Marketing Concept
Lesson 1: Basic Concept of Marketing
MARKETIN
G needs and wants more effectively and efficiently than its
The process of getting people interested in
your company’s product or service. This happens
through market research, analysis, and understanding of
your ideal customer’s interests. Marketing pertains to all
aspects of a business, including product development,
distribution methods, sales, and advertising.
Modern marketing began in the 1950s when
people started to use more than just print media to
endorse products. As TV, and soon, the internet, entered
households, marketers could conduct entire campaigns
across multiple platforms. And as you might expect, over
the last 70 years, marketers have become increasingly
important in fine-turning how a business sells a product
to consumers to optimize success.
In fact, the fundamental purpose of marketing is
to attract consumers to your brand through messaging.
Ideally, that messaging will be helpful and educational to
your target audience so you can convert consumers into
leads.
Product Concept
The company attempts to find interested
buyers after producing products.
Selling Concept
The firm produces the product and then adapts
a selling strategy designed to convince a group of
perceived customers.
The firm defines its target market and
determines the needs, wants, and values of the
market. The firm then adapts a strategy to satisfy those
competitors.
Factors of Marketing
These factors are necessary for marketing to occur,
a. The presence of two parties with unsatisfied
needs.
b. The desire and ability of the parties to be
satisfied.
c. The existence of a way for parties to
communicate.
d. Each party must have something to exchange.
Marketing Strategy
An action plan designed to achieve the
marketing goal. A marketing strategy refers to a
business’s overall game plan for reaching prospective
consumers and turning them into customers for the
company’s value proposition, key brand messaging, data
on target customer demographics, and other high-level
elements.
Marketing Strategy Vs. Marketing Plan
The marketing strategy informs the marketing
plan, which is a document that details the specific types
of marketing activities a company conducts and contains
timetables for rolling out various marketing initiatives.
Marketing strategies should ideally have longer
lifespans than individual marketing plans because they
contain value propositions and other key elements of a
company’s brand, which generally hold consistent over
the long haul. In other words, marketing strategies cover
big-picture messaging, while marketing plans delineate
the logistical details of specific campaigns.
MARKETING
MIX
It is the set of tools (4Ps) the firm uses to
implement its marketing strategy. It includes product,
price, promotion, and place.
 1. Product
- The tangible commodity or intangible service
that the business firm offers for sale to
prospective customers.
2. Price
- The amount of money paid by the customer to
the selling firm so the customer can use the
product.
3. Promotion
- The provision of required information to
prospective customers so that they are
persuaded to buy.
4. Place
- The location and time required by buyers to
make the company’s product available.
THE MARKETING
ENVIRONMENT
Part of the external environment of the firm is
the marketing environment consisting of variables
confronting the firm. The company has little or no
control over these variables consisting of social forces,
economic forces, technological forces, competitive
forces, and regulatory forces.
Technological Forces
 Development in the existing technology that
affects consumer choices.
Competitive Forces
 The effect of the firm’s competitors on the firm’s
strategy formation.
Regulatory Forces
 Government institutions are entities that
constrain, direct, and influence decisions that the
business follows.
Economic Factors
 Internal and external factors in the market that
affect the economy, including interest rates, tax
rates, laws, policies, wages, and governmental
activities.
BASIC FORMS OF
1. Pure COMPETITION
Competition
- Market situation where there are many
competitors offering for sale identical products or
services. In this competition, prices of products
were determined by the market and not by any
individual buyer and seller.
2. Monopolistic Competition
- A market situation where many sellers exist, but
less than those in pure competition, in a
particular market competing with each other.
Manufacturers often promote certain features of
their products, and then charge higher prices.
3. Monopoly
- A market situation where there is only a single
seller in a particular market. In this market, the
government regulates the prices for some
monopolies like public utility companies (e.g.,
electricity and water).
4. Oligopoly
- A market situation where a few large firms
compete in a given industry. The products sold
are homogenous or identical (e.g., gasoline
steel, and automobiles). Prices are set by
oligopolist in collusion with one another.
Lesson 2: Consumer Behavior
Every consumer has distinct characteristics in
terms of buying. Each has his own taste and preferences
that affects his buying decision. To come up with an
effective marketing strategy, a marketer must identify the
buying behavior of the prospective customers and the
factors that influence the buying decision of a certain
buyer.
 PURCHASE DECISION terms of buying certain products. The following are the
general factors that affect the buying behavior:
PROCESS
a. Psychological Variables
b. Social Influences
c. Purchase Situation

PSYCHOLOGICAL VARIABLES

The following are the specific psychological

variables that can influence buying decision of a certain
customers.

