Principles of Marketing

Quarter 2 – Module 2:
The Price
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Principles of Marketing
Quarter 2 – Module 2:
The Price
Introductory Message
For the facilitator:

Welcome to the Principles of Marketing – Grade 12 Alternative Delivery Mode (ADM)

Module on The Price !

This module was collaboratively designed, developed and reviewed by educators both
from public and private institutions to assist you, the teacher or facilitator in helping
the learners meet the standards set by the K to 12 Curriculum while overcoming
their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration their
needs and circumstances.

In addition to the material in the main text, you will also see this box in the body of
the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to manage
their own learning. Furthermore, you are expected to encourage and assist the
learners as they do the tasks included in the module.
For the learner:

Welcome to the Principles of Marketing – Grade 12 Alternative Delivery Mode (ADM)

Module on The Price!

The hand is one of the most symbolized part of the human body. It is often used to
depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a learner
is capable and empowered to successfully achieve the relevant competencies and
skills at your own pace and time. Your academic success lies in your own hands!

This module was designed to provide you with fun and meaningful opportunities for
guided and independent learning at your own pace and time. You will be enabled to
process the contents of the learning resource while being an active learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the
module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of the

lesson. This aims to help you discover and
understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled in to process
what you learned from the lesson.

What I Can Do This section provides an activity which will

help you transfer your new knowledge or skill
into real life situations or concerns.
 Assessment This is a task which aims to evaluate your
level of mastery in achieving the learning
competency.

Additional Activities In this portion, another activity will be given

to you to enrich your knowledge or skill of the
lesson learned. This also tends retention of
learned concepts.

Answer Key This contains answers to all activities in the

module.

At the end of this module you will also find:

References This is a list of all sources used in developing

this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the
module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.

We hope that through this material, you will experience meaningful learning and
gain deep understanding of the relevant competencies. You can do it!
 What I Need to Know

This module covers the second of the four P’s of marketing (marketing mix), Price,
and includes issues such as setting prices, new product pricing and general pricing
approaches. The primary takeaway that you should have after going through this
module is that price is not just means for generating profit but rather price can be
used to help communicate the nature of the product to the market.

At the end of the lesson, the learners will be able to:

1. Identify factors to consider when setting prices - ABM-PM11-l1a-e-17;
2. Discuss new product pricing; and
3. Explain general pricing approaches/strategies.
 What I Know

Price is the money, good or service exchanged for the ownership or use of a good or
service. It is customary to quote price in many ways. Different terms of price is listed below.
Your task is to write the letter of the correct response.

Another Name of Commodity

Price Purchased

1. tuition a. bus ride

2. interest b. education

3. taxes c. use of asset

4. subsciption d. membership

e. guest speaker's
5. royalty
services

6. rent f. use of money

g. lawyer's
7. fare
services
h. services of
8 . fee
physician
i. services of
9. retainer white collar
worker
j. services of blue
10. toll
collar worker
k. government
11. salary
service
l. regular receipt
12. wage
of periodical
m. salesperson's
13. commission
services
n.use of
14. honorarium
copyright
o. travel on
15. dues
highways
 Lesson

2 The Price

After product, pricing plays a key role in the marketing mix.

The reason for this importance is that where the rest of the
elements of the marketing mix are cost generators, price is
a source of income and profits. Through pricing, the
organization manages to support the cost of production, the
cost of distribution, and the cost of promotion.

Price is the value measured

in money term in the part
of the transaction between
two parties where the
buyer has to give
something up (the price) to
gain something offered by
the other party or the
seller.

Pricing the product or service is one of the most important business decisions you

will make.
You must offer your products for a price your target market is willing to pay – and

one that produces a profit for your company – or you won’t be in business for long.

S
ETTING THE PRICE – Let us now attempt to understand the process of how
firms set prices. When does a firm set prices? A firm must set a price for the
first time when it develops a new product, when it introduces its regular
product into a new distribution channel or geographical area, and when it enter bids
on new contract work. Is setting prices easy? It involves making a number of guesses
about the future. You would want to know how an organization proceed? It follows:

1. Identify the target market segment for the product or service, and decide what
share of it is desired and how quickly.
2. Establish the price range that would be acceptable to occupants of this
segment. If this looks unpromising, it is still possible that consumers might
be educated to accept higher price levels, though this may take time.
3. Examine the prices (and costs if possible) of potential or actual competitors.
4. Examine the range of possible prices within different combinations of the
marketing mix (e.g. different levels of product quality or distribution methods).
5. Determine whether the product can be sold profitably at each price based upon
anticipated sales levels (i.e. by calculating break-even point) and if so, whether
these profits will meet strategic objectives for profitability.
6. If only a modest profit is expected it may be below the threshold figure
demanded by an organization for all its activities. In these circumstances, it
may be necessary to modify product specifications downwards until costs are
reduced sufficiently to produce the desired profit.

