Module 2:

Consumer Marketing Strategies

This module discusses consumer buying behavior, entrepreneurial research on consumer

buying behavior and the marketing mix. It will also deal with the concept of needs, wants and
branding.

At the end of this module, you will be able to:

a. Discuss the concept of consumer buying behavior;

b. Describe the need for entrepreneurial research;
c. Determine the marketing mix;
d. Differentiate needs from wants; and
e. Identify the commonly used branding strategy

Lesson 1: Consumer Buying Behavior

What you already know?

How many times do you make decisions throughout the day? What should I wear today?
What perfume should I put on? What am I going to have for lunch?

If you think about it, we make many buying decisions every day without giving them
much thought.

These decisions, as insignificant as they might seem, keep marketers up at night. Because
decoding the processes behind customers’ decisions means that we can use that info to boost
revenue.

Kick-Start

Recall your last purchase of a

personal item or gadgets. What are the
considerations that you have in mind
before you finally purchase the item? What
are the factors that influence your buying
decision? Share your experience in class.

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 DISCUSSION

CONSUMER BUYING BEHAVIOR

The term behavior in this chapter refers to the reaction of the consumers to changes
happening in the environment that influence their buying decision. The consumer buying
behavior is simply the reaction of the consumers to various events or forces that are happening in
the business community which contribute to the decision process.

Determining the buying behavior of the consumers is not easy. It may take several wild
guesses to predict their reactions and responses to the stimuli.

Some relevant questions on consumer buying behavior are as follows:

1. What are the taste and preferences of the consumers?

2. What makes the consumers buy or not buy the product?
3. What factors influence the consumer buying behavior?
4. How does the consumer decide in buying the product?

Various studies have determined some degree of relationship between the environmental
factors and the buying behavior of the consumers. The most common of these are the
environmental factors, buying decision process, and marketing mix. In addition, the buying
decision process may also contribute in determining the buying behavior of the consumers.

ENVIRONMENTAL FACTORS

The environmental factors include the following:

1. Cultural factor
2. Social factor
3. Personal factor
4. Psychological factor

 Cultural Factor

There are different ethnic or racial groups in the Philippines. Each ethnic or racial group
has a different and distinct culture. The perceptions, attitudes, value system, and even religion of
these groups influence their buying behavior. These comprise the cultural factor.

For example, the subculture of the Ilocano consumers is definitely different from that of
Visayan consumers. The entrepreneur needs to determine the dominant culture of Ilocanos and
Visayan for that matter. By having a concrete understanding of it, the entrepreneur can predict the

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buying behavior of the consumers in these groups. He/She can also make an assessment as to how
the needs and wants of these target consumers can be satisfied.

Each ethnic or racial group in the Philippines has different priorities. The entrepreneur
must find all the possible means to design a product that will provide a value proposition to -e
majority of a particular segment to be served. The product must be tailored to the needs of the
consumers with a distinct culture in the targeted market.

 Social Factor

The term social factor refers to the relationship maintained or established by the
consumers with other members of society. This is characterized by the social class where the
consumers Jong and their social roles and affiliations with some social groups.

The social class is an informal grouping of consumers based either on the personal
perception of the consumers or that of others. Usually the upper social class is composed of elite
and wealthy consumers; the middle social class is made up of professionals and blue- and white-
collar workers; and the lower social class consists of the working poor and marginalized people.

Each category of social class has a different pattern of buying behavior. The wealthy and
elite consumers buy expensive goods, live in luxurious homes, ride in high-end cars, and send
their children to exclusive schools. The lower class, on the other hand, is only capable of
purchasing the cheapest goods in the market.

The social roles and affiliations with social groups also affect the buying behavior of the
consumers. The buying behavior tends to coincide with the social roles of the consumers in
society and the social groups where they belong. The buying behavior works in accordance with
the old maxim that consumers of the same social roles flock together. Consumers who belong to a
certain social class tend to have the same or similar buying behavior.

 Personal Factor

The personal factor in this lesson refers to the personal characteristics of the buyer in
terms of age, occupation, income, and lifestyle. The buying behavior of the consumers, in
addition to the influence of the social group where they belong, is also largely influenced by the
personal factor.

As a person grows, he/she experiences changes in the different aspects of his/her life.
These changes, such as taste, perception, preferences, interest, or hobby are sometimes due to
aging. For example, the game that a preschooler plays may not be the same game that a high
schooler plays. Similarly the type and style of clothes that are highly favored by adolescents may
change when they reach middle age. The entrepreneur, therefore, has to be conscious of the

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changes happening in the buying behavior of consumers as they experience changes in various
life stages.

The type of occupation of consumers also influences their buying behavior. The
corporate bigwigs of multinational corporations have different tastes and preferences in clothes
compared to those of blue-collar workers. The income and lifestyle of the consumers likewise
affect their buying behavior. Consumers with high-paying jobs can afford an extravagant lifestyle
unlike their low-wage-earning counterparts.

 Psychological Factor

The term psychological factor in this context refers to the perceptions, beliefs, and
attitudes of the consumers. These are highly attributed to their specific experiences with particular
products. Hence consumers may have different perceptions, beliefs, and attitudes toward the same
stimulus. In this case the entrepreneur must evaluate the dominant or prevalent perception, belief,
and attitude of the target market. He/She must conduct substantial research since the
psychological factor cannot be measured quantitatively.

BUYING DECISION PROCESS

The entrepreneur must properly evaluate the buying decision process of the consumers.
Some consumers may undergo the complete buying decision process, while others may
immediately buy the product without passing through the buying decision process. This usually
happens when the consumer has an impulsive buying behavior.

The buying decision process of consumers involves the following steps:

1. Recognition of their needs and wants

2. Search for relevant information about the product
3. Evaluation of alternatives
4. Purchase decision
5. Post-purchase analysis

 Recognition of the Consumers' Needs and Wants

The first step in the buying decision process is the recognition of the needs and wants of
the consumers. Everybody buys because of their needs, but not all buy because of their wants.

When a person feels that there is a need to buy, then he/she processes the thought of such
necessity. He/She recognizes the dictate of the inner voice that there is a need to buy. The
recognition of the need basically comes from within the person. For example, when a person feels
thirsty, then he/she buys water or soda to drink. When he/she feels hungry, he/ she buys food to
eat.

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 However, for others, the first step in the buying decision process is the recognition of
their wants. When the basic needs have already been satisfied, the consumers tend to move to the
higher level of satisfaction by buying what they want. The recognition of wants is usually the
result of an external factor that stimulates such desire. For example, a person becomes interested
with the features of a brand-new car. He/She develops the desire to drive it. He/ She then
recognizes the want to own the car. If the person is an impulsive buyer, then he/she will
immediately satisfy his/her want and buy the car.

The entrepreneur must clearly determine whether the buying decision of the consumers is
stimulated by their needs or wants.

 Search for Relevant Information about the Product

After the recognition of the need to buy, consumers usually try to gather enough
information about the product. The search for relevant information usually happens when the
product is not an ordinary household commodity. For example, buying a car requires more
relevant information before making a decision compared to buying an electric flat iron. On the
other hand, when the product is a commonly used household commodity, like a detergent, the
consumer does not have to gather much information about it.

