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ENTREPRENEURSHIP

Definition of Entrepreneurship  Passion for the Business

"Entrepreneurship is the purposeful - This passion typically stems from the


activity of an individual or a group of entrepreneur's belief that the business will
associated individuals, undertaken to initiate, positively influence people's lives.
maintain or aggrandize profit by production  Product/Customer Focus
or distribution of economic goods and
- An entrepreneur's keen focus on products
services" - A. H. Cole
and customers typically stems from the fact
"Entrepreneurship is based on purposeful that most entrepreneurs are, at heart, crafts
and systematic innovation. It included not people.
only the independent businessman but also
 Execution Intelligence
company directors and managers who
actually carry out innovative functions." - The ability to fashion a solid business idea
- Joseph A. Schumpeter into a viable business is a key characteristic
of successful entrepreneurs.
"Entrepreneurs are people who have the
abilities to see and evaluate business  Achievement motivated
opportunities, together with the necessary  Alert to opportunities
resources to take advantage of them, and to  Creative
ensure appropriate action to ensure  Decisive
success." - International Labour Organization  Energetic
 Has a strong work ethic
"An entrepreneur is a person who starts a  Is a networker
new venture, taking the initiative and risk  Initiative Taker
associated with it and does so by creating  Lengthy attention span
something new to provide value to  Optimistic disposition
customers." - David Holt  Persuasive
 Responsive to criticism
Other Definitions of Entrepreneurship  Self-confident & Self-starter
 Tenacious
"Entrepreneurship is the process by which
 Tolerant of ambiguity
individuals pursue opportunities without
 Visionary
regard to resources they currently control."
- Stevenson & Jarillo
Entrepreneurs v/s Managers
"Entrepreneurship is the art of turning an
 Entrepreneur refers to a person who
idea into a business." - Fred Wilson
creates an enterprise, by taking financial
risk in order to get profit.
Entrepreneurial Traits  Manager is an individual who takes
 Innovation the responsibility of controlling and
administering the organization.
- does something new and different, seeking
to do something different and unique, try to .
meet the changing requirements of
customers.
 Risk-Bearing

- must be able to assume the risk involved in


the enterprise, needs to be a risk taker not
an avoider, should have ability of risk
bearing.
Steps in the Entrepreneurial The crucial role played by the entrepreneurs
in the development of the Western countries
Process
has made the people of underdeveloped
Once the decision to become an countries too much conscious of the
entrepreneur is taken, the entrepreneurial significance of entrepreneurship for
process begins. economic development.
• The 5 stages of entrepreneurial
process are: Role of Entrepreneurship in Economic
1. Discovery Development
2. Concept Development
1. Promotes Capital Formation
3. Resourcing
2. Creates Large-Scale Employment
4. Actualization
Opportunities
5. Harvesting
3. Promotes Balanced Regional Development
4. Reduces Concentration of Economic
Power
5. Wealth Creation and Distribution
Steps in the Entrepreneurial Process 6. Increasing Gross National Product and Per
Capita Income
1. Discovery: The stage in which the 7. Improvement in the Standard of Living 8.
entrepreneur generates ideas, recognizes Promotes Country's Export Trade
opportunities, and studies the market.
9. Induces Backward and Forward Linkages
2. Concept Development: Develop a 10. Facilitates Overall Development
business plan: a detailed proposal describing
• Promotes Capital Formation
the business idea.
3. Resourcing: The stage in which the  Entrepreneurs promote capital
entrepreneur identifies and acquires the formation by mobilizing the idle
financial, human, and capital resources savings of public.
needed for the venture startup, etc.  They employ their own as well as
borrowed resources for setting up
4. Actualization: The stage in which the their enterprises.
entrepreneur operates the business and
utilizes resources to achieve its • Creates Large-Scale Employment
goals/objectives. Opportunities

5. Harvesting: The stage in which the  Entrepreneurs provide immediate


entrepreneur decides on business's future large-scale employment to the
growth/development, or demise. unemployed which is a chronic
problem of underdeveloped nations.
Role of Entrepreneurship in • Promotes Balanced Regional
Economic Development Development
• Entrepreneurship is one of the most  Entrepreneurs help to remove
important input in the economic regional disparities through setting
development of a country. up of industries in less developed
• The entrepreneur acts as a trigger head to and backward areas.
give spark to economic activities by his  The growth of industries and
entrepreneurial decisions. business in these areas lead to a
large number of public benefits like
• The entrepreneur plays a pivotal role not road transport, health, education,
only in the development of industrial sector entertainment, etc.
of a country but also in the development of
farm and service sector.
• Reduces Concentration of Economic • Induces Backward and Forward Linkages
Power
 Entrepreneurs like to work in an
 Industrial development normally environment of change and try to
lead to concentration of economic maximize profits by innovation.
power in the hands of a few  When an enterprise is established in
individuals which results in the accordance with the changing
growth of monopolies. technology, it induces backward and
 In order to redress this problem a forward linkages which stimulate the
large number of entrepreneurs need process of economic development
to be developed. in the country.
• Wealth Creation and Distribution • Facilitates Overall Development
 It stimulates equitable redistribution  Entrepreneurs act as catalytic agent
of wealth and income in the interest for change which results in chain
of the country to more people and reaction by multiplying their
geographic areas, thus giving entrepreneurial activities, thus
benefit to larger sections of the creating an environment of
society. enthusiasm and conveying an
impetus for overall development of
• Increasing Gross National Product and
Per Capita Income the area.