An organization goes through the following steps in setting its pricing policy.

1
A company can pursue any of five major
Selecting
the Pricing objectives through pricing: survival, maximum
Objective current profit, maximum market share,
maximum market skimming, or product-
quality leadership.
 2
Determining In the normal case, demand and price are
the inversely related: the higher the price, the
Demand lower the demand.

3
Estimating A company charge a price that covers its cost
Cost of producing, distribution and selling the
product including a fair return for its effort
and risk.

4
Analyzing While demand sets a ceiling and costs set a
competitor’s floor to pricing, competitors’ prices provide an
Costs, prices in between point you must consider in setting
and offers
prices.

5
Selecting
a pricing Determine best approach for the product
method

6
Selecting
the final Adopt the chosen pricing strategy
price
 What’s In

Modified True or False. Write the word TRUE if the statement is

correct. Otherwise write the word FALSE and change the underlined word/s to
make the statement correct.
1. Product is a source of income and profit.
2. A firm must set a price for the second time when it develops a new product,
3. In setting prices, it is necessary to modify product specifications downwards
until costs are increased sufficiently to produce the desired profit.
4. Examine the range of possible prices within different combinations of the
marketing mix.
5. Through marketing, the organization manages to support the cost of
production, the cost of distribution, and the cost of promotion.
6. Demand sets a ceiling and costs set a floor to pricing.
7. It is important to examine prices of actual competitors.
8. Determine whether the product can be sold profitably at each price based
upon actual sales.
9. Price is the value measured in money term in the part of the transaction
between two parties.
10. It’s easy to educate consumers to accept high price levels.

´TAGGING THE RIGHT PRICE WARRANTS SUBSTANTIAL

MARKET SHARE ´
(Dizon C., 2020)
 What’s New

Honda: Entering the Market via the The company eventually got around
People's Car Program the entry requirement through the
skin of its teeth. For its People's Car
entry, Honda chose to bring in the
Up until the end of the MArtial Law two-door Honda Civic-a car which
era, there were only three car brands normally would be sold at a loss if
in the country: Toyota, Mitsubishi and priced below P 200,000.00. The
Nissan. But by the early 1990s, the company then proceeded to strip the
People's car program , a govenrment car of all its luxuries-air contioning,
initiative to introudce low-cost upholstery, sound system, power
automobiles to the market, led to the options-and declare the stripped
entry of a host of new automobile vehicle to be its Peopl's Car. If any
brands. buyer wanted to trick out their Civic
The program, however, had a fairly with these amenities, then they will
challenging entry requirement. In have to pay for all the extras, bringing
order for a new automaker to enter the the total price of the package well over
Philippine market, it must introduce a P 200,000.00.
"Peoples'Car"which at that time was The two-door Civic went on to become
classified as a vehicle that would be on a best seller. Althougheven at its
sale for less thPride. stripped down state, Honda did not
To Honda Motors, however, which was make any real money from this model.
intent on entering the local market, But that did not matter because the
this was going to be a serious car allowed the company to enter the
challenge. Honda was a producer of Philippine market. It was with its more
cars that were at a slight premium premium vehicles suc as the Accord
compared to other mid-price vehicles and later, the CR-V that it was finally
and there was no way that they could able to have profitable operations.
produce a vehicle that could be sold
for less than P 200,000.00.

“Price should never be just about cost plus markup. It should also
be a tool for communication and for strategy.”
 What is It

P
rice is the amount
of money that your
customers have to
pay in exchange for your
product or service.
Determining the right price
for your product can be a bit tricky.

A common strategy for beginning small businesses is creating a bargain pricing

impression by pricing their product lower than their competitors. Although this may
boost initial sales, low price usually equates to low quality and this may not be what
customers to see in your product.