The consumer usually gathers the desired information from commercial publications;
advertising catalogs; television and radio commercials; members of the family, friends, and
colleagues; and the Internet. As more information is provided, the level of awareness of the
consumer about various competing products is enhanced. Therefore the entrepreneur must be
watchful enough to design the right advertising or promotional plan.

 Evaluation of Alternatives

Once the desired information are already available to the consumers, they can make the
necessary evaluation of various alternatives and make an intelligent comparison different brands
existing in the market.

Consumers consider the following significant areas of the product:

1. Price
2. Quality and durability
3. Brand, color, and design
4. Terms and conditions
5. Required payment
6. Amount of credit

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 The entrepreneur intervenes to influence the buying decision of the consumers. He/She
acts like a marketer to aid in or appropriately influence the decision process of the consumer. The
marketer usually intervenes when the grocery shoppers are in the process of evaluating what
brand to purchase. He/She approaches the grocery shoppers and tries to influence their buying
decision. He/She introduces the brand and highlights the value proposition of the product.

 Purchase Decision

The purchase decision is the stage when the consumer actually buys the product. His/ Her
decision to buy a particular brand of product may come solely from his/her own decision or may
be attributed to the influence of outside factors like family members, social group, friends, or
some future economic events.

For example, while a shopper in a grocery is in the process of deciding which powder
detergent to purchase, a close friend comes by and shows another (that he/she personally uses).
The shopper may then be influenced by his/her friend's recommendation.

At this stage the entrepreneur must clearly define how the buyers formulate their
purchase decision in order to prepare the proper marketing approaches to influence their final
decision.

 Post-purchase Analysis

Post-purchase analysis is the last stage in the buying decision process when the buyer
makes a simple analysis at the back of his/her mind whether his/her expectation has been met or
not.

Before the consumer buys the product, he/ she has already set the expectation on the
probable benefits or value that he/she may derive from the product. The bundle of expectations
usually arises at the time of gathering the desired information about the product.

After the product is used by the consumer either to satisfy his/her needs or wants, the
consumer usually compares the actual benefits or value received against the expectations. In most
instances the consumer recalls the different factors considered during the buying decision process
to compare the actual value proposition and the expectations.

The extremes of the post-purchase analysis are the levels of being highly satisfied or
being poorly satisfied. The consumer is highly satisfied when the features of the product surpass
his/her expectations. He/She is poorly satisfied when the value he/she receives from the product
purchased has not met even half of his/her expectations.

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 The entrepreneur at this stage must gather enough information about the level of
satisfaction of the consumers as manifested by the fast or slow sale of the product. He/She then
must address the response of the consumers to the product.

KNOWLEDGE SELF- CHECK 2 . 1

1. Identify the some environmental factors that will assist in determining the
buying behavior of the consumers.
2. Explain the steps involved in buying decision process.

A C T I V IT Y 15

Self-concept and Purchases

Source: https://www.greatideasforteachingmarketing.com/self-concept-and-purchases/

Is there a relationship between a consumer’s personality/self-concept and the products

that they purchase? Listed below are the contents from three shopping baskets at a local
supermarket. Your task is this activity is to see if you can describe each of the three consumers
simply based upon their grocery purchases.

Purchases

Consumer A Consumer B Consumer C

One kilo of budget ground One kilo of T-bone steak Strawberries

beef Two loaves of white
bread One kilo of ‘generic’
flour Two cans of peaches
Three kilos of potatoes
One jar of instant coffee
A loaf of high-fiber bread Muesli
One can of Indian curry Soy milk
Two cans of smoked oysters Herbal tea
Three avocados One kilo of bananas
One jar of gourmet coffee Two packets of ‘cup-of-soup’

QUESTIONS
1. How would do describe the three consumers based upon their shopping baskets?
2. Do you think that there is a strong correlation between consumer’s self-concept and their
purchase decisions?
3. If so, how can marketers utilize this relationship? Are there certain types of products
where this relationship would be more prominent?
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 Lesson 2: Entrepreneurial Research on Consumer Buying Behavior

What you already know?

It is important to know and understand the buying behavior of the consumers in the target
market segment. The entrepreneur must have an idea of what goes on in the mind of the
consumers, so that he/ she can plan what marketing strategy can best influence their buying
decision and thereby ensure that his/her business will remain competitive in the market. Ignoring
the buying behavior of the consumers would mean losing a share in the market in favor of
competitors, which translates to losing the expected income of the entrepreneurial venture and its
competitive position in the market. The best possible means of influencing the buying behavior of
consumers is for the entrepreneur to know by heart the consumers of the market segment. He/She
must abide by the basic rule of "Knowing thy customers" by conducting an entrepreneurial
research work.

Kick-Start

What have you observed about the

buying behavior of Filipino consumers?
Prepare a list of common buying behavior
that you have observed. Share your work in
class.

DISCUSSION

ENTREPRENEURIAL RESEARCH

Most research work is conducted because of the occurrence of a certain phenomenon. In

the context of this lesson, research work is conducted in relation to the buying behavior of the
consumers in the target market segment.

Research is defined as a scientific investigation. It involves the collection, presentation,

analysis, and interpretation of gathered data. As a scientific investigation, research is conducted
to find out the buying behavior of the consumers by following a procedural process.

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 Research may be conducted to

1. determine the taste and preferences of the consumers;

2. know the competitors, the suppliers of the raw materials, and the processing methods
that best apply to the business; and
3. determine the relationship of the different marketing variables relative to the buying
behavior of the consumers.

The research work conducted by the entrepreneur usually follows the following
procedural steps:

1. Identifying the problem

2. Deciding the type of data to be gathered
3. Evaluating how data will be collected
4. Gathering the data
5. Analyzing the data gathered
6. Making a conclusion and recommendation
7. Reporting the result of the research work

All research work conducted by the entrepreneur either leads to searching for a solution
to the problem, describing certain relevant phenomenon, or formulating a theory or hypothesis.
He/She may conduct various types of entrepreneurial research work in order to know what is at
the back of the minds of the consumers.

Types of Entrepreneurial Research

There are several dichotomies in the classification of the types of research endeavor.
They can be classified as exploratory, descriptive, and causal research.

 Exploratory Research

Exploratory research is considered the preliminary research work conducted by an

entrepreneur that is primarily designed to gather baseline information to be used in solving a
problem or forming a hypothesis. A hypothesis is considered a preliminary answer about the
relationship of two or more variables in the research. The hypothesis may be true or not
depending on the result of the test or the gathered data.

For example, the entrepreneur has a strong belief about the buying behavior of the
consumers that they will buy more products if the design is changed from traditional to modern.
This statement is a hypothesis. It is a tentative answer to the question, "Will the consumer buy
more products if the design is changed from traditional to modern?"

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 A hypothesis is a statement of assertion that must be proven in a subsequent research
work. The above assertion must be proven by the entrepreneur whether it is true or not.