 Entrepreneurs are always on the Recognize and Understand the


look out for opportunities. Market
 They explore and exploit
A market analysis provides insights into
opportunities,, encourage effective
potential customers and your competition.
resource mobilization of capital and
skill, bring in new products and How to Conduct a Market Analysis for
services and develops markets for Your Business?
growth of the economy.
 In this way, they help increasing The core components of the market analysis
gross national product as well as per are:
capita income of the people in a 1. Industry analysis: Assesses the
country. general industry environment in which
you compete.
• Improvement in the Standard of Living
2. Target market analysis: Identifies
 Increase in the standard of living of and quantifies the customers that you
the people is a characteristic feature will be targeting for sales.
of economic development of the
What is Industry Analysis?
country.
 Entrepreneurs play a key role in • Industry analysis is a market assessment
increasing the standard of living of tool used by businesses to understand the
the people by adopting latest competitive dynamics of an industry.
innovations in the production of • Make sense of what is happening in an
wide variety of goods and services in industry
large scale that too at a lower cost.  demand-supply statistics
• Promotes Country's Export Trade  degree of competition within the
 Entrepreneurs help in promoting a industry
country's export-trade, which is an  future prospects of the industry
important ingredient of economic taking into account technological
development. changes, credit system within the
industry
 In your existing and new recruits so
Why carry out Industry Analysis?
that they can help you grow the
• Able to retain valuable and existing business.
customers It's critical to hire someone who has the
 understand the competitors required skills industry supports.
 understand the offerings in the  Without which you'll not be able to
market generate competitive advantage for
 understand how business can your organization
enhance its value creation
• Understanding the business and
 understand how company can
creating a big picture
provide more value to existing
 helps create a helicopter view for
customers
the business
• Attracting new customers  helps a business to see the big
 Understand the customers needs picture and create pixel view
 how many prospective customers  goals and short terms objectives to
are out there for their competitors work upon
to serve ?
 If offering is not what customers the Types of Industry Analysis
want then...
• Porter's 5 Forces
 Value proposition needs to be
changed • Broad Factors Analysis
 Industry Analysis not only about (PESTLAnalysis)
competitors but also about
• SWOT Analysis
customers
• Ensuring sustainability of business: Porter's 5 Forces
 IA will let business know what the
competitor is launching next • Introduced by Michael Porter in his 1980
 How to grasp business from book "Competitive Strategy: Techniques
competitors? for Analyzing Industries and
Competitors"
 How to create barriers for
competitors to enter? • According to Porter, analysis of the five
 How to become a threat for forces gives an accurate impression of the
competitors? industry and makes analysis easier.
 How to keep business sustainable
for next 20 to 30 years?
• Aligning organizational strategy in
culture
 IA gives you framework for strategy
 Without making a change in
corporate culture you will not be
able to create competitive
advantage.
 Industry analysis will help a business
 Intensity of Industry Rivalry
align its strategy with the
organizational culture. • The number of participants in the industry
and their respective market shares are a
• Attracting new and retaining existing
direct representation of the competitiveness
star performers
of the industry.
Industry analysis will help you understand
what skills you should look for: • Lack of differentiation in products tends to
add to the intensity of competition.
2. External Economies of Scale: These are
• High exit costs like high fixed assets,
based on factors that affect the entire
government restrictions, labor unions, etc.
industry, rather than a single company.
also make the competitors fight the battle a
little harder. The size of a business generally matters
when it comes to economies of scale. Larger
Rivalry Determinants:
companies can achieve more cost savings
 Industry Growth
and higher production levels, leading to
 Fixed/storage costs
lower per-unit costs. Economies of scale are
 Product Differences Brand Identity
an important concept for businesses in any
 Exit Barriers
industry, as they represent the cost savings
 Diversity of competitors
and competitive advantages larger
 Switching costs
businesses have over smaller ones.
 Threat of Potential Entrants
 Bargaining Power of Suppliers
• This indicates the ease with which new
firms can enter the market of a particular • If the industry relies on a small number of
industry. suppliers, they enjoy a considerable amount
of bargaining power.
• If it is easy to enter an industry, companies
face the constant risk of new competitors. • This can affect small businesses because it
directly influences the quality and the price
• If the entry is difficult, whichever company of the final product. E.g. What if Parachute
enjoys little competitive advantage reaps the Coconut Oil's supplier Union says they want
benefits for a longer period. to increase prices of raw materials by 20% ?
• Also, under difficult entry circumstances, What will happen?
companies face a constant set of  Bargaining Power of Buyers
competitors.
• The complete opposite happens when the
• To avoid new entrants, and to keep the bargaining power lies with the customers.
industry profitable, the industry needs
several entry barriers in place. • If consumers/buyers enjoy market power,
they are in a position to negotiate lower
Entry Barriers: prices, better quality, or additional services
 Economies of Scale and discounts.
 Capital Requirements
 Proprietary Product differences • This is the case in an industry with more
 Switching Costs competitors but with a single buyer
 Government Policy constituting a large share of the industry's
 Access to Distribution sales.