A. Motivation
- The motivation to buy is the result of “drive
stimulus” which is the result of unsatisfied need.
Problem Recognition

 It occurs when the buyer recognizes a problem

or need triggered by internal stimuli and external
stimuli.

Consumer Information Processing

 Internal search occurs when the customer scans

his memory for experiences with products he
thinks will satisfy his needs. External search
occurs when the attempt to generate information
is outside of the customer’s personal
experiences.

Evaluation of Alternatives

 It is how the consumers process information to

arrive at the best decision. Alternatives
indicated will be evaluated with the use of a set
of criteria like price, functions, quality, and the
like.

Purchase

 The act by the consumer to buy the product

of his choice. The purchase decision can be
affected by the attitudes of others and
unexpected situational factors.

Post-purchase Evaluation

 Marketers must determine the consumer’s

behavior after a purchase is made. The
consumer satisfaction level is a result of
comparing expectations about the product
against performance as perceived by the
consumer. The larger gap between expectation
and performance, the greater the consumer’s
satisfaction.

FACTORS AFFECTING CONSUMER

BUYING BEHAVIOR
The buying behavior of each consumer varies from
each other. Each consumer has distinct characteristics in
B. Perception
- Products, advertisements, packaging, and
others are perceived differently by different
people. People are affected by the following
selective process of perception.
1. Selective Exposure – Pays attention to
information that conforms with this
attitude and belief.
2. Selective Attention – Pays attention to
supportive information and avoids
contradictory information.
3. Selective Comprehension – Interprets
selected information to conform with his
attitudes and beliefs.
4. Selective Retention – Remembers only
information that conforms with his
attitudes and beliefs.
C. Learning
- It is a change in behavior occurring as a
result of past experience. When a series of
repeat purchases satisfied consumer, the
probability of buying the same product again is
increased.
D. Attitudes
- It is a person’s feeling about something.
Attitudes do not form easily. It takes many years
to develop them through a learning process
which are affected by:
family influences; peer group influences;
information; experience; and personality.
E. Lifestyle
- It is the individual’s mode of living. It may be
identified by his activities, interests and opinions.
Lifestyle reflects on how people see
themselves and how they believe others see
them.
SOCIAL INFLUENCES
A. Personal Influence
- The views, opinions, and behavior of other
persons oftentimes influence the purchasing
decisions of the consumers. Personal influence
that are important to marketers comes from the
opinion leaders and word-of-mouth.
B. Reference Groups
- These are groups of people that are looked up
upon by a concerned member when forming an
attitude about a particular topic.
C. Family
- Consumer buying behavior is influenced by
three sources related to the family as a concern:
1. Consumer socialization
2. Family life cycle
3. Family decision-making
D. Social Class
- It refers to a group of people who have
approximately equal position as viewed by
others on the society. Social classes may be
roughly subdivided into upper, middle and lower
class.
E. Culture
- A set of values, beliefs, attitudes and
behavior pattern shared by the members of
society and transmitted to the next generation
through socialization.
PURCHASE SITUATION
A. Purchase Task
- It is derived from the reason why the consumer
is making a purchase and this affects buying
behavior.
B. Social Surroundings
- Refers to the situation of the people present in
the purchase area.
C. Physical Surroundings
- The physical surroundings may also affect the
purchase decision of the consumer.
D. Temporal Effects
- The time of the day the purchase is made and
the time available for shopping are temporal
effects that may also affect the buying behavior
of the consumer.
 E. Antecedent States - Is undertaken when the items purchased
- It is like the consumer’s mood or the amount remain the same, but members of the buying
of money he has in his pocket can affect his center are not satisfied with the product.
buying behavior.
- C. New task buying
- This happens when the organization has a new
Organizational Markets buyer and the buyer wants a great deal of
- Groups that buy goods for production information.
purposes or reselling.

A. Industrial Markets
- Organizations that require goods and services
for the purpose of producing goods or
services. The production output of the industrial
firms is sold for profit.