To prove the hypothesis that the consumers will buy more products once the modern
design is adopted, the entrepreneur must collect quantitative data from the sample and test them.
He/She may also gather the desired information through qualitative methods.

 Descriptive Research

Descriptive research is conducted by the entrepreneur when the foremost objective is

describe the present buying behavior of the consumers in terms of environmental factors, buying
decision process, and marketing mix.

For example, the entrepreneur would like to know the buying behavior of the consumers
in terms of the following factors:

1. Social class
2. Age
3. Occupation
4. Income

The entrepreneur must gather the desired data in order to describe the buying behavior of
the consumers in terms of the above variables. Descriptive research simply describes the present
condition or status that is happening in the business environment relative to the study conducted.

For example, the data gathered from the sample may provide the following description of
consumers in the segment market:

1. 48% of the consumers are 21 to 30 years old

2. 29% of the consumers are 31 to 40 years old
3. 23% of the consumers are 41 years old and above

Similarly the entrepreneur may want to know the level of buying behavior of the
consumers. It may either be high, moderate, or low. Descriptive research is usually conducted
when the entrepreneur wants to know the present condition of the consumers.

 Causal Research

The entrepreneur conducts a causal research or correlational study when the objective is
to determine whether the buying behavior of the consumer is caused by some environmental
factors. In this study the entrepreneur must test whether the hypothesis is true or not by
determining the relationships between the buying behavior and other variables of the study. In

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causal or correlational study, there is a cause- and effect- relationship between or among
variables.

For example, the entrepreneur strongly believes in the following hypothesis: the amount
of income of the consumers in the market segment directly affects the pattern of their buying
behavior. In the tentative assertion, the entrepreneur believes that the amount of income is the
cause of the change in the buying behavior of the consumers. The entrepreneur, in this case, will
likewise gather the necessary data and test whether there is a relationship between the change in
the buying behavior of the consumers and the increase in income.

The core of the research process in identifying the buying behavior of the consumer is the
gathering or collection of data, through which the entrepreneur will be able to make a conclusion
about the buying behavior of the consumers in the target market segment.

RESEARCH DATA

Research data refers to the kind of necessary information to be gathered in answering

the objective of the research work. In this lesson research data simply refers to the information
needed by the entrepreneur in order to answer the objective relative to the buying behavior of the
consumers. Research data can be classified either as quantitative or qualitative data and primary
or secondary data.

Quantitative Data

Quantitative data can be counted and mathematically computed. They are expressed in
numerical values. Some examples of quantitative data relative to the buying behavior of the
consumers are as follows:

1. Income of the consumers

2. Sales volume of the product
3. Age of consumers
4. Number of units produced Qualitative Data

Qualitative Data

Qualitative data are generally descriptive data and hence cannot be counted.
Mathematical computations cannot be performed on quantitative data since they are not
numerical values.

Some examples of qualitative data are the following:

1. Ethnic or tribal group of where the consumers belong

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 2. Perception of the consumers
3. Gender of the consumers
4. Dominant culture of the segment market

Primary Data

Primary data are research data sourced by the entrepreneur directly from the consumers
belonging in the market segment. The subject being studied by the entrepreneur is the consumers
and their buying behavior. Hence the data that come directly from the subject are considered
primary data. The commonly used research methods of gathering primary data are survey,
experimentation, and observation.

Secondary Data

Secondary data are data previously gathered by another researcher for other purposes
and now exist on other sources.

Examples of secondary data, among others, include the following:

1. Data gathered by marketing associations and included in their publications

2. Data collected from the survey conducted by the National Statistics Office (NSO)
and published in its website
3. Data gathered by the Bangko Sentral ng Pilipinas (BSP) and included in the BSP
annual report

Most secondary data are service statistics or information gathered by different line
agencies the government and used as basis for decision-making. For example, the information
gathered by the NSO about the number of entrepreneurs engaged in furniture-making in year
2015 is a service statistics.

RESEARCH INSTRUMENT

The entrepreneur does not simply gather data based on his/her whims and caprices but
through the so-called research instrument.

A research instrument is a tool used by the entrepreneur in gathering or collecting data.

The choice of research instrument to use will depend on the type of research to be conducted and
the type of data to be gathered. The commonly used research instruments to collect data are the
survey questionnaire, personal interview, and focus group discussion.

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Survey Questionnaire

The survey questionnaire is commonly used by the entrepreneur in gathering the required
data about the buying behavior of the consumers. It may be administered personally by the
entrepreneur who conducts the study or mailed directly to the consumers. In case the survey
questionnaire is administered personally, the entrepreneur must first seek prior approval from the
consumer. If it is mailed to the respondent consumers, the entrepreneur must attach a simple and
brief cover letter explaining the purpose of the survey and the importance of answering the
questionnaire.

In the selection of the respondents or the consumers to whom the questionnaire will be
administered, the entrepreneur conducting the research work may use any of the following
sampling methods:

1. Simple random sampling

2. Cluster sampling
3. Stratified sampling
4. Multi-stage sampling

The type of questions contained in the survey questionnaire may either be a dichotomous
question that has only two choices or alternatives (e.g., yes or no, true or false, present or absent),
a multiple-choice question that has several or multiple choices or alternatives with corresponding
numerical weight, or an open-ended question where the respondents are free to provide their
answers in any form.

Personal Interview

In a personal interview, the entrepreneur conducting the study has face-to-face interaction
with the consumers who are the respondents of the study. The entrepreneur carefully prepares a
series of questions that are designed and arranged properly, so that the objective or problem of the
study is addressed. The instrument which lists the questions to be asked during the personal
interview is called interview schedule. During the actual interview and with expressed approval
from the respondent consumers, the entrepreneur usually reads the prepared questions and records
in verbatim the responses on the instrument.

Conducting a personal interview is quite costly though the response rate is high compared
to a survey questionnaire. It allows the consumers to clarify the questions with the entrepreneur
based on the level of their understanding.
Focus Group Discussion

The focus group discussion is conducted by an entrepreneur with the assistance of a

moderator to gather the views of selected consumers on certain issues relative to their buying
behavior. The entrepreneur purposefully selects the participants from the consumers of the market

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segment. The group is normally composed of a small number of participants ranging from six to
twelve members. The participants are encouraged by the moderator or facilitator to share their
opinions, beliefs, or perceptions about the given issue. All their ideas and opinions are recorded.

Usually a focus group discussion is used when the research design is qualitative in nature.
In other words the entrepreneur cannot use focus group discussion when there is yet a hypothesis
that must be tested as true or not. In similar manner the opinions, ideas, or perceptions of the
participants in the focus group cannot be used to generalize the whole consumers of the target
market segment. For example, the entrepreneur is interested to know the perceptions or opinions
of the consumers about their buying pattern on energy drink. Some participants of the focus group
may share an idea that the chemical ingredient used in producing an energy drink appears to be
hazardous to health. This opinion of the participants cannot be applied to the whole market
segment. However it may serve as a hypothesis that has to be proven whether true or not.
Through the research work, the entrepreneur may be able to formulate an idea about the buying
behavior of the consumers in a target market segment.