Economies of scale are cost advantages that • Do you know why modern retail is taking
companies experience when production away the business from small retail outlets?
becomes efficient. This happens because  It is because these modern retail
costs are spread over a larger number of companies have huge bargaining
goods. Companies can achieve economies of power due to bulk buying.
scale by increasing production and lowering  Hence they are crushing the small
costs'. There are two types of economies of retailers.
scale:  Modern retailers will have huge
bargaining power due to which a
1. Internal Economies of Scale: These small retailer can consider them as a
originate within a company due to changes huge problem when establishing his
in how the company functions or produces own business.
goods.
 Threat of Substitute Social
Goods/Services • The social impact on an industry refers to
• The industry is always competing with trends among people and includes things
another industry in producing a similar such as population growth, demographics
substitute product. (age, gender, etc), and trends in behavior
• all firms in an industry have potential such as health, fashion, and social
competitors from other industries. movements.
• This takes a toll on their profitability Technological
because they are unable to charge • The technological aspect of PEST analysis
exorbitant prices. incorporates factors such as advancements
• Substitutes can take two forms: and developments that change the way a
 Products with the same business operates and the ways in which
function/quality but lesser price, or people live their lives (ie. advent of the
 Products of the same price but of internet).
better quality or providing more
utility. SWOT Analysis

Broad Factors Analysis SWOT Analysis stands for Strengths,


Weaknesses, Opportunities, and Threats.
(PEST Analysis)
• Broad Factors Analysis, also commonly It can be a great way of summarizing various
called the PESTLE Analysis stands for industry analysis methods and determining
Political, Economic, Social, Technological, their implications for the business in
Legal, and Environmental. PESTLE analysis is question.
a useful framework for analyzing the external
environment.

(PEST Analysis) To use PEST as a form of


industry analysis, an analyst will analyze each
of the 4 components of the model. These
components include:
Internal
Political  Internal factors that already exist and
• Political factors that impact an industry have contributed to the current position
include specific policies and regulations and may continue to exist.
related to things like taxes, environmental
External
regulation, tariffs, trade policies, labor laws,
 External factors which are contingent
ease of doing business, and the overall
events. Assess their importance based on
political stability
the likelihood of them happening and
Economic their impact on the company. Also,
• The economic forces that have an impact consider whether management has the
include inflation, exchange rates (FX). intention and ability to take advantage of
interest rates, GDP growth rates, conditions the opportunity/avoid the threat.
in the capital markets (ability to access
capital), etc.
A market analysis is a thorough 4. Revenue projections: A market
assessment of a market within a specific forecast is a key component of most
industry. These analyses have many benefits, marketing analyses, as it projects the future
such as reducing risk for your business and numbers, characteristics and trends in your
better informing your business decisions. A target market. This gives you an idea of the
market analysis can be a time-intensive profits you can expect, allowing you to
process, but it is straightforward and easy to adjust your business plan and budget
do on your own in seven steps. accordingly.

To perform a market analysis for your 5. Evaluation benchmarks: It can be


business, follow the steps: difficult to gauge your business’s success
outside of pure numbers. A market analysis
What does a market analysis include? provides benchmarks or key performance
indicators (KPIs) against which you can judge
A thorough marketing analysis should
your company and how well you are doing
answer the following questions:
compared to others in your industry.
•Who are my potential customers?
•What are my customers’ buying habits? 6. Context for past mistakes: Marketing
analytics can explain your business’s past
•How large is my target market?
•How much are customers willing to pay for mistakes or industry anomalies. For example,
my product? in-depth analytics can explain what
•Who are my main competitors? impacted the sale of a specific product, or
•What are my competitors’ strengths and why a certain metric performed the way it
weaknesses? did. This can help you avoid making those
mistakes again or experiencing similar
These are some other major benefits of anomalies, because you’ll be able to analyze
conducting a market analysis: and describe what went wrong and why.

1. Risk reduction: Knowing your market Marketing optimization: This is where


can reduce risks in your business, since you’ll an annual marketing analysis comes in
have an understanding of major market handy – regular analysis can inform your
trends, the main players in your industry, ongoing marketing efforts and show you
and what it takes to be successful, all of which aspects of your marketing need work,
which will inform your business decisions. To and which are performing well in
help you further protect your business, you comparison to the other companies in your
can also conduct a SWOT analysis, which industry.
identifies the strengths, weaknesses,
opportunities and threats for your business. A business vicinity map is a type of map
that depicts the location of your business
2. Targeted products or services: You
and its surrounding area, including
are in a much better position to serve your
landmarks and establishments. It helps
customers when you have a firm grasp on
professionals, architects, and engineers to
what they are looking for from you. When
get an accurate reference to the area around
you know who your customers are, you can
their project sites, such as highways and
use that information to tailor your business’s
roads. It can also be used to determine
offerings to your customers’ needs.
whether your business will be successful in
3. Emerging trends: Staying ahead in the current location and to promote your
business is often about being the first to business by giving easy directions to your
spot a new opportunity or trend, and using a business.
marketing analysis to stay on top of industry
trends is a great way to position yourself to
take advantage of this information.
A business vicinity map depicts the ownership of an issue the business
landmarks and establishments around your isn't accountable for can lead to even
business to determine whether your more unrealistic expectations and set
business will be successful in the current your team up for failure.
location. It also helps promote your business
Customer requirements refer to the
by giving easy directions to your business.
specifications or features of a product or
service that are deemed necessary by
customers.
 These requirements motivate
customers to buy a product or service.
To determine customer requirements,
companies can research their target
market to understand their desires
and needs.