B. Reseller Markets
- Organization that buy goods or services, which
they later sell at a profit.

C. Government Markets
- Government agencies that buy products and
services for use in the production of public THE BUYING BEHAVIOR OF
goods and services. These include the ORGANIZATIONAL MARKET
national, regional, provincial, and municipal
governments.
Participants in Organizational Buying Process
D. Non-profit Organizations
- Nongovernmental organizations that serve their 1. Users are those that will use the product or
clients but do not use profits as organizational service.
goal. 2. Influencers are persons who influence the
buying decision.
Organizational Buying Behavior 3. Deciders are persons who make decisions on
product requirements and suppliers.
Organizational buying behavior has unique
4. Approvers are the persons who authorize the
characteristics regarding the following:
proposed actions of deciders or buyers.
 Demand 5. Buyers are authorized to select the supplier,
and arrange the terms of purchase.
 Potential buyers 6. Gatekeepers have the power to prevent sellers
 Buying objectives or information from reaching members of the
buying center
 Buying Criteria

 Size of order or purchase PURCHASE DECISION-MAKING

PROCESS
 Buyer–seller interaction
1. Recognition of a problem or need
 The buying centers a. Organizational purchasing is a result of
product or operational needs.
b. An organization's needs can be identified by
KINDS OF BUYING
different employees of the firm.
PROCESS
c. Progressive firms are engaged in
A. Straight Rebuy requirements planning.
- Is a routine repeat purchase. This happens d. The firm needs to determine product
when previous purchase is satisfactory. specifications.

B. Modified rebuy 2. Search for information about products and

suppliers.
 a. A listing of products or services that will
solve the problem.
b. Make or buy analysis.
c. Information must be gathered about
potential suppliers
d. Progressive firms are engaged in
requirements planning.
3. Evaluation and selection of supplier
a. Quality of goods or services being
considered for purchase.
b. Characteristics and needs of the buyer.
c. Supplier’s ability to meet quality standards
d. Supplier’s ability to meet delivery schedules.
e. The price.
f. Technical capability of the supplier.
4. The Purchase
- In support of the efficiency objective,
organizations prefer to routinize their purchases.
The blanket purchase order effectively shuts
other supplier until the buyer is no longer
satisfied with its relationship with the current
supplier.
5. Performance evaluation and feedback
a. Buyer inspects the delivered products.
THE CONCEPT OF SOCIAL
RESPONSIBILITY
b. User will determine the product
performance.
c. Buyer evaluates the supplier’s performance
on the promptness of delivery, product
quality, and after sales service.
Factors that Influence Organization Buyers
satisfied. The society endeavors to raise the standard of
living and the quality of life of its constituents.
1. The Product
 Defective products,
 Low quality products,
 Poor service,
 School perceived as “diploma mills”,
 Unsanitary conditions, and
 Harmful chemical in products.
2. The Price
- Cartels control the price to detriment of
consumers. Another area of concern is the price
of electricity and telephone services. Customers
complain about the arbitrary and complicated
manner of pricing in such service firms.
3. Distribution System
- Too many middlemen involved in the selling of
goods; thus, unnecessary jacking up the price of
such commodities.
- Another criticism of marketing is its inability to
move agricultural products from places where
they are abundant to other areas where they
most wanted.
4. Promotional Activity
- Intrusion of consumer’s policy. During elections,
the physical landscape becomes a place for
garbage coming from political posters.
Social responsibility may be defined as the
idea that organizations are part of a society and are
accountable to society for their actions.

Economic factors:
Consumerism
 Price
It refers to the activities undertaken by
 Service independent individuals, groups, and organizations to
protect their rights as consumers.
Lesson 3: Marketing and the Society BASIC CONSUMER RIGHTS

 Right to safety means firms must not knowingly

Personal factor: sell anything that could result in personal injury
GOALS OF THE
 Emotion SOCIETY or harm to consumers.
 The right to be informed refers to the freedom
of the consumer to review complete information
about a product before purchase is made
 The right to choose means competition among
SOCIAL ISSUES THAT AFFECT
firms must be free to flourish.
MARKETING  The right to be heard covers the following:
An institution must be able to satisfy the needs a. The assurance that the interest of the
of its intended clientele, if it wants its own needs consumers will receive full consideration,
and
 b. The assurance of fair treatment of - Deals with the revenue and expenditure patterns
consumers of the government and their various effects on
the economy.
Environmentalism

