CHAPTER III

MARKETING ASPECT

Marketing is a system of business activities designed to plan, price,

promote and distribute want-satisfying goods and services to potential

customers. It is considered as the lifeblood of every business transaction

because it is a strategic way of adapting and satisfying the ever-changing needs

and wants of the customers, finding opportunities regarding it, introducing and

marketing the product, and achieving customer loyalty and patronage.

This chapter covers the study of the identification of the target market,

market demand and supply, and determination of marketing strategies to be

applied in the business. This can be done through an analysis of the data

gathered concerning the possible acceptance of the product in the market. This

will serve as a basis to analyze the complexity of the business and to determine

the feasibility of the study as to its marketability.

Target Market

The target market refers to the group of customers a business wants to

sell its products to, and includes a target set of customers to whom it directs its

marketing efforts. Identifying the target market is an essential step in the

development of the marketing aspect because it helps in developing an effective

marketing strategy.
 According to the Integrated Agricultural Research Centers in their article

published in Bureau of Agriculture website (www.bar.gov.ph), Korean, Chinese

and Japanese people are more familiar with oyster mushrooms. Moreover, a

research conducted by the Department of Tourism in their Industry Performance

for Travel and Tourism for June 2016 statistic article showed that among the top

spending visitor market in the Philippines, Korea ranks first, China ranks third

and Japan ranks fourth. As per data gathered from A/D Cards & Shipping

Manifests, it shows that visitor arrivals to the Philippines in June 2016 ranked

Cebu as second to Manila having welcomed 77,900 visitors or 16.77% of the

total visitor volume in the Philippines for the month. These are the reasons why

the proponents recommended Korean, Chinese and Japanese restaurants as

target market of this study. The proponents used the 100% sampling to gather

information from the target market. Surveys and interviews with the personnel of

the target market were conducted to further understand the demand of the

product.

Cuisines Offered by the Respondents

Table 4 shows the different cuisines offered by the respondents. This is to

identify the cuisines that the respondents offer in order to know what cuisine

majority uses mushroom.

 Table 4

Cuisines Offered by the Respondents

n = 71

Responses Number of respondents Percentage

Chinese 18 25%
Japanese 27 38%
Korean 24 34%
Filipino 12 17%
Asian or International 4 6%
Singaporean 1 1%
American 1 1%
Italian 1 1%
Thai 1 1%

Table 4 shows the different cuisines offered by the respondents in their

respective restaurants. The top three cuisines offered by the respondents are

Japanese, Chinese, and Korean. This means that Japanese cuisine is the

dominant offering of the respondent restaurants which may indicate such cuisine

demands the use of more mushrooms.

Respondents Who are Using Mushrooms as Ingredient of their Menus in

the Past Five Years

Table 5 shows the number of respondents who are using mushrooms as

ingredient, which will determine how many of the respondents are using

mushrooms to partially see the feasibility of the market.

 Table 5

Whether or Not Respondents Use Mushrooms as Ingredient of their Menus in the

Past Years

n = 71

Responses Number of respondents Percentage

Respondents who use 63 89%
mushroom as ingredient
in their menus.
Respondents who do not 8 11%
use mushroom as
ingredient in their
menus.
Total 71 100%

With 89% who answered yes, majority of the respondents use mushroom

as an ingredient of their menus. This indicates that there is a good possibility of a

market for the proposed project.

Types or varieties of mushrooms purchased by the respondents.

The table below shows the percentages of the different types of

mushrooms that the respondents purchase in order to rank the varieties. This
infor shall aid the researchers in determining the current share of Oyster

mushroom in the market.

Table 6

Type or Varieties of Mushrooms Purchased by the Respondents.

n = 63

Responses Number of respondents Percentage

Oyster Mushroom 24 38%
Button Mushroom 31 49%
Shiitaki Mushroom 40 63%
Straw Mushroom 1 2%
Kikorage Mushroom 1 2%
Golden Mushroom 1 2%
Chicken Mushroom 1 2%
Fouki Mushroom 1 2%

Shiitaki mushroom ranks first with 63%. Shiitaki mushroom is popularly

used in Japanese dishes, such result is aligned with the result of table 4 that

shows that restaurants with Japanese cuisines are rampant in Cebu City. Oyster

mushroom ranks 3rd with 38% indicating the existence of the market.

Oyster Mushroom as Substitute or Supplementary Ingredient to an Existing

or New Dish
 Since Oyster mushroom in Cebu is not popularly known because of lack of

suppliers, this question aims to answer the possibility that the respondents who

currently are not using Oyster mushroom will purchase Oyster mushroom in the

near future. The 39 respondents in table 7 are those who do not use Oyster

mushrooms as ingredient for their menus, computed as the original 63

respondents, who purchase mushroom for their menus, deducted by those 24

who use Oyster mushroom as indicated in table 6.