20 Types of Customer
Requirements
1. Price
The price of a product or service can affect
customers' purchasing decisions, as each
customer has unique budget allowances
or constraints. They may compare prices
between competitors to determine which
Customers are, first and foremost, the
offers the best deal or decide whether they
lifeblood of every company; without
are willing to pay for quality versus
them, there would be no business.
convenience. Companies must understand
Businesses must use every effort to attract their customers to set the right price or
and retain customers since they are the discounts. However, these companies must
source of the income required for survival also price their product or services high
and expansion. enough to ensure they make money.

Is the customer always right? For example, a haircare company might


offer a bundle of three products for a
The phrase ‚the customer is always right‛ is
discount. While the customer saves money
a slogan that was popularized by successful
because the bundle costs less than buying
retailers and service providers.
products separately, the company increases
 It suggests that businesses should
its revenue because the value of their
prioritize customer satisfaction and
purchase ends up being larger.
cater to their needs.
However, it is important to note that this
2. Quality
phrase is not meant to be taken literally.
The quality of a product or the materials
In reality, customers are not always right,
used to manufacture it can impact
but their opinions and feedback are valuable
purchasing decisions.
for businesses to improve their products and
The definition of quality can vary but may
services .
refer to its durability. A customer may
Aside from that, saying the customer is consider a highquality product to be one
always right doesn't make it true. that lasts a significant amount of time, rather
 Sometimes customers are wrong, and than one that breaks easily. Quality can also
employees need to be trained to depend on the customer's preferences.
handle these sticky situations. Taking
For example, they may prefer buying products specifically to improve the
organic foods because they believe those performance of another product. For
foods have benefits that create a higher example, a person who plays video games
quality product. Similarly, a customer may on their computer can buy a new graphics
want to purchase a sweater made out of a card to enable higher video quality.
natural fiber such as cashmere rather than a
6. Sustainability
synthetic material like polyester. Both
Some customers seek products that do not
options serve the same function, but the
have negative environmental impacts. In
customer has a particular opinion on which
response, companies launch products that
materials provide more quality.
use less energy to manufacture or recycled
3. Functionality materials. Or they may sell products that
Every product or service has a purpose, promote sustainability.
which is its function. Often, customers For example, car manufacturers sell
require products and services that solve hybrid or electric models that can help
specific problems or meet specific goals or reduce pollution. Another company might
desires. For example, a customer may want notice customers' call for sustainability and
to purchase a couch that they not only can begin selling glass straws, which provides a
sit on but can also convert into a bed for reusable alternative to plastic straws.
sleeping.
Functional requirements are an essential 7. Transparency
component of software development—these Customers require transparency, which
means they want to know what to expect
requirements define what the system does. If
when purchasing a product or service. To
a company creates an app, they want to
enable transparency, companies must avoid
ensure that it accomplishes the tasks desired
hiding information, such as fees or
by customers. For example, the user can click
ingredients, when promoting their offerings.
a button to start watching a video.
One way to promote transparency is
4. Reliability through direct communication, such as
When customers purchase something, they companies that use social media to inform
want the ability to rely on it to perform its customers about any service outages.
intended function. Along with reliability, Enabling customers to publish online
customers seek durability. They expect that product reviews is another form of
the product or service will last a reasonable transparency. Establishing transparency can
lifespan or throughout continued use. be an advantage for companies because it
Companies looking to provide reliability creates trust, which can lead to other
often need to test their products and benefits such as customer loyalty.
services to ensure they can withstand
potential challenges. For example, when a
8. Convenience
Customers seek products and services
customer purchases a car, they expect they
that can save them time and effort.
can drive it often and in all types of weather.
Companies can meet these requirements by
Therefore, car manufacturers perform tests
understanding how customers use their
to ensure their models can handle varying
offerings and determine ways to make
temperatures and road conditions.
them even easier to use.
5. Performance Some, for example, provide convenience
Customers not only require that a product or by offering same-day delivery. By giving
service performs its intended purpose but customers the ability to make a purchase
also that it does it well. The definition of online and have it delivered to their home, it
good performance varies, but examples may saves them the time and effort of having to
include its speed or accuracy when go to the store, find the item and transport it
conducting tasks. Customers also purchase home.
9. Efficiency want to ensure compatibility with something
Somewhat similar to convenience, customers that they already have access to or own.
seek products or services that can help Companies often include compatibility
streamline everyday processes. details to help customers make purchasing
For example, the checkout line at a store decisions.
can become a timeconsuming aspect of For example, a company that sells
shopping. Some stores implement self- memory cards provides a chart or list that
service stations, allowing customers to tells customers which of its memory cards
bypass the traditional lines and quickly pay are compatible with specific models of
for their items. Another option is the use of digital cameras.
apps that let customers pay directly from
13. Options
their phones. Similarly, this can speed up the
Every customer is unique, so they require
payment process because customers only
options when making purchases. Multiple
need to pull out their phones rather than go
options allow companies to meet the
into their wallet and find cash or a credit needs of various customers rather than
card. one specific type.
10. Risk reduction For example, an apparel company offers
a t-shirt style in a variety of colors and
When making purchases, some customers
patterns for customers to choose from.
consider risk—for example, they want to
Streaming services often offer multiple
ensure that they will not lose money. To
ease such concerns, many companies subscription plans that vary in price, with
offer and promote return or guarantee some offering ad-free or higher video
policies. These policies may help attract quality features. With these options,
customers and make them feel more customers weigh the cost of the service
comfortable making a purchase. versus getting additional features.
For example, a shoe company might
provide customers a 30-day window to try
14. Control
Customers may seek control when
their purchase. If the customer determines
interacting with a service or making a
they do not like the shoes, they can return
purchase. Control can sometimes overlap
the product and receive their money back
with the options requirement, as multiple
11. Safety options allow customers to control which
Safety can be an important consideration subscription plan they purchase from a
for customers, as they want to ensure the company, for example. Companies can also
product does not cause harm to them or provide control to their customers by
those around them. Companies can enabling them to customize their
promote products by confirming they meet purchases. For example, a shoe company
relevant safety regulations or standards. may offer a fully customizable style of shoes.
For example, a person might buy a Customers can choose from a variety of
particular car based on how well it performs colors, patterns and other features to create
in crash tests. Or a parent purchasing a toy a unique product that suits their preferences.
for their young child looks at features to
assess whether their children can play with it
15. Experience
Defining what constitutes a positive
safely—for example, they want a toy that
customer experience will vary on the
does not have sharp edges or small pieces
company and its offerings, so customer
that pose a choking hazard.
research is essential. Generally, a positive
12. Compatibility experience refers to products or services
When customers require compatibility, they that are easy to understand and use. The
want the product or service to work or customer experience is crucial when
integrate with another one. Often, they developing software or websites, for
example. Users must have the ability to The payback period – refers to the
easily navigate the website to achieve their amount of time it takes to recover the cost
goals, such as purchase a product or find an of an investment.
article to read.  It is the length of time an investment
reaches a breakeven point.
What are the first two  The payback period is calculated by
fundamental questions a potential dividing the amount of the investment
investor is going to ask? by the annual cash flow.
 It is a useful metric for investors and
1. How much profit do I make from
corporations to calculate investment
this venture or investment? returns and make informed decisions.
2. When can I recover my initial  Please note that the payback period
investment? does not consider the time value of
money.
Profitability is the ability of a company
 It is one of the many metrics used in
or business to generate revenue over and
corporate finance to evaluate the
above its expenses. It is usually measured
profitability and viability of an
using ratios like gross profit margin, net
investment
profit margin, etc.
 These ratios help analysts, shareholders,
and stakeholders to analyze and
measure the company’s ability to
generate revenue.