- It refers to the organized movement of 2. Private Finance

concerned citizens and government to protect
and enhance people’s living environment.
Government responses
- The government has attempted to provide
protection to consumers and the environment in
terms of constitutional guarantees and
specific laws enacted by Congress.
- “The Truth Lending Act”
- “Food and Drugs Act”
- “Clean Air Act”
Business Responses
Two options of businesses:
a. Ignore the complaints
b. Accommodate calls for improvement.
- This category deals with the area of general
finance not classified under public finance. It is
subdivided into the following:
a. Personal Finance
b. The finance of non-profit organizations
c. Business Finance
 Provision of money for commercial
use.
 Concerned with the effective use of
funds.
 It covers the financial management
of private profit-seeking concerns in
the business.
- With the foregoing requirements, business
finance may be defined as the procurement and
administration of funds with the view of
achieving the objective of the business.

GOALS OF
FINANCE

Lesson 1: Fundamental Concepts and

the Goals of Finance 1. Maximizing Proft
- Realizing the highest possible peso or dollar
income. A firm, for instance, may seek to double
Finance a body of FINANCE facts, principles, its peso or dollar income for the current year.
and theories relating to raising This framework, however, is not very useful in
and using money by individuals, businesses, and making sound financial decisions.
governments.

It may be defined as the study of the 2. Maximizing Profitability

acquisition and investment of cash for the purpose of - Profitability can be measured by computing
enhancing value and wealth. Return on Investment (ROI).

CATEGORIES OF - ROI = Profit / Investment

FINANCE Example Calculations:

1. Public Finance
 Profitability can be maximized by obtaining a higher The expected value of a return on investment is
rate of ROI. equal to the return times the percentage of probability
that it will happen (called the risk factor).
3. Maximizing Profit Subject to Cash Constraint
- The ideal set-up is to maximize profits, while at
the
THE FINANCIAL same
STATEMENTS time
maintaining a cash balance that can take care of
cash requirements anytime. This condition is
especially critical in the operation of banks.

4. Maximizing the Net Present Worth

- Under the net present worth concept, the
objective of the firm is to maximize the current
value of the company to its owners. The net
present worth of the firm is equal to the value
now of the firm plus values arising in the future. Financial Statements are those that present
This concept considers the relevance of the financial information to various interested parties. Two
time value of money. This concept indicates important financial statements in the point of view of
that money increases in value with the passing business finance: (1) the balance sheet; and (2) the
of time. profit and loss statement.

- In financial management perspective, the 1. The Balance Sheet

primary goal of finance is not to maximize the
profit, but rather maximizing the shareholder’s - The Balance Sheet Shows:
wealth is of primary concern.

Example Calculations of Present Worth:

a. Assets
What is the value of today of P100,000 to be received - Current Assets
next year assuming that the prevailing rate of interest is
10% per annum?

5. Seeking an Optimum Position along the Risk-

Return Frontier.
- A firm can set a goal of achieving the best - Trade Investments
- Fixed Assets
- Intangible Assets

b. Liabilities
- Accounts Payable
- Loans and Notes Payable
- Advances from Customers
- Accrued Expenses
possible combination of risk and return. - Mortgage Payable
- Bonds Payable
- A little more risk may be accepted, for instance,
for an expected additional rate of return. c. Net Worth/ Owner’s Equity

Return on Investment is the net income generated 2. The Income Statement

by the use of investments or the net worth of a firm.
When it is expressed in percentage, it is called the rate
of return. Risk means uncertainty as to loss. When used
in finance, the term applies to the potential incurrence of
loss of money or its equivalent.
Calculation of Expected Value Using Risk and
Return Factors.
- Represents the revenues realized from the sale
of commodities and services produced by the
company, as well as the costs and expenses
incurred in connection with the realization of said
revenues. Also referred to as profit and loss
statement.
THE BUDGETS
 In case the firm is part of a group, the report must
also contain a consolidated balance sheet and a
Budget consolidated profit and loss statement.
 An TERMS TO estimate of
KNOW income and
expenditure for a future period