Your pricing strategy should reflect your product’s positioning in the market and
the resulting price should cover the cost per item and the profit margin. The amount
should not project your business as timid or greedy.
Low pricing hinders your business’ growth while high pricing kicks you out of the
competition.

There are a number of pricing strategies that you can follow. Some strategies may
call for complex computation methods and others are intuitive decisions. Select
a pricing strategy that’s based on the product itself, competitive environment,
customer demand, and other products that you offer.
Penetration Pricing

A low price is set by the company to build up sales and market share. This
may be done to establish position in a market with preexisting similar products on
offer. Once a position is created, the prices may be raised. A satellite channel provider
may offer an introductory price and then increase as business grows.

Skimming Pricing

Here, the initial price is set high and may slowly be brought down. This will
allow the company to introduce the product step by step to different layers of the
market. Electronic and tech gadgets often start at a very high price which is
subsequently lowered with the lowest point reached right before a new model is
launched.

Competition Pricing

When trying to go head to head with competitors offering similar benefits, a

company may decide to:
a. price higher to create a higher quality perception or to target a niche market
b. price the same to show more benefits for the same price
c. price lower to try to gain a wider customer base

Product Line Pricing

Here, different products in the same range may be set at different prices.
Television sets are priced differently depending on whether they are HD or not,
whether they have wifi features of not and whether they are 3D or not.

Bundle Pricing

A group of products may be bundled together and sold at a reduced price.

Supermarkets often use this method through their ‘buy one get one free’ offers.

Psychological Pricing

Often a company will make small changes to prices to make a customer think
the item is priced lower than it is. This is often seen in prices ending in 99. For
example, an item market 199 will be perceived as closer in price to 100 than 200.

Premium Pricing

A high price is set to establish an exclusive product of high quality. Designer

cars and premium brand stores are a good example of this type of pricing.

Optional Pricing

A company may add optional extra items within the price to increase a
product’s attractiveness. For example, car sellers may offer car insurance for the first
year.

Cost Based Pricing

Simply, a company may determine the exact cost of producing and selling an
objective, add a markup that may be desirable for profits and price accordingly. This
method may be used in a changing industry where even costs of production are
unpredictable.
Cost Plus Pricing

A percentage is added to the costs as a profit margin to determine final price.

Direction: Tick (/) the sentence that expresses what is true about pricing.

________1. When trying to go head to head with competitors offering similar benefits,
a company may decide to price lower to try to gain a wider customer
base.

_________2. Low pricing is good for a business growth.

_________3. Designer cars and premium brand stores are a good example of optional
pricing.

_________4. Select a pricing strategy that’s based on the product itself, competitive
environment, customer demand, and other products that you offer.

_________5. A common strategy for beginning small businesses is creating a bargain

pricing impression by pricing their product higher than their
competitors.

_________6. Penetration pricing may be done to establish position in a market with

preexisting similar products on offer.

_________7. A high price is set to establish an exclusive product of high quality.

_________8. In Cost based pricing A percentage is added to the costs as a profit margin
to determine final price.

_________9. Television sets are priced differently depending on whether they are HD
or not, whether they have wifi features of not and whether they are 3D
or not.

_________10. Electronic and tech gadgets often start at a very high price which is
subsequently lowered with the lowest point reached right before a new
model is launched.
 What’s More
Give the meaning of the word in the middle of the model map below
by writing your ideas under the heading in each quadrant.

Nature
Short meaning
2.
1. 3.

Price

Characteristics Examples

4. 7.

5. 8.

6. 9.

What I Have Learned

Direction: Fill in the blanks to complete the information about pricing.

Through 1. _________________________, the organization manages to support the cost

of production, the cost of distribution, and the cost of promotion.
You must offer your products for a price your target market is willing to 2.
_________________________ – and one that produces a profit for your company – or you
won’t be in business for long. Determining the right price for your product can be a
3. _________________________. A company charge a price that covers its cost of
producing, distribution and selling the product including a 4.
__________________________. While demand sets a ceiling and costs set a floor to
pricing, 5. _________________________ prices provide an in between point you must
consider in setting prices.

A common strategy for beginning small businesses is creating a 6.

_________________________ impression by pricing their product lower than their
competitors Your 7. __________________________ should reflect your product’s
positioning in the market and the 8. __________________________ should cover the cost
per item and the profit margin.