Profitability analysis helps analysts,


shareholders, and stakeholders evaluate the
company’s capacity to generate revenue and
cover operational costs.
By adding value to the balance sheet and
demonstrating the ability to undertake
growth projects, profitability contributes to
business growth.

Return on Investment (ROI) is a popular


profitability metric used to evaluate how well
an investment has performed.
 It is expressed as a percentage and
calculated by dividing an investment’s
net profit (or loss) by its initial cost or
outlay.
 ROI can be used to compare the
efficiency of different investments and
rank them. However, it does not
consider the holding period or passage
of time, so it may miss opportunity
costs of investing elsewhere.
 ROI is a useful measurement for
investors to assess the profitability of an
investment and make informed
decisions.
which the buyer may accept as offering for his
Marketing Mix satisfaction or wants or needs‛.
Alderson defines, ‚A product is a bundle of
What is Marketing Mix?
utilities consisting of various product features and
 a set of actions, tactics, strategies, and tools
accompanying services.‛
that a company uses to promote its brand and
products within their market. According to Philip Kotler, ‚A product is
 It is about putting the right product or a anything that can be offered to a market for
combination thereof in the place, at the right attention, acquisition, use or consumption that
time, and at the right price. might satisfy a want or need. It includes physical
objects, services, persons, places, organization and
ideas‛.
According to Cravens, Hills and Woodruff
‚Product is anything that is potentially valued by
a target market for the benefits or satisfactions it
provides, including objects, services, organizations,
places people and ideas‛.
Product has the want satisfying attributes which
drive a customer to purchase the product. It is
something more than a physical product. This is
because a product encompasses several social and
Why is Marketing Mix Important? psychological attributes and other intangible
factors which provide satisfaction to the consumer.
Marketing Mix provides a roadmap for your
business objectives. It keeps you on track, while
keeping your target market in the forefront of your
mind.
Marketing Mix will help make sure the business is Product Life Cycle
marketing the right product, to the right
A product life cycle is the amount of time a
people, at the right price and time.
product goes from being introduced into the
PRODUCT market until it's taken off the shelves. There are
four stages in a product's life cycle— introduction,
A product is what a seller must sell and what a
growth, maturity, and decline.
buyer must buy to satisfies the needs of customers.
Customers purchase products because they realize
some benefits out of the product. A marketer can
satisfy the needs and wants of his customers by
‘offering something’ (good or service) in exchange
for money. And this ‘offering’ is basically called
product.