The Sales Budget 1. Principal. The amount of resources loaned or

 The starting point of company budgets. It shows
an estimate of sales in units and dollars or pesos
for each major subdivision of sales.
The Materials and Purchases Budget
 The estimate of the materials required by the
firm, specified in quantities, costs, timing of
purchase, the required delivery dates, and other
requirements.
Production Budget
 An estimate of the quantity of products that
should be produced in accordance with the
sales budget. It also shows the monthly
breakdown of quantities to be produced for each
product depending upon the firm’s seasonal
sales index.
This could be derived using the following equation:
borrowed.
2. Interest. The cost of using money over time.
a. Simple Interest. It is the product of the principal
amount multiplied by the period’s interest rate.
b. Compound Interest. It is the interest paid on
both principal and interest accumulated in prior
periods.
3. Compounding. The process of determining future
value when compound interest is applied.
4. Future Value. It is equal to the initial principal
amount compounded at the interest rate for period.
5. Present Value. Is the current value of future amount
of money, or series of payments, evaluated at an
appropriate discount rate.
6. Nominal interest rate. Is simply the stated interest
rate in the contract.
7. Effective interest rate. Also called as an annual
percentage rate. It is the true interest rate and may
differ from
the

Significance of Financial Statements and Budgets

Financial statement and budgets are significant

in terms of decision making of various users of
information derived from these reports.
nominal rate depending on the frequency of the
The Five distinct groups interested in knowing the compounding.
financial standing of the firm. 8. Discount rate. Sometimes called as required rate of
return, is the rate of interest that is used to find the
1. The owners
present value.
2. The management
9. Discounting. It is the process of determining the
3. The creditors
present value of the future amount.
4. The government
10. Annuity. Sometimes called as fixed annuity, a
5. The prospective investors
stream of equal payments made at a regular time
THE ANNUAL REPORT interval.
11. Ordinary annuity. Is one in which payments or
receipts occur at the end of each period. This type of
annuity called regular or deferred annuity
The report sent out each year by the company to its
12. Annuity due. Is one which payments or receipts
stockholders or members. It normally contains the
occur at the beginning of each period.
following:
13. Perpetuity. It is an annuity with an infinite life; that
1. The Balance Sheet is, the payments continue indefinitely.
2. The profit and loss statement
3. The auditor’s report THE TIME VALUE OF
4. The chairman’s report MONEY

Lesson 2: Time Value of Money

 The concept of time value money lies to the principle have grown to P11,000. Your money grows by 10% of
that “the value of your money today may not be the principal amount. It earns P1,000.
same in the future”.
Solution:
Because of some uncertainty ahead, the Note: In the simple interest
businessmen of entities tend to circulate their money and I=Pxi
computation, only the principal
earn interest. Money that was just kept in the pocket will I = P10,000 x 10%
not grow and will lose its value due the decline of its amount will earn interest.
purchasing power. That’s why many businessmen or I = P1,000
entities believe that by investing and earning interest,
they can cover up the possible decline in value of their
money and may earn more than what is necessary. To
make your money grow, you must invest it and earns
additional money out of it. In this time value concept, the principal earns
interest. The interest earned on the prior periods
On the point of view of the borrowers, the cost of becomes part of the new principal amount in the current
using money over time is called interest. That’s why
some economists called the interest as the time value of
money.

Two major concepts of time value of money: future

value and present value.
period.
Both concepts consider the three factors:
I = (P + I from prior periods) i
 Principal
 Interest Example: Now Suppose that ABC Corporation leaves its
 Time period P10,000 on deposit for 2 years in a bank paying 10%
FUTURE VALUE CONCEPT annual
SIMPLE INTEREST interest. At
the CONCEPT end of the
first year, the
initial deposit becomes P11,000. It grows by P1,000 or
10% of the principal. During the 2nd year, the firm will
earn 10% on the P11,000, or it grows additional P1,100
in interest. The firm is earning interest on the changing
balance. Hence, at the end of 2nd year, the firm will have
P12,100 in its deposit account.

Note: When we compare the earning power of the two

types of interest, the compound interest will give larger
interest earning compared to simple interest.
Simple Interest

I=Pxi

I (interest), P (principal amount), and i (interest rate).