Table 7

Oyster Mushroom as Substitute or Supplementary Ingredient to an Existing or

New Dish

n = 39

Responses Number of respondents Percentage

Respondents who are 36 92%
willing to use Oyster
Mushroom as substitute
or supplementary
ingredient.
Respondents who are 3 8%
not willing to use Oyster
Mushroom as substitute
or supplementary
ingredient.
Total 39 100%

The respondents are open to the idea of using Oyster mushroom in the

future. This indicates that the current market of Oyster mushroom has a

possibility of an increase.
 Whether or not respondents would be willing to patronize new supplier of

mushroom in Cebu City.

This table aims to know if the respondents are willing to patronize a new

Oyster mushroom supplier, which will help in the determination of the possible

penetration of the proposed project in the existing market. The 60 respondents is

the sum of 24 respondents who currently uses Oyster mushroom for their menus,

from table 5, and those who are open to using Oyster mushrooms for their

menus in the future, from table 7.

Table 8

Whether or Not Respondents are Willing to Patronize a New Supplier of Oyster

Mushroom in Cebu City

n=60

Responses Number of respondents Percentage

Respondents who are 53 88%
willing to patronize a
new supplier of Oyster
mushroom in Cebu City.
Respondents who are 7 11%
not willing to patronize a
new supplier of Oyster
mushroom in Cebu City.
Total 60 100%

Eighty-eight percent of the respondents are willing to patronize a new

supplier of Oyster mushroom in Cebu City. This means that if the project is to be
implemented, the proposed Oyster mushroom cultivation has a potential in the

market and the possibility of penetrating into the existing market.

Preference of the respondents.

The proposed research is offering fresh mushrooms, the information as to

what the respondents prefer as to the kind of mushrooms that they purchase will

help in the projection of the market for the proposed study focuses on providing

fresh mushrooms to the market.

Table 9

Preference of the Respondents.

n = 60

Responses Number of respondents Percentage

Fresh 49 82%
Canned 6 10%
Dried 2 3%
Abstain 3 5%
Total 60 100%

The respondents prefer their Oyster Mushrooms fresh when they

purchase it, as shown in the table, with results of 82% out of 100%. This shows
 that the respondents demand for freshness, as primary objective of the project,

can be met.

Whether or Not Respondents are Satisfied With the Product and Service of

Their Current Mushroom Suppliers

The researchers would want to know if the respondents are satisfied with

the performance of their current supplier. Such information will be a factor to

know the possibility of acquiring the customers in the existing market in favor of

the proposed project. Since the proposed project only offers fresh Oyster

mushrooms, only the 49 who prefers fresh Oyster mushroom are considered as

respondents in table 10.

Table 10

Whether or Not Respondents are Satisfied With the Product and Service of Their

Current Mushroom Suppliers

n=49

Responses Number of Percentage

respondents
Respondents who are 40 82%
satisfied with the product and
service of their current
mushroom supplier
Respondents who are not 9 18%
satisfied with the product and
service of their current
mushroom supplier.
Total 49 100%

Eighty-two percent of the respondents are satisfied with the performance

of their current supplier while eighteen percent are not satisfied. Both the

satisfied and unsatisfied respondents seek improvements in their current supplier

as shown in the next table.

DEMAND

It is very essential to know the demand of the products in order to

answer the customer needs and wants. Knowing the demand will help in

determining the trend for the demand of Oyster mushroom in the future.

Analyzing the demand thoroughly will give the projection of the total number of

quantity of each product that will become the basis for the production. The

questions which serve as the basis for the demand are present in the survey

questionnaire located in the appendices.

Kilos of mushroom respondents needed per week.

Demand of the respondents can be seen in this table. This is to know the

average quantity of fresh mushrooms that the respondents purchase which will

support the production planning of the proposed project.

Table 11

Kilos of Mushroom Respondents Needed Per Week.

 n = 49

Responses Number of respondents Kilos

1 0.5
1 2 2
1.5 1 1.5
2 4 8
3 8 24
5 12 60
6 1 6
7 5 35
8 6 48
9 1 9
10 5 50
Abstain 3 0
Total 49 244
Average Per Week 4.98
Average Per Year 258.94

The average kilo of mushrooms purchased by the respondents , as shown

in table 11 above, is 4.98 on a per week basis. The average kilo of mushrooms

per week is derived from total number kilos divided by total number of responses.

This will give the implementer an idea on how to utilize the production capacity of

the enterprise to be able to produce such quantity.

Present Demand
 Table 12 discloses the present demand in kilos for Oyster

mushrooms of the respondents. Weekly demand is computed by multiplying the

demand in kilos per week by the number of respondents. It is then multiplied to

the total number of weeks in a year to get the current annual demand in kilos.

The total current annual demand is 12,688 kilos.