1. Introduction Stage – In this stage, the


product is being released into the market.
Marketing and promotion are at a high - and the
company often invests the most in promoting the
product and getting it into the hands of
consumers. Costs are generally very high and there
is typically little competition. The principal goals of
the introduction stage are to build demand for the
product and get it into the hands of consumers
aiming to attain growing popularity.

2. Growth – In this stage, consumers are already


Stanton defines, ‚A product is a set of tangible taking to the product and increasingly buying it.
and intangible attributes, including packaging, The product concept is proven and is becoming
colour, price, manufacturer’s and retailer’s services, more popular - and sales are increasing. Other
companies become aware of the product and its Why is Product the most important in
space in the market, which is beginning to draw 7 P’s of marketing?
attention and increasingly pull in revenue. If
competition for the product is especially high, the Importance of PRODUCT in marketing mix
company may still heavily invest in advertising and The product is one of the most important elements
promotion of the product to beat out competitors. of the 7Ps of the marketing mix. It refers to a good
As a result of the product growing, the market or service that satisfies the needs and wants of
itself tends to expand. customers. It is offered in the market by an
organization to earn revenue by meeting the
3. Maturity – When a product reaches maturity, requirements of customers. It is regarded as an
its sales tend to slow or even stop - signalling a asset of an organization and referred to as the
largely saturated market. At this point, sales can backbone of marketing mix. Hence, utmost care
even start to drop. Pricing at this stage can tend to should be taken to handle product decisions. A
get competitive, signalling margin shrinking as bad product not only generates bad name for the
prices begin falling due to the weight of outside firm but also negatively affects the price set for the
pressures like competition or lower demand. product, discourages the channel members and
Marketing at this point is targeted at fending off reduces the believability of the promotional
competition, and companies will often develop measures. Other elements of marketing mix such
new or altered products to reach different market as. price, promotion and place are complementary
segments. In this stage, saturation is reached, and to the product.
sales volume is very successful. Companies often
begin innovating to maintain or increase their PRICE
market share, changing or developing their What is the definition of PRICE in Marketing
product to meet with new demographics or Mix?
developing technologies.
Price: refers to the value that is put for a product.
4. Decline – In the decline stage, product sales It depends on costs of production, segment
drop significantly and consumer behavior changes targeted, ability of the market to pay, supply –
as there is less demand for the product. The demand.
company's product loses more and more market
Low pricing hinders your business’ growth while
share, and competition tends to cause sales to
high pricing kicks you out of the competition.
deteriorate.
What is the role of Price in Marketing Mix?
“What can I do to offer a better product to this
group of people than my competitors” Pricing is the only element in the marketing mix
that generates a turnover for the organization
In developing the right product, the following
which is REVENUE. The other 3 elements of the
questions must be answered:
marketing mix are the variable cost for the
1. What does the client want from the service or organization as product, promotion and place.
product?
Price must support the other elements of the
2. How will the customer use it?
marketing mix. Pricing is difficult and must reflect
3. Where will the client use it?
supply and demand relationship. Pricing a
4. What features must the product have to meet
product too high or too low could mean lost sales
the client’s needs?
for the organization.
5. Are there any necessary features that you
missed out? Why is Pricing an important element in
6. Are you creating features that are not needed Marketing Mix?
by the client?  Price is important to marketers because it
7. What’s the name of the product? represents marketers’ assessment of the value
8. Does it have a catchy name? customers see in the product or service and are
9. What are the sizes or colors available? willing to pay for a product or service.
10. How is the product different from the  While product, place and promotion affect
products of your competitors? costs, price is the only element that affects
11. What does the product look like? revenues, and thus, a business’s profits. Price
can lead to a firm’s survival or demise.
 Adjusting the price has a profound impact on
the marketing strategy, and depending on the
price elasticity of the product, it will often
affect the demand and sales as well. Both a b. second-degree – means charging a different
price that is too high and one that is too low price for different quantities.
can limit growth. The wrong price can also Example - quantity discounts for bulk purchases.
negatively influence sales and cash flow.
c. third-degree – means charging a different price
PRICING STRATEGIES to different consumer groups.
A pricing strategy is a model or method used to Examples: cinema goers can be subdivided into
establish the best price for a product or service. It adults and children; telephone supply. (most
helps the company choose prices to maximize common)
profits and shareholder value while considering C. Psychological Pricing is the practice of
consumer and market demand. setting prices slightly lower than a whole number.
3 TYPES OF PRICING STRATEGIES This practice is based on the belief that customers
do not round up these prices, and so will treat
1. Demand-based pricing, also known as them as lower prices than they really are.
customer-based pricing, is any pricing method An example of psychological pricing is an item
that uses consumer demand based on perceived that is priced P10.99 but conveyed by the