TYPES OF BUYING BEHAVIOR

The buying behavior of Filipino consumers may differ significantly from that of foreign
consumers. This is largely due to the different ethnic or racial groups with different cultures,
traditions, beliefs, religions, and customs.

The buying behavior of Filipino consumers may be classified as follows:

1. Complex
2. Simple
3. Brand-sensitive
4. Price-sensitive

Complex Buying Behavior

The complex buying behavior of Filipino consumers is usually manifested when they are
buying expensive goods. Consumers normally go through the buying decision process where they
gather enough information about the features of the product that they intend to buy.

The term complex in this context simply indicates that there are several variables
involved in the buying decision process because the consumer makes a critical evaluation of the
different variables. If a consumer is planning to buy a residential house and lot in a class-A
subdivision, he/she must gather sufficient and relevant information before buying the residential
house and lot. He/She must thoroughly study the price, amenities, location and distance, monthly
or annual dues, and even the social class of the neighborhood. These kinds of variables make the
buying decision complicated.

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 The buying decision process does not usually happen in a short period_ The pros and
cons of every alternative, the probable effects, and other major concerns roust be carefully
examined and evaluated. Consumers, therefore, who are buying or about to buy expensive
products exhibit a complex buying behavior. Entrepreneurs who do business by selling expensive
products must know how consumers gather information about the products.

Simple Buying Behavior

The simple buying behavior of consumers is usually exhibited when the goods are not
highly priced and the consumers are not deeply attached to certain brands. This type of buying
behavior is mostly manifested when buying common household products. Consumers who
exhibit simple buying behavior are mostly concerned with the price of the product. When they go
shopping, they first check on the price of the product. If the price is too high for them, they
immediately decide not to buy it.

These consumers do not necessarily gather enough information about the product. They
do not see any significant differences between or among brands that exist in the market. For
example, if a consumer is looking for a powder detergent labeled as Brand X and she does not
find it in the grocery store, he/she simply will pick up Brand Y as a replacement for Brand X
without even checking the product description of Brand Y. The consumer does not even bother to
transfer to another store to look for Brand X.

Consumers with simple buying behavior din easily switch to another product if their first
preference is not available. They are not particular with the features or brand of the product. They
know only that such product exists through the television or radio advertisements.

Entrepreneurs doing business with low-priced household commodities must make sure
that their products are always available in different sales outlets.

Brand-Sensitive Buying Behavior

Consumers who exhibit a brand-sensitive buying behavior are very particular with
product brands. They highly value branded products or those that have established a certain
image in the market. They are less concerned with the price. They may appear to be buying the
brand and not actually the product.

Consumers who are partial to well-known expensive brands commonly attach themselves
to the upper social class in the community. They prefer to be identified as sosyal because of the
branded products that they are using. Brand-sensitive consumers do not easily switch to another
brand in the absence of their preferred brand in the market.

Entrepreneurs who are producing branded products must consider hiring important
personalities or celebrities to advertise their products.

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Price-Sensitive Buying Behavior

Consumers exhibiting a price-sensitive buying behavior are mostly concerned with the
price of the product instead of the brand. In other words the price becomes the determining factor
when they buy a product. For them the higher the price of the product, the better it is than the
low-priced ones. They equate high price with high quality and, inversely, low price with low
quality, regardless of the brand. It is the price, therefore, that commands the quality and not the
brand name.

KNOWLEDGE SELF- CHECK 2 .

1.
1
Describe the three types of research that must be performed by the entrepreneur
to determine the buying behavior of the consumer.
2. Differentiate qualitative data from quantitative data
3. Differentiate primary data from secondary data
4. Identify the commonly used research tools in gathering data

A PP L IC A T IO N 16
Direction:
Interview at least three neighbours/friends/relatives who recently bought an appliance,
gadget or a car. Ask about how they gather information and what factors they consider in
deciding to buy such item. Write your findings in the table below.

Customer Product Means of gathering Factors affecting

information their decision
Consumer 1

Consumer 2

Consumer 3

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 Lesson 3: The Marketing Mix

What you already know?

The marketing mix simply refers to a mode, means, or tool used by the entrepreneur to
position the product in the target market segment to efficiently and effectively deliver it to the
consumers and to convince them about the benefits that they will derive from buying the product.
The marketing mix is also known as the "Ps" in marketing. Originally, there were only 4Ps, but
the model has been continuously modified until there became 7Ps. The original 4Ps stand for
product, place, price, and promotion. Eventually, three elements have been added, namely,
people, packaging, and positioning, to comprise the 7Ps.

Kick-Start

Recall an item that you have recently bought.

Evaluate the quality of the product, was it priced
reasonably as to its quality? Is it available in a
location that you can easily access? How did you
become aware of the product? Share your insights
in class.

DISCUSSION

The marketing mix basically addresses the following questions:

1. How can the target consumers be influenced to buy the product or service?
2. What marketing strategy must be adopted to convince the consumers that the product or
service being offered satisfies their needs?

PRODUCT

Product refers to the tangible good or intangible service offered by the business to the
target consumers. Entrepreneurs do not create products without any existing need or want for
them in the market. Otherwise, the entrepreneurs themselves have to create the need or want.
The products must satisfy the needs of the consumers better than other competing products. This
is the very essence of the product as an element of the marketing mix. A product that cannot meet
the needs of the consumers will not stay long in the market.
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 For emphasis, the two basic entrepreneurial tenets relative to product are as
follows:

1. The product is only produced once there is an existing need or want.

2. The product must satisfy the need or want better than the competing products.

Information about consumers' tastes, preferences, perceptions and priorities has

significant contribution to the design of the product. This enables the entrepreneur to satisfy the
needs and wants of the consumers. Satisfied customers mean satisfactory sales and income for the
entrepreneur.

As a future entrepreneur, you may start with a small entrepreneurial venture in your local
community. Having lived there for a certain period puts you in a competitive position by being
knowledgeable about the tastes and preferences of the consumers in your community. Thus, you
can easily design a product that will satisfy their needs and wants.

Remember that the consumers are buying the product. Any additional features carried by
the product are product attributes that the consumers must be willing to pay for. For example,
consumers buying Adidas or Nike shoes are not only buying a pair of sneakers but also durability
and the brand name.

The product, therefore, is the nucleus of the marketing mix. Once the product fails to
satisfy the needs and wants of the consumers, the other Ps may no longer be considered essential
in the buying decision. In most instances, they no longer appeal to the consumers. For example,
consumers will not be enticed to buy a skin-whitening product which can hardly whiten the skin
even though it is priced very low.

In order to improve the marketing performance of the primary product, big businesses
nowadays adopt the concept of product mix where they make different products or services
available to the consumers on top of the primary product. Some experts in the field of marketing
and entrepreneurship also call this product strategy as differentiation strategy.

In the Philippines, one business that has exemplified concretely this marketing strategy is
Mercury Drug. It was formed and designed to primarily sell a complete line of pharmaceutical
products. Today, however, Mercury Drug has already included household merchandise, food,
toiletries, among others, as part of its product mix.
National Bookstore also observes product mix. It has included various school and office
supplies and equipment in addition to its primary products which are books and magazines. It
also sells Christmas lights and decors during the Yuletide season.

