains, and
consumers purchase those products from the grocery stores.
 Advantages: Indirect distribution can expand a manufacturer's market reach and reduce logistical
complexities. Intermediaries may have established customer bases and expertise in marketing and
sales.
 Challenges: Manufacturers have less direct control over pricing and the customer experience.
They need to manage relationships with multiple intermediaries, which can be complex.

 PROMOTION
Promotion is the collection of strategies that businesses employ to capture the interest of potential
customers. These encompass a wide array of techniques, including sales promotions, public relations,
advertising, and more. When constructing a promotion strategy, it's crucial to consider your competitors'
tactics, choose effective channels to reach your target audience, and align these methods with the
perceived value of your product.

PROMOTIONAL METHODS
1. Advertising: Creating Visibility
 Definition: Advertising is a powerful promotional method that involves crafting and delivering
compelling messages to a broad audience. It serves as a dynamic tool for building visibility and
attracting customers. Various advertising techniques can be employed to achieve this goal
 Primary Advertising Techniques
o Television Commercials (Spot Advertising): These brief video ads are strategically aired
during popular TV shows or events, allowing businesses to reach a diverse and extensive
audience. Television commercials are known for their ability to create a lasting impact.
o Print Advertising: Placing advertisements in magazines, newspapers, or on billboards is an
effective way to target specific demographics or geographical regions. Print ads come in
various formats and are designed to captivate the audience's attention.
o Online Banner Ads: Displayed on websites or social media platforms, online banner ads can
take various forms, such as display ads, pop-ups, or native ads. They offer businesses a
digital platform to promote their products and services.
 Other Techniques
o Product Placements (Sponsored Advertising): Integrating products into TV shows, movies,
or video games subtly promotes them. This technique can subtly enhance a product's visibility
in the market.
o Digital Advertising: This encompasses various online advertising channels, including social
media ads, search engine ads, and more. It's crucial for businesses seeking an online
presence.
 o Broadcast Advertising: This entails creating television and radio commercials that resonate
with viewers and listeners, aiming to capture their interest and drive action.

2. Social Media: Engaging Through Online Platforms

 Definition: Leveraging social media can be highly effective for engaging with modern consumers.

3. Public Relations: Shaping Brand Image and Reputation

 Definition: Public relations focuses on managing and enhancing a company's reputation through
positive media coverage and strategic communication.

4. Direct Mail: Traditional and Electronic

 Definition: Direct mail promotion uses physical or electronic mail to deliver promotional materials,
offers, or information directly to recipients.

5. Sales Promotion: Encouraging Sales

 Definition: Sales promotion techniques aim to stimulate immediate purchases or loyalty by offering
incentives, deals, or discounts.
 Example Techniques:
o Discounts: Offering limited-time discounts or coupons.
o Sample: Distributing free product samples in-store or digitally.
o Rebates: Providing cash rebates or cashback for specific product purchases.
o Reward Programs: Offering loyalty points for every purchase, redeemable for discounts or
free items.
o Gifts: Providing free gifts with the purchase of certain products.
o Premium: Offering a higher-priced product version with added features.

6. Personal Selling: Building Relationships

 Definition: Personal selling involves direct communication between sales representatives and
potential customers to educate, persuade, and make sales.

Adding the "3Ps" to the traditional 4Ps is a way to expand the marketing mix framework to better reflect the
complexities and nuances of modern marketing. The additional Ps are:

 PEOPLE
People recognizes the importance of the people involved in delivering and receiving the service. It includes
employees, customer service representatives, and other individuals who play a role in customer
interactions. The quality of these interactions can significantly impact the customer experience
.
 PROCESSES.
Processes refers to a company's procedures, systems, and workflows to deliver its products or services
effectively and efficiently. Efficient processes can lead to cost savings and improved customer satisfaction.

 PHYSICAL EVIDENCE
Physical Evidence relates to the tangible and intangible elements that provide evidence of the service or
product's quality. It can include physical facilities, branding, packaging, and other elements that customers
can see, touch, or experience.