value –as the central element.
consumer as 10 pesos and not 11 pesos, treating
6 Types of Demand-based Pricing: P10.99 as a lower price than P11.00.
a. price skimming;
D. Price Bundling is a strategy where businesses
b. price discrimination;
combine multiple different products or services
c. psychological pricing;
into one package at a single price. These
d. bundle pricing’;
complementary products are typically sold at a
e. penetration pricing; and
lower price than if they were purchased
f. value-based pricing
individually.
A. Price Skimming is a pricing strategy in which Common examples include option packages on
the producer sets a high introductory price to new cars, value meals at restaurants and cable TV
attract buyers with a strong desire for the product channel plans.
and the resources to buy it, and then gradually
reduces the price to attract the next and E. Penetration Pricing is a marketing strategy
subsequent layers of the market. It involves setting used by businesses to attract customers to a new
a high price before other competitors come into product or service by offering a lower price during
the market. This is often used for the launch of a its initial offering. The lower price helps a new
new product which faces little or no competition – product or service penetrate the market and attract
usually due to some technological features. customers away from competitors.
Examples include an online news website offering
Example, when IPhone4s was introduced in the one month free for a subscription-based service
market 4 years ago, its price was huge. Few people or a bank offering a free checking account for six
could actually afford an IPhone. With the passing months.
of time, prices of the IPhone4s have decreased
gradually, such that nowadays many people can F. Value-based Pricing is setting a price based
afford an iPhone. on how much the customer believes what you're
selling is worth. In its literal sense, it implies basing
B. Price Discrimination is the practice of pricing on the product benefits perceived by the
charging a different price for the same good or customer instead of on the exact cost of
service. developing the product. For example, a painting
Three Types of Price Discrimination may be priced as much, more than the price of
canvas and paints: the price in fact depends a lot
a. first-degree – alternatively known as perfect
on who the painter is.
price discrimination, the company set flexible
prices for products or services based on current 2. Cost-plus pricing is a pricing strategy in
market demands. which the selling price is determined by adding a
Example: During high demand periods like specific markup to a product's unit cost.
holiday season and weekends, prices go up
with a rise in demand, and vice versa.
3. Competitive Pricing Strategy is a method retail outlets. This may raise product costs since
of pricing that calls for price-setting based on each intermediary will get their percentage of the
prices charged by competitors. profits. This channel may become necessary for
large producers who sell through hundreds of
Three choices:
small retailers.
a. Price the product lower,
b. Price the product higher, or 3. DUAL DISTRIBUTION
c. Same price set by the competitors
In this type of channel, a company may use a
PLACE combination of direct and indirect selling. The
product may be sold directly to a consumer, while
What Is Place (Physical Distribution) In
in other cases it may be sold through
Marketing Mix?
intermediaries.
Place is the process of moving products from the
producer to the intended user. In other words, it is
There are four main types of
how your product is bought and where it is intermediaries:
bought. This movement could be through a 1. Agents. The agent is an independent entity
combination of intermediaries such as distributors, who acts as an extension of the producer by
wholesalers and retailers. representing them to the user. An agent never
What is a Distribution Channel? actually gains ownership of the product and usually
make money from commissions and fees paid for
A distribution channel can be defined as the
their services.
activities and processes required to move a
product from the producer to the consumer. Also 2. Wholesalers. They are also called
included in the channel are the intermediaries that independent entities. But they actually purchase
are involved in this movement in any capacity. goods from a producer in bulk and store them in
These intermediaries are third party companies warehouses. These goods are then resold in
that act as wholesalers, transporters, retailers and smaller amounts at a profit. Wholesalers seldom
provide warehouse facilities. sell directly to an end user. Their customers are
usually another intermediary such as a retailer.
Types of Distribution Channels
3. Distributors. Like wholesalers, distributors
1. Direct 2. Indirect 3. Dual Distribution
differ in one regard. A wholesaler may carry a
1. DIRECT DISTRIBUTION CHANNEL variety of competition brands and product types. A
distributor, however, will only carry products from
a single brand or company. A distributor may have
a close relationship with the producer.
4. Retailers. Wholesalers and distributors will sell
In this channel, the manufacturer directly provides the products that they have acquired to the retailer
the product to the consumer. In this instance, the at a profit. Retailers will then stock the goods and
business may own all elements of its distribution sell them to the ultimate end user at a profit.
channel or sell through a specific retail location.
Internet sales and one on one meetings are also How Important is PLACE in Marketing Mix?
ways to sell directly to the consumer. One benefit  Place in marketing mix plays a major role in the
of this method is that the company has complete distribution and flow of goods, because it
control over the product, its image at all stages ensures that the product is in the right place
and the user experience. at the right time. Without proper product
placement, customers are likely to look
2. INDIRECT DISTRIBUTION CHANNEL
elsewhere for what they need or desire.

PROMOTION
What is PROMOTION in Marketing Mix?