In a general sense, the product mix strategy makes the business appear to have everything
that the consumers need or want.

18
PLACE

The term place in the marketing mix simply refers to the place where the target
consumers are. The entrepreneur must establish his/her business or product in the most strategic
place or location. The term strategic place, however, is relative. What may be considered strategic
for a convenience store may not be considered strategic for a bookstore. Most entrepreneurs
equate strategic place with a location or site where there are plenty of people during a particular
time. This can be misleading since the presence of many people does not exactly assure the
presence of target consumers.

The basic entrepreneurial concept relative to place in the marketing mix is very simple
and straight forward, that is, put your business where your consumers are willing to buy the
product. For example, if you intend to engage in selling school supplies, it would be appropriate
to place the business near schools, colleges, or universities where the target consumers are.
In sharp contrast, a school supplies business in a seaport will be a failure although a lot of people
pass by that place every day, simply because they are not the target consumers. Thus a substantial
number of non-target customers do not actually provide any benefit to the school supplies
business.

The nature of the business and the type of the product significantly determine the most -
appropriate place for the business. There are businesses and types of products that require
sufficient parking space for consumers. A spot in the corner of a street does not apply to all
business and products.

PRICE

The concept of pricing relative to the marketing mix can be viewed from two opposing
perspectives, namely, the perspective of the entrepreneur who produces the product and the
opposing perspective of the consumers who ultimately buy the product. Normally producers
apply higher prices for the products to gain a higher profit, while the consumers want lower
prices for the products.

Albeit there are no rigid rules as to how prices are set, there are some variables that
highly influence the setting of prices of goods or services. These include the following:

1. Availability of the competing products

2. Cost of making the product
3. Type of product
4. Presence of substitute products
5. Stages of the product in the market
6. Demographic profile of the target consumers

19
Availability of the Competing Products

When the supply of the competing products is high, the price of the product is usually
low. Producers tend to gradually pull down the prices when the supply is high and adopt a reverse
mechanism when the supply is low. As an entrepreneur you must know then the level supply and
demand for the product.

Cost of Making the Product

In manufacturing the product, cost is involved. The term cost in this lesson simply refers
to the amount spent by the manufacturer in view of the expected future benefits. The
manufacturing cost includes the direct materials, direct labor, and factory overhead. The basic
rule is that the entrepreneur should not set a price lower than the cost involved in making the
product.

Direct labor refers to the wages paid to the workers who are directly involved in
manufacturing the product. Factory overhead includes indirect materials and labor and other
expenses like the cost of light, water, fuel, or machinery maintenance. Direct materials pertain to
the materials that form part of the finished product. Direct labor, factory overhead, and direct
materials are the three elements of cost. They must be present in all instances in the process of
determining the cost of the product.

The entrepreneur must know then the cost of manufacturing the product. It is illogical to
set the price of a product without knowing the production cost. The absence of information about
the cost of the product may result in a price below the cost or a very high price thus, making the
product uncompetitive in the market.

Type of Product

Products are broadly classified into industrial products and consumer products. Industrial
products are used as raw materials of other manufacturing entities. These products usually have
higher prices compared to consumer products. Prices of industrial product remain fixed for a long
period, while consumer products may undergo several price changes within a very short span of
time.

On the other hand, consumer products are used and consumed by individual consumers.
These products may be further classified into convenience product, shopping product, and highly-
priced product. The classification of consumer products is entirely dependent on the consumers.
Hence, the same product may be classified as convenience product by one consumer but
classified as shopping product by another.

20
Presence of Substitute Products

The presence of substitute products is a threat to the primary product. Substitute products
basically set the limit to the selling price of the primary product. The consumers can easily switch
and buy the substitute products with lower prices especially when the primary product –is not
available. The threat of substitute products is strongly felt in the realm of consumer products.
Since the prices of consumer products are relatively low, competitors can easily join the market,
and the resulting competition is expected to be stiff.

The entrepreneur must continuously monitor and study the entrepreneurial opportunities
that may be provided by substitute products as these likewise position themselves in the market.

Stages of the Product in the Market

The product usually undergoes the following stages:

1. Introductory stage
2. Growth stage
3. Maturity stage
4. Decline stage

The pricing model that may be adopted during the introductory stage is entirely different
when the product has already reached maturity stage. For example, during the introductory stage,
the entrepreneur may adopt the price skimming approach in which the new product is highly
priced when introduced in the market, but is gradually reduced as competitors increase. The
entrepreneur may also adopt the price penetration approach in order to build well-founded
consumer base. In this approach, the product is introduced with a low price.

In the growth and maturity stages, the entrepreneur may adopt the commonly used
pricing strategy which is the cost-based model, in which the price is simply equal to the cost plus
the desired profit margin. The desired profit margin must be sufficient enough to cover operating
expenses like salaries of office employees, traveling expenses, taxes and licenses, and other types
of business expenses that are normally charged to operations.

In the decline stage, the product experiences a decreased or negative growth in sales. This
leads to lower profits or eventual losses for the business, and ultimately, the discontinuance of
production and distribution of the product.

Demographic Profile of the Target Consumers

Since the final buyers are the consumers, their demographic profile highly influences the
process of setting the most appropriate prices of the goods or services. For instance, consumers
who belong to the higher economic status in the community usually buy products that are highly

21
priced. This type of consumers tends to always protect their social status. Buying low-priced
consumer goods may tarnish their social image in the community where they belong. Hence,
products that are intended for them are competitively priced. The pricing strategy may be
completely different when the income of the target consumers is merely enough to sustain the
basic needs of the family.

The pricing strategies most often used by retail businesses include psychological pricing
and discount pricing.

Psychological pricing is categorized as follows:

1. Promotional pricing - where products are sold at a lower price in a limited temporary
period like midnight sale, Christmas sale, or anniversary sale

2. Odd or even pricing - where products sold at prices that end in odd number 5 like
P99.95, P199.95, or P399.95 appear cheaper compared to products with prices that end in
even number 0 like ?100, 200, or 400

3. Prestige pricing - where products are purposely sold at a higher price in order to create a
high or superior image like a skin lotion sold at ?700 whereas other similar products are
sold between ?150 and ?200

The entrepreneur may resort to discount pricing to keep up with the competition in the
market, recreate interest in the product, and get rid of the old stock. Other demographic factors
that must be considered by the entrepreneur in pricing his/ her product are age, gender, civil
status, education, occupation, race, and religion of the target consumers.

PROMOTION

In marketing mix, the term promotion refers to the mode of conveying the presence and
attributes of the product to the target consumers. Through promotions, the business
communicates to the target consumers the pertinent information about the product including its
benefits, price, and position in the market. It creates an awareness of the product in the minds of
consumers and elicits their desire to buy it.