1. Single Cash Flow
Total Interest - Simple Interest: FV = P + (I x n) where P is the
principal, I is the interest and n is the time
Total Interest= I x
period.
n

n (time period) - Compound Interest: FV= PV (1+i) where PV is

the present value, i is the interest rate and n is
the number of years or time period.
COMPOUND INTEREST
CONCEPT
Example: The future Values of P1,000 compounded at a
Example: ABC Company deposits P10,000 in a bank at
10% annual interest rate at the end of one year, two
10% interest a year. One year later the P10,000 will
years, 5 years are computed as follows.
Substituting PV, P1,000 and i=0.10 for different values of
n produces the following results.
Series of Cash Flow
Future Value with Intra-period Compounding

Compounding that occurs more than once a year is

called intra-period compounding.

Example: Instead of placing P1,000 in Atlanta Bank that

pays 10% interest annually, the finance manager
decides to put the money in National Bank that pays
10% interest compounded semi-annually. Between the
two banks, there would be a difference in the future
Unequal Cash Flow
value of your investment after one year.
When computing the future value of money with unequal
cash flows, you have to get the future value of each cash
flow then sum up all the future values computed from
each cash flow.

It Is worth noted that the money will grow faster when it

has intra-period compounding than annual
compounding.

Nominal Interest Rate vs. Effective Interest Rate

Nominal Interest

The rate stated in the contract. Sometimes it is

called as conventional interest rate.

Effective Interest Rate

The true interest rate. Sometimes is called as

annual percentage rate or APR. Some may call this as
Market interest or market prevailing rate. This APR
shall be computed when there’s Intra-Period
Compounding.
Example: Firm has to deposit P2,000 today and P1,500
one year from now at Mount Carmel Rural Bank. No
future deposits or withdrawal are made and the bank
pays 10% interest compounded annually. The future
value at the end of four years is computed to be:

Example: Walnie
Incorporated deposits money in a bank that pays a 10%
nominal interest rate and compounds interest semi-
annually.

Equal Cash Flows

a. Ordinary Annuity

where A is the Annuity or the annual equal cash
flow.
Example: Diamond Corp. deposits P1,000 at the end of
each three consecutive years in a bank account paying
10% interest compounded annually. The value of
account at the end of 3rd year is computed by:
PRESENT VALUE
CONCEPT
b. Annuity Due
Example: The firm
makes an annual deposit of P1,000 each year starting at
the beginning of each year. Interest is compounded at
10%. How much will the firm have in account after three
years?
Note that your money will grow faster when you
make your investment at the beginning of each year
rather than at end.
As you observe the Future Value of Annuity Due
is greater than the Present Value of Ordinary Annuity.
Note also that the higher the interest rate and
the longer the time, the larger the future value.
 When we compute the present value, we will use 1. Single Cash Flow
the discount rate. The present value determination
discounts money that will be received in the future back
in time to see what it is worth in the present. The process
of determining the present value is called discounting.
 2. Series of Cash Flow
Example: Danmar Company expects to receive P1,100
one year from now. What is the present value of this Unequal Cash Flow
amount if the discount rate is 10%?
To compute the present value of series unequal cash
flows, simply calculate the present value of each cash
flows (future amounts).

Example: DM Company expects to receive payments of

P1,000, P1,500, and P2,000 at the end of first, second
and third year respectively. Compute the present value
using 10% discount rate.

Equal Cash Flows

Unlike with the computation of present value of

series of unequal cash flows, the calculation if equal
cash flow is very simple to compute. You can also
compute the present value of each cash flow but it will
be time consuming if you will do the same. Just refer to
the following formula for simple computation.

a. Ordinary Annuity

A (Annuity or Annual Period)

n (time period)

b. Annuity Due
Example: The same information in example 11, except
that the annual cash flow happens at the beginning of
each year.

Present Value of Perpetuity

Example: Babe Corporation wants to deposit an amount

of money in a bank account that will allow it to withdraw
P1,000 indefinitely at the end of each year without
reducing the amount of initial deposit. If a bank
guarantees to pay the firm 10% interest on deposits, the
amount
of money
the firm has
to deposit
is

computed as follows

Note: In the present or future value problems, unless

stated otherwise, the cash flow is assumed to be at year
end. In present value calculation, the higher the discount
rate, the longer the time, the smaller the present value.