In marketing, promotion refers to any type of


marketing communication used to inform or
In this channel, a company will use an intermediary persuade target audiences of the relative merits of
to sell a product to the consumer. The company a product, service, brand or issue. It is the way the
may sell to a wholesaler who further distributes to business makes its products known to the
customers, both current and potential. It is also  It is another way to reach your audience. It
used to persuade customers that the product is helps build awareness and create a positive
better than competing products and to remind image of your business. Instead of PR
customers about why they may want to buy. competing, it can support initiatives in a way
advertising and marketing cannot.
TYPES OF PROMOTION
1. Advertising Why is PROMOTION Important in Marketing
2. Direct Marketing Mix?
3. Sales Promotion
Role of Promotion in Marketing Mix
4. Personal Selling
5. Public Relation  Promotion is the voice of your company which
send out your brand’s message loud and
1. Advertising clear to the audience. Various media platforms
 Means to advertise a product, service or a can be used to promote your company and
company with the help of television, radio or brand. They include television, radio, shopping
social media. It helps in spreading awareness outlets, billboards, magazines, and social
about the company, product or service. media.
Advertising is communicated through various  The goal of promoting a product is to reveal
mass media, including traditional media such as to consumers why they need it and why they
newspapers, magazines, television, radio, should pay a certain price for it.
outdoor advertising or direct mail; and new  It is a key element in putting across the
media such as search results, blogs, social benefits of your product or service to the
media, websites or text messages. customers.

2. Direct Marketing Benefits of Promotion in Business


 Is a form of advertising where organizations Promoting your brand will help you in many
communicate directly to customers through a different ways:
variety of media including cell phone text
• Increase brand awareness
messaging, email, websites, online adverts,
• Provide appropriate information
database marketing, fliers, catalog distribution,
• Increase Customer Traffic
promotional letters and targeted television,
• Build sales and profits
newspaper and magazine advertisements as
well as outdoor advertising.

3. Sales Promotion
 Is a marketing strategy where the product is
promoted using short-term attractive initiatives
TARGET
to stimulate its demand and increase its sales.
MARKET
 This strategy is usually brought to use in the
following cases such as to introduce new
products, sell out existing inventories, attract
more customers, and to lift sales temporarily.

4. Personal Selling
 Is a method where companies send their agents
to the consumer to sell the products personally. PEOPLE
It is where businesses use people (the "sales
force") to sell the product after meeting face- - This includes everyone who is involved in the
to-face with the customer. product or service whether directly or indirectly.
 Great examples include cars, office equipment
(e.g. photocopiers) and many products that are
sold by businesses to other industrial
customers.

5. Public Relation (PR)


 Is the process of maintaining a favorable image
and building beneficial relationships between
an organization and the public communities,
groups, and people it serves.
Importance of PEOPLE in Importance Of Packaging
Marketing Mix
 Packaging is important because it preserves
and protect the product throughout the
 The Building Blocks of a Marketing Mix manufacturing, transport, storage, and
Strategy consumption chain. Good packaging
1. People are the ones who make the products guarantees the health and safety of
2. People are the ones who bring the products to consumers.
the customers
3. People are the ones who talk to the customers
POSITIONING
Positioning is a brand’s unique way of providing
PACKAGING value to its customers. Where does a brand sit in
Packaging is the science, art and technology of the hearts and minds of customers?
enclosing or protecting products for distribution,  Refers to an overall strategy that "aims to
storage, sale, and use. It also refers to the process make a brand occupy a distinct position,
of designing, evaluating, and producing relative to competing brands, in the mind of
packages. the customer".
 Packaging is an integral marketing strategy to  Positioning defines how the brand’s offering is
glamorize a product to attract the unique, how it provides a distinct benefit to
consumer’s attention. Many consumers will customers. Businesses use marketing to
judge a product by its packaging before buying communicate their market position to
it, so creating compelling and alluring customers and influence their perception of the
stationary will build first time buyers’ intrigue. brand’s products or services.

Examples:
FUNCTIONS/PURPOSE OF PACKAGING
Lux, print
1. To protect the product from damage.
advertisement
Product packaging not only protects the product
(1916) positioned
during transit from the manufacturer to the retailer,
the soap as a
but it also prevents damage while the product sits
gentle product for
on retail shelves.
washing delicate
2. Packaging Facilitates Purchase Decision. clothing
Information contained on a package may push the
Within the prestige
reader to buy the product without ever having to
vehicle category,
speak to a store clerk.
Volvo positions
3. Packaging can differentiate one brand itself as a car
of product from another brand. Packaging offering superior
helps consumers to identify the product as it sits safety and
among the competition’s products on store performance
shelves.
J & J Baby Bath
4. Information transmission. Packages and Products are
labels communicate how to use, transport, recycle, positioned against
or dispose of the package or product. a user or segment,
5. Marketing. The packaging and labels can be namely children
used by marketers to encourage potential buyers
to purchase the product.
Importance of Positioning
6. Convenience. Packages can have features that
 Positioning creates an image of the company’s
add convenience in distribution, handling, stacking,
products in the mind of consumers,
display, sale, opening, re-closing, use, dispensing,
highlighting the most important benefits that
reuse, recycling, and ease of disposal.
differentiate the product from similar products
7. Security. Packages can be made with improved in the market. It establishes the image or
tamper resistance to deter tampering and can have identity of a brand or product so that
tamper-evident features to help indicate consumers perceive it in a certain way.
tampering.

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