Promotion utilizes the most appropriate media to reach the consumers. These include the
following:
1. Advertising
2. Publicity
3. Personal selling
4. Sales promotion
5. Direct marketing

22
 To be more effective in the promotion of the product or service, some entrepreneurial
ventures adopt a mixture of different promotional tools. Nevertheless, whether using one or more
tools, the entrepreneur must properly plan the cost of promoting the product or service.

Advertising

The most common medium of promoting a product or service is through advertising in

following forms:

1. Television or radio commercials

2. Print advertisements like those on billboards, magazines, telephone directories, or
newspapers
3. Online advertising
4. Packaging ads

Since advertising is a paid promotional activity, small businesses usually create and
kindle their own advertising. On the other hand, large businesses use advertising agencies since
they have the financial capability to pay the high cost of advertising.

The most important element in advertising is the message that must be conveyed to the
consumers. Advertising must be able to do the following:

1. Attract the attention of consumers

2. Communicate the message of the product
3. Elicit the feeling or desire to buy the product
4. Identify the benefits of the product
5. Convey the message using plain and simple language
6. Appeal to consumers' understanding by being meaningful and believable
7. Distinguish the product from other similar products

Publicity

Publicity is another way of promoting the product or service to the target consumers
through media coverage. Members of media are usually informed through a formal statement or
press release about a particular event where the product or service will be presented or endorsed
by some well-known personalities. However, the same media people may publish or write about
the product, service, or business negatively or unfavorably, particularly if they do not have the
full knowledge about the product or service. This may project a bad image of the product or
service to the target consumer.

Publicity, which does not usually involve payment of a fee to the media, can also be
undertaken by establishing strong public relations with the general public. This is usually done by
extending relief program or other types of extension services to the community. Self-promotion is

23
another approach to handling publicity where goods like pens, T-shirts, mugs, and the like with
the business name and logo printed on them are distributed to the target consumers for free.

Personal Selling

Personal selling involves a salesperson who has personal and direct contact with the
prospective consumers. This approach may not cover consumers who have not visited the
business establishment or have not been approached by the sales force.

In personal selling, the salesperson is in a competitive position to influence the

consumers to buy the product. In his/her informal conversation with them, he/she can roughly
identify their needs and wants. Thus, it is a must for the entrepreneur who undertakes personal
selling to have full knowledge of the product, particularly its features and benefits.

Most underwriters of life and health insurance companies and sales representatives of
organic health products promote their new products by adopting the personal selling strategy.
Tupperware in the Philippines has been successful in promoting its product mix through this
approach.

Sales Promotion

Sales promotion aims to influence the target consumers to buy the product or avail of the
service now and not tomorrow. This strategy involves giving incentives to consumers so they will
acquire the product or service. The most popular promotional tools adopted in sales promotion
category are discounts, coupons, cash rewards, and gift certificates.

The monetary or financial benefits offered by the product attract the consumers to buy it.
Sometimes, window shoppers who do not have any plans to buy a product may eventually do so
because of the discounts. This is very evident in the "buy-one-take-one" sales promotion strategy,
which is already a popular technique even among small merchandising businesses. The "eat-all-
you-can" promotion strategy is likewise gaining a wide acceptance among consumers.

Discounts allow the consumers to buy the product or avail of the service at a price lower
than the regular selling price. The 10-to 50-percent discount given by businesses during their
anniversary sales or major events like town fiestas, Valentine celebration, and Yuletide season
encourage the consumers to buy the product

Coupons are a form of incentive to the customers for patronizing a store. Ordinarily they
have to buy more products in order to accumulate more coupons to acquire the product that is
being promoted.

Cash rewards as a means of promoting the product helps the business in gaining the
loyalty of the customers. They are encouraged to become members of the cash reward program

24
where they are issued plastic cards to record the accumulated points every time they make
purchases. Big shopping malls in the Philippines have been competing in providing reward cards
to shoppers.

Gift certificates are an incentive to the customers who have completed the required
accumulated amount of purchases. However, the recipients can only use the certificates in the
same store. This helps assure the business of continuous patronage of customers.

Direct Marketing

Promoting a product or service through direct marketing is undertaken through the

Internet. The entrepreneur starts by building a consumer database, performs a one-on-one
approach in building consumer relationship, and sells the product online.

Direct marketing is convenient both for the entrepreneur and the consumers. They can
choose from a wide range of product selection and buy the desired product anywhere and anytime
from the online seller. Oftentimes, products sold through direct marketing are cheaper than those
sold in physical stores.

PEOPLE

The modified model of the marketing mix has added people as another element that
assists in product positioning. The term people here refers to individual employees or workers
who are directly involved in the production, marketing, and sale of the product or service. Hence,
the entrepreneur must be sure to hire the right person for the position.

The term right in this context simply means that the educational qualifications and
expertise of the person to occupy the position match the specifications and requirements of the
job. For example, an entrepreneurial venture that is in need of a marketer who will promote the
product in the whole, island of Mindanao must hire a graduate of marketing or business course
and not a graduate of an engineering or information technology course_ The technical expertise
that the job requires must also be given due consideration in the process of hiring an employee.

Finding the right person for a position entails cost on the part of the business venture. The
amount of salary is dependent on the educational qualifications, technical expertise, and
professional experiences of the applicant. The higher the requirement for the job, the higher the
salary level.

Big businesses have an edge over small ones in the aspect of financial capability to
recruit the best people for the job. These big businesses can offer them better pay and benefits,
which commonly translate to better work performance.

25
PACKAGING

In the context of marketing mix, packaging refers to the process of putting the product in
a package or container. It includes the kind of material used for the wrapper or container and the
label and product information printed on the package. The basic purpose of packaging is to
protect the product from spillage, damage, or spoilage. Spilled, damaged, or spoiled products
create impressions that are disadvantageous to the product or business. The type of product
basically determines the kind of packaging whether it will be plastic container, breakable bottle,
tin can, carton or box, or paper or cellophane wrapper.

Consumable liquid products are usually placed in plastic containers, breakable bottles,
and cartons or boxes.

The packaging of a product must be user-friendly, that is, it must be easy to open, handle,
and store. It can be resealable and reusable. It can also be environment-friendly. The label printed
on the packaging material must be attractive, readable, and complete with the necessary product
information.

POSITIONING

Positioning, as an additional element in the modified model of the marketing mix, refers
to the place occupied by the product in the minds of the consumers. It is a marketing strategy that
defines the target consumers. It is the last marketing stage in the customer identification process.
The entrepreneur must always define the product from the perspective of a customer-driven
position. This position is actually a mixture of the different attributes of the Ps. For example, in
relation to the product image, there must be a quality product that satisfies the needs or wants of
consumers.

INTEGRATED MARKETING MIX

The different categories or Ps of the marketing mix are not usually applied separately or
independently in positioning the product or service in the minds of the consumers. Rather, the
different elements of the marketing mix blend harmoniously in order to influence the demands of
the target consumers. Since the four or seven Ps are considered marketer- or seller-oriented, these
must be converted to become consumer-oriented.

For example, the first P stands for product. The product is produced or provided by the
business. This concept is seller-oriented. It must be converted into a consumer-oriented concept
by having also a C on the side of the consumers. This C stands for customer satisfaction. Hence,
if there are four Ps, there must be corresponding four Cs.