There are a number of pricing strategies that you can follow. Some strategies may
call for complex computation methods and others are 9. ___________________________
decisions. Select a pricing strategy that’s based on the 10.
___________________________ itself, competitive environment, customer demand, and
other products that you offer.

What I Can Do
Directions: Arrange the following event in chronological order by writing
the number concern in the blank provided.

a. b.
Analyzing competitor’s
Costs, prices Determining the demand
and offers

____________________ ____________________
c.

d.

Selecting the final price

Selecting the Pricing

Objective

____________________

__________________

e.

f.

Estimating Cost

Selecting a pricing method

____________________

_____________________
 Assessment
Directions: Think and Match. Look for the best match of pricing
strategies from the given responses inside the word pool.

1. A low price is set 2. A percentage is added to the costs as

by the company to a profit margin to determine final price.
build up sales and
market share.

4. The initial price

is set high and
may slowly be
brought down.
3. Supermarkets often WORD
POOL
use this method
through their ‘buy Penetration

one get one free’ Skimming 5. Price lower

offers. to try to gain
Competition
a wider
Cost plus
customer
bundle base
 Additional Activities

Direction: Write the letter that corresponds to the BEST answer.

1. A strategy of pricing that may be used in a changing industry where even costs
of production are unpredictable.

a. Cost plus pricing

b. Cost based pricing
c. Penetration pricing
d. Skimming pricing

2. A pricing strategy that l allows the company to introduce the product step by
step to different layers of the market.

a. Cost plus pricing

b. Cost based pricing
c. Penetration pricing
d. Skimming pricing

3. All concerns with competition pricing except:

a. Price is higher to create a higher quality perception or to target a niche

market
b. Price is the same to show more benefits for the same price
c. Price is lower to try to gain a wider customer base
d. Price is lower to build up sales

4. Different products in the same range may be set at different prices.

a. Product line pricing

b. Bundle pricing
c. Optional pricing
d. Premium pricing

5. A high price is set to establish an exclusive product of high quality.

a. Product line pricing

b. Bundle pricing
c. Optional pricing
d. Premium pricing
 What I have learned:
1.Pricing
Assessment: What I Can Do: 2.Pay
Additional Activities: 3.Bit tricky
1.Penetration a. 4 4.Fair return for its
1. b
2.Cost plus b. 2 effort and risk
2. d
3.Bundle c. 6 5.Competitors’
3. d
4.Skimming d. 1 6.Bargain pricing
4. a
5.competition e. 3 7.Pricing strategy
5. d
f. 5 8.Resulting price
9.Intuitive
10. product
What is It: What I Know:
What’s More:
1./ What’s In: 1.b
1.Value exchange 2. 1.False-price 2.f
between buyer and
2.False-first time 3.k
seller. 3.
2.With different 3.False-reduced 4.l
approaches 4./ 4.True 5.n
3.A bit tricky 5.False-pricing 6.c
4. Based on product 5. 6. True 7.a
5.Based on customer 7.True 8.h
6./ 8.False-anticipated
demand 9.g
6.Based on competitive 9.True 10. o
7./ 10. False-it takes time
environment 11. i
7.Fee 8. 12. j
8.Fare 13. m
9.rent 9./ 14. e
10./ 15. d
Answer Key
References
2020. Erucult.Files.Wordpress.Com.
https://erucult.files.wordpress.com/2011/02/24274231.jpg.

Acutt, Mark. 2020. "Price - Marketing Mix Pricing Strategy". The Marketing Mix.
https://marketingmix.co.uk/price/.

Alcoran Alaric Brian. 2018. Principles of Marketing. Philippines: Bookline

Publishing Corporation.

Bhasin, Hitesh. 2020. "Pricing - Setting The Price". Marketing91.

https://www.marketing91.com/pricing/.
Ilano A.B. 2017. Principles of Marketing. Philippines. Rex Book Store.

"Label,Blank,Tag,Empty,Sale - Free Image From Needpix.Com". 2020. Needpix.Com.

https://www.needpix.com/photo/1111161/label-blank-tag-empty-sale-paper-
sign-template-shape.

"Marketing Mix | Pricing In Four P’S". 2020. Cleverism.

https://www.cleverism.com/pricing-four-ps-marketing-mix/.
"Pricing In Marketing: Introduction, Concepts, Objectives, Methods, Strategy".
2020. Your Article Library.
https://www.yourarticlelibrary.com/marketing/pricing-in-marketing/99744.

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