Marketing Mix and the 7Ps

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Questions and Answers

Which of the following expenses is considered an operating expense?

Freight-out costs

Cost of goods sold

Utility expenses (correct)

Capital expenditures

How is the cost of goods sold (COGS) calculated?

Beginning inventory - Ending inventory + Purchases

Purchases - Beginning inventory + Ending inventory

Beginning inventory + Purchases - Ending inventory (correct)

Ending inventory + Purchases - Beginning inventory

What is the formula for calculating Gross Profit Rate?

Net Sales / Gross Profit Margin

Net Sales / Operating Profit

Gross Profit / Net Sales (correct)

Gross Profit / Total Assets

What is the primary goal of penetration pricing?

To increase market share with a low initial price (C) Signup and view all the answers

Which ratio measures a company's ability to cover short-term obligations with its most liquid assets?

Quick Ratio (B) Signup and view all the answers

What does the term 'Return on Investment (ROI)' measure?

Net income per peso invested (A) Signup and view all the answers

Which pricing strategy involves initially high prices that are later lowered?

Skimming (C) Signup and view all the answers

Which of the following is NOT a strategy for personal selling?

Using media coverage for publicity (D) Signup and view all the answers

Operating Profit Margin is defined as which of the following?

Gross profit minus operating expenses (A) Signup and view all the answers

What does the term 'forecasting' aim to support in a business context?

Adjusting and coping with future uncertainties (D) Signup and view all the answers

What is included in the calculation of Current Liabilities?

Marketable securities (D) Signup and view all the answers

What do operating expenses refer to in a business?

Costs that a business incurs during operations (D) Signup and view all the answers

How is the Current Ratio calculated?

Current Assets / Current Liabilities (D) Signup and view all the answers

Which of the following is a component of the 4Ms of production?

Manpower (A) Signup and view all the answers

How is 'markup' defined in a business context?

Amount added to the cost to establish a selling price (C) Signup and view all the answers

What characterizes the strategy of competitive pricing?

Setting prices by comparing with competitors' prices (B) Signup and view all the answers

Study Notes

Marketing Mix

The marketing mix combines the 4Ps (product, place, price, promotion) with 3 extra Ps (people, packaging, process) to form effective marketing strategies.
These 7Ps are used until the entrepreneur finds the right combination to serve customer needs.
Product: A tangible good, service, or idea, created by an entrepreneur, that can be perceived by senses.
Place: Physical location considerations involve population, traffic patterns, customer behavior, and preference for the location. Cyber locations need web analytics to understand visitor behavior.
Price: The assigned value of a product or service, considering costs, competition, objectives, positioning, and target market. It is the only P that generates revenue.
Variable Costs: Directly proportional to the number of products or services.
Fixed Costs: Not directly proportional to production/service, examples include equipment, employee costs, rent, and utilities.

Most Common Pricing Strategies

Bundling: Combining two or more products or services in one reduced price.
Penetration Pricing: Setting a low price to gain market share, followed by increasing prices.
Skimming: Initially high prices, decreasing over time, to reach a broader market.
Competitive Pricing: Benchmarking prices against competitors.
Product Line Pricing: Various price points for products in a product line.
Psychological Pricing: Utilizing pricing strategies that affect consumer psychology and perception.
Premium Pricing: High prices to reflect exclusivity and superior quality.

Promotion

Promotion: Creates product awareness and desire to buy. Media choices should reach the target consumer base.
Advertising: Can include television, radio, print, online, and other formats.
Public Relations/Publicity: Use media coverage, press conferences, events, strong media relations, public relations as strategies.
Personal Selling: Direct contact with customers by a salesperson.
Sales Promotion: Short-term promotional gimmicks to influence quick purchases.

Packaging and Physical Environment

Physical Environment: The overall ambiance of the service area, or "servicescape", to enhance customer experience.

Process

The internal and external operations, workflow to serve customers better.
Internal process refers to the back office operations.
External process refers to the actual interaction (servicing) with customers.

Manpower, Materials, Method, Machine

Manpower: Appropriate human resources to manage business operations.
Materials: Inputs used to produce products or deliver services.
Method: Procedure or technique for completing a task.
Machine: Tools or equipment for manufacturing or service delivery.

Forecasting Revenues and Costs

Forecasting: Estimating future revenues and costs, based on past or current data, to adapt to uncertainties.
Revenue: Earned when sales exceed production/service costs. Factors include economic conditions, competition, community changes and business specifics.
Sales/Service Income: Revenue from selling goods or services.

Computation of Gross Profit

Gross Profit: Revenue from sales less cost of goods sold. Gross profit margin calculation (rate).
Operating Profit Margin: Gross profit less operating expenses, rate of calculation.
Net Profit Margin: Final level of profitability calculation for the revenue earned.

Analyzing Liquidity Status

Liquidity Ratios: Assessing the ability to meet short-term obligations using current assets, and quick ratios.
Return on Investment (ROI): Measuring net income per invested peso in the business.

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Description

Explore the essential concepts of the marketing mix, including the 4Ps of marketing and the additional 3Ps that enhance strategic planning. This quiz covers the significance of product, place, price, and promotions while considering customer needs and the impact of costs. Test your knowledge on how these elements interact to create effective marketing strategies.