Based on the customer-oriented perspective, the seven Ps may be represented in a

customer-driven strategy as follows:

26
 1. Customer satisfaction for product
2. Customer convenience for place
3. Customer cost lowered
4. Customer information for promotion
5. Customer quality assurance for people
6. Customer safety for packaging
7. Customer decision for positioning

The four or seven Ps, whatever the framework used in the development of the marketing
am, must be supported by a tool that will complement other tools of the marketing mix. makes the
marketing mix integrated.

For example, the entrepreneur can adopt the tool of product variety under the first P
is product, and discounts and allowances in the second P which is price. In the third which is
promotion, the entrepreneur may use advertising. This mixture of different Ps to on the product in
the market is technically called integrated marketing mix.

KNOWLEDGE SELF- CHECK 3 .

1.
1
Enumerate and explain the different elements comprising the modified framework
of marketing mix
2. Identify the most common tools used by business venture to promote its products
or service to the target consumers.
3. Name and describe the pricing strategy that is most appropriate to use when the
product is in its introductory stage.

A C T I V IT Y 17
Instruction:

Choose a partner, contact a radio station and set an appointment for an online/phone
interview with the radio personnel regarding advertising. The following are some points of
interest that you can ask about. Write your findings in a clean sheet of paper.

1. Rate of advertising per minute

2. Frequency of airing the advertisement
3. Time of airing the advertisement
4. Length of advertisement
5. Ethical considerations about the message/content of the advertisement.

27
 Lesson 4: The Concept of Needs, Wants, and Branding

What you already know?

The product that the entrepreneur intends to produce and sell must be properly positioned
in the minds of the target consumers through a marketing tool or strategy called marketing mix.
Its center or nucleus is the product. Once the product fails to satisfy the needs and wants of the
other target consumers better than the competitors, the other elements of the marketing mix will
definitely lose their significant value.

Apparently all the marketing tools and strategies are directed toward the satisfaction of
needs and wants of the consumers. Without these there can be no marketing, economics, or even
entrepreneurship.

Kick-Start

What comes to your mind when you

hear the word "toothpaste?"
How about "shampoo?"
When you are asked to describe
"burger," what will you say first?
How about "soft drink?"

DISCUSSION

NEEDS AND WANTS

All human beings, whether rich or poor, have needs and wants. In the parlance of
economics, it is only in human needs and wants that the rich and the poor share a common
ground. However, the degree or level of needs and wants differs among individuals.

The term needs refers to the things that a person must have in order to survive. These
include food, clothing, and shelter among others. On the other hand, the term wants refers to the
things that a person must have in order to be happy, comfortable, and satisfied.

For example, everybody needs food to survive. When you are hungry, you need food, but
may want local simple Filipino dish or even an Italian or Japanese dish. Food is the most
common
28
need of all people. However we may differ in the type of food that we want or prefer to satisfy-
our hunger.

Therefore, as an entrepreneur, you must produce and sell a product that will satisfy both
the needs and wants of the consumers.

In the theory of hierarchy of needs, Abraham Maslow postulates that human needs are
classified into five levels. This theory will help the entrepreneurs in determining the particular
needs of the target consumers.

Maslow’s Hierarchy of Needs

The physiological needs include food, clothing, shelter, water, and sleep. They are
generally known as the basic needs of human beings. At present, sex is also considered one of the
basic needs. The physiological needs occupy the widest base in the hierarchy to indicate that all
human beings have physiological needs.

The safety needs rank second. These include physical safety, economic safety, and
financial safety. Maslow's theory suggests that the lower level of needs should be fulfilled first
before satisfying the needs on the succeeding level. Hence, the physiological needs must be fully
met ahead of the safety needs.

The social needs are on the third level in the hierarchy of needs. These include the need
for friends, acceptance, and love or belonging, which are all viewed from the perspective of
social groups. According to the model, people who have fully satisfied the two lower levels will
seek the need for socialization and acceptance by joining different social organizations, albeit
formal or informal ones.

29
 The need for self-esteem ranks fourth. These include the need for respect, recognition,
and honor by the local community or by the Filipino people in general. The need to become
popular or well-known is the very essence of self-esteem. There may be some Filipino politicians
who join the political race just because they want to be recognized throughout the Philippines.

The highest level of need is self-actualization. This need is satisfied when people have
finally realized their "ultimate dream." For example, a politician can achieve self-actualization
when he/she finally wins in the elections.

It may appear that self-actualization is the terminal point of all needs because upon
reaching it, there are no other needs to be met. However that is not the case. The field of
economics strongly reiterates that human beings have insatiable needs and wants.

The theory of the hierarchy of needs does not carry any value to you as a future
entrepreneur if you simply memorize the different levels of human needs. The theory provides
you with a sound basis for determining the kind or type of product to produce and sell.

However producing a general product may not be beneficial or favorable to the business.
It may not be able to create a competitive product position in the minds of the consumers. It
becomes a must, therefore, that you give a specific name to your product. Make a product that is
distinct and different in terms of attributes, beliefs; benefits, and value from your competitors. In
other words you should brand your product.

BRANDING

Now, as a future entrepreneur, picture your product without a brand name, displayed on
the shelves of various malls and groceries competing with other products with brand names? How
do you think will your product fare in sales? Will the consumers notice it or even remember it?

Brand names play a significant role in the positioning of the product. Brand refers to the
name, design, color, symbol, quality, features, or a combination of these elements that make the
product separate and distinct from similar products of the competitors.

Branding is very critical in the promotion of a product among consumers. In most

instances, they associate the features, attributes, benefits, or value of the product with the brand.
Consumers sometimes become more familiar with the brand name than with the product itself.
They position the brand, and not the product, at the back of their minds. The tendency is that the
consumers directly equate the product with the brand. The entrepreneur must exercise extra care
about this behavior of the consumers.

For example, when a mother instructs her child to buy toothpaste, she may simply say,
"Buy Colgate from the nearby store," although she may actually mean another brand of
toothpaste. By doing so she unconsciously affirms that the brand name Colgate has already been

30
positioned in her mind for any toothpaste product. The same goes for Coke as the brand name for
any soft drink product.

Branding has been considered by experts in the field of marketing and entrepreneurship
to be another marketing strategy of product petitioning. The brand carries the attributes, benefits,
and even values of the product. It communicates to the consumers the relevant information about
the product. It provides the specific perspective of the product to the consumers.

For example, a consumer may say, "I will buy a' pair of shoes." This statement is very
general. It does not specify information or any features or attributes of the product. If the
consumer says, "I will buy Nike," the brand name he/she mentions may appear to be more than
enough to convey information about the product. The brand name Nike may connote safety,
durability, quality, and even social status.

Because of the significant role of brand name in the minds and buying behavior of the
consumers, companies are printing their brand names, logos, and colors on their products.

Brand Name

Almost everything in the market today is already branded. The brand may have started
from the time the product is produced, planted, or harvested. Just simply imagine that consumers
already have wide selections of branded rice. Consumers can select from Banaybanay rice, 7
tonner rice, Dinorado rice, Masipag rice, Milagrosa rice, organic rice, and even NFA rice.

Even with tomatoes there is already a wide range of selection for the consumers to
choose from. This farm harvest has been packed and labeled as Del Monte tomatoes, Diamante
tomatoes, cherry tomatoes, or simply native tomatoes. Durian comes as Puyat durian, Arancillo
durian, Memer durian, or simply the native durian. Mangoes, bananas, and almost all kinds of
agricultural products are being sold with brand names as well.

Brand names influence the buying decision of the consumers. That is why the
entrepreneur must define a clear and effective branding strategy, so that the product remains
competitive in the market. The basic concept in effective and competitive branding strategy is to
"Build a strong brand."

Colgate, Bear Brand, Coke, Pepsi, San Miguel Beer, Downy, Tide, Safeguard, Toyota,
Mitsubishi, Ateneo de Davao, University of Immaculate Conception, and University of Mindanao
have proven to be strong brands for many years now.

Now, what is the best brand name for a product?

The term "best" indicates that the brand name can easily attract the attention of the target
consumers, influence them, and lead them to buy the product.

31
 Though there are no standard procedures in the formulation of the best brand name, the
following approaches may be of great help:

1. Review carefully the attributes, benefits, and values of the product.

2. Evaluate the consumers in the target market.
3. Analyze the proposed marketing strategies.
4. List the possible brand names by considering the first three steps.
5. Limit the brand name to one or two words.
6. Check the Internet if the chosen brand name already exists.

Branding Strategy

Branding strategy starts with the formulation of a brand name for the first single product
that the business intends to make. The situation becomes more complicated when the business
starts to offer an additional product. Though most entrepreneurial endeavors engaged in
manufacturing start with a single product, they eventually add a new product line in response to
new entrepreneurial opportunities. When this happens, will all the products carry one brand name
or will each product carry a distinct and separate brand name?

For example, a business that is engaged in the production of machinery it’s producing
agricultural machineries and provides them with a brand name. After some time it also produces
poultry feeds processing machines and later moves on to the production of printing machines.
What will be the brand name of the poultry feeds processing machines and the printing machines?

Businesses existing in situations like this adopt two branding strategies, namely the
umbrella brand approach and house brand approach.

Whatever branding strategy is deemed appropriate to position the product in the minds of
the consumers, the entrepreneur must ensure the proper management of the brand or brand name.
When a new product with a brand name is introduced to the target consumers, the primary
objective of the entrepreneur is to open the awareness level of the consumers. The most
appropriate promotion strategy is to gradually make the consumers knowledgeable of the product
and its value and to help build their loyalty to the brand.

 Umbrella Brand Approach

In the umbrella brand approach of branding names, all products of the business carry the
same brand name. The various product lines are not differentiated from each other from the
perspective of the brand name.

For example, Honda Motors produces motorcycles, cars, agricultural machines, grass
cutters, and lawn mowers. Each product line has different types and models. For motorcycles

32
there are the Honda TMX series, Honda Wave series, Honda XR series, and Honda Scooter. For
the cars, there are the Honda Odyssey, Honda Accord, Honda Civic, Honda CR-V, and Honda
VTEC. All the products are marked Honda Motors, the umbrella brand.

The umbrella brand strategy helps the business introduce new product lines more easily
and receive a similar favorable response from the consumers who appreciated the company's •
other products. However, in case one of the products is rated poorly by the consumers for any
reason, the other products with the same brand will likewise be affected. It may be difficult to
introduce a new product once the brand name has been damaged already.

 House Brand Approach

In the house brand approach, every product of the same business has a separate brand
name that distinguishes it from the rest of the company's products. For example, Procter &
Gamble Philippines, Inc. has applied the house brand approach in providing brand names to its
various product lines such as Joy, Tide, Downy, Pampers, Pantene, Head and Shoulders, Rejoice,
Vicks, Max Factor, Safeguard, Ariel, Whisper, and Oral B, among others.

In the house brand approach, the problems and negative perception about one product
will not affect the other products. The consumers may not even be aware that the different
products are produced by the same business. Nevertheless, introducing each product to the target
consumers becomes more costly on the part of the business. Imagine the cost involved in
advertising each product in various media with national coverage.

Branding Extension Strategy

The level or degree of the consumers' perceptions or reactions to a brand is technically

known as brand equity. When the level is high or when the perception of the consumers is
favorable to the brand, the brand equity is considered positive. This indicates that the product has
a strong brand name in the market. The reverse scenario happens when the brand equity is
considered negative. Entrepreneurial ventures with high positive brand equity are capitalizing or
leveraging on such concept. This branding strategy is usually called branding extension strategy.

Generally there are two approaches in branding extension strategies, namely, line
extension approach and product extension approach.

 Line Extension Approach

In the line extension approach, the existing product has been modified or altered resulting
in a new product or more products without eliminating the original product. The new additional
product must be within the same category.

33
 The change or modification may be in the form of flavor, ingredients, mechanical parts,
size or usage. Usually, it is due to the existence of a new promising target market that the existing
product line is modified.

For example, the Bear Brand milk products now include the following variations:
sweetened condensed filled milk, sterilized milk, powdered ma, full cream evaporated milk,
pasteurized milk, and low-fat milk.

The carbonated and noncarbonated drinks of Pepsi Cola include the following brand
names: Pepsi, Mirinda, 7 Up, Mountain Dew, Mug Root Beer, Tropicana, Lipton, and Gatorade,
among others.

Since the different varieties of the product line are definitely competing against each
other in the market, the entrepreneur must make sure that each product offers considerable
benefits to the target consumers.

 Product Extension Approach

In the product extension approach, a new product carries the brand name in a new
category. The new or added product appears to be totally different from the old or existing
product line.

For example, General Electric Company, popularly known as GE, provides one brand
name to all of its products under the different categories, such as refrigerators, freezers, ranges,
ovens dishwashers, air conditioners, washers and dryers, housewares, industrial products, and
light and power products. Each category offers various models of products.

KNOWLDGE SELF- CHECK 4 . 1

1. Differentiate needs and wants.
2. Enumerate and explain the five categories or levels or needs based on Maslow’s
hierarchy of needs. Discuss the importance of this theory from the perspective of
entrepreneurship.
3. Discuss the importance of branding in the practice of entrepreneurship

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 A C T I V IT Y 4

Instruction:

List down on a clean bond paper your top five (5) present needs and wants. See the example
below.

Brand of the product

Needs Level of needs Wants
(if applicable)
Food Physiological Spaghetti Shakeys
Education Security Private School Ateneo de Davao
University

1. Suppose you intend to open a small entrepreneurial venture, which of those needs and
wants would you want to serve? What will be the brand name of your product?

References:
Aduana, NL. (2016). Entrepreneurship in Philippine Setting
https://www.omniconvert.com/blog/consumer-behavior-in-marketing-patterns-types-
segmentation/
https://www.greatideasforteachingmarketing.com/self-concept-and-purchases/

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