Table 12

Current Annual Demand

n=49
Demand in Number of Weekly Number of Annual
kilograms per Respondents demand weeks in a Demand
week (In kilos) year (In kilos)

1 52 26

1 2 2 52 104

1.5 1 1.5 52 78

2 4 8 52 416

3 8 24 52 1,248

5 12 60 52 3,120

6 1 6 52 312

7 5 35 52 1,820

8 6 48 52 2,496

9 1 9 52 468

10 5 50 52 2,600

Abstain 40 0 0 0

Total demand 86 244 52 12,688

by
respondents

Percentage of 49/86
target market

Total demand 7229.21

of the target
market

Projected Demand

Since there is no statistical data recorded in the Department of Trade and

Industry (DTI) and Department of Agriculture (DA) regarding the demand for
Oyster mushrooms, past demand is computed through the result of the survey

conducted. Table 13 is shown below to illustrate the demand for Oyster

mushroom for the past five years.

Table 13

Average Demand for Oyster Mushroom for the Last Five Years

n=49

Number of Annual Demand Percentage Responses

respondents

16 2,360.56 33% Increase by

1.72% per year

33 44,868.65 67% Remain

Constant

49 7,229.21 100% Total

Table 13 shows that 33% of respondents believe that there is an average

of 8.6% in the demand of Oyster mushroom for the last five years while 67%

consider the demand as constant. To further analyze the annual demand for the

next five years, the 4,243.02 kilos which represent the 33% of the total annual

demand serves as the base for computing the 1.72% increase in the annual

demand.

Projected demand is necessary to plan and prepare for the production and

sales budget of the company to know if it will continue to become feasible in the

future. Projected demand is computed by multiplying the current annual demand

by the average annual increase of 1.72% to determine the demand for the next
five years. Table 14 shows an illustration of the projected demand for 2016 to

2021.

Table 14

Projected Future Demand

n=49

Year Demand Remain Demand are Annual Demand

Constant Increased by 1.72%
(12688x33/49) (12688x16/49x1.72
%)

2016 4,868.65 2,360.56 7,229.21

2017 4,868.65 2,401.16 7,269.81

2018 4,868.65 2,442.46 7,311.11

2019 4,868.65 2,484.47 7,353.12

2020 4,868.65 2,527.20 7,359.85

2021 4,868.65 2,570.67 7,439.32

Illustrated in Table 14 above is the annual demand for the next five years.

It is computed using the total current annual demand of 7,229.21 kilos as basis.

The 2,360.56 kilos which represent the 33% of the total annual demand serves

as the base for computing the 8.6% increasing demand or an equivalent of

1.72% annual increase. It will be added to the constant demand of 4,868.65kilos

to come up with the yearly demand for 2016 to 2021.

SUPPLY
 Supply describes the total amount of products that is available to the

market. Supply can relate to the amount available at a specific price or the

amount available across a range of prices. Together with the analysis of demand,

understanding the supply is necessary to determine the market share of the

distribution of Oyster Mushroom in Cebu City.

One way of determining the supply of Oyster mushrooms in Cebu City is

to identify its existing competitors in the market. Shown on the table below the

direct and indirect competitors of the business.

Table 15
Where the Respondents Purchase Their Mushroom
n=49

Responses Number of Percentage

respondents

Supermarket 26 53%

Public Market 14 29%

Direct from the farm 4 8%

Abstain 5 10%

Total 49 100%

As illustrated in Table 16 above, 82% is composed of the supermarkets

and public markets who are considered as indirect competitors, 8% is composed

of farms where mushrooms are purchased, considered as direct competitors and

10% of the respondents abstained from answering.

Current Supply
 Competitors Weekly Supply to Number of weeks Annual Supply
the target market in a year
(in Kilo)
Supermarkets 77.50 52 4030
Public Markets 41 52 2132
Suppliers 84 52 4368
Direct from Farm 25 52 1300
Total supply to the 227.5 52 11830

respondents
Percentage of the 49/86

target market to

the respondents
Total supply to the 6,740.35

target market

The current supply is derived using the data regarding the respondents

purchases per week. The researchers presumed that what was purchased by the

respondents directly corresponds with the supply provided by the vendors

Projected Supply

Number of Annual Supply Percentage Responses

respondents

16 2,200.93 33% Increase by

1.72% per year

33 4,5339.42 67% Remain

Constant

49 6,740.35 100% Total

 Considering that the demand is increasing by 1.72% annually, the

researchers presumed that such increment will result to a corresponding

increase, by the same percentage, to the supply provided by the vendors. Such

increase and the projected supply are presented in the table below.

Year Remain Constant Increase by 1.72% Annual Supply

(6,740.35x33/49) (6,740.35x16/49x1.0172

)
2016 4,539.42 2,200.93 6,740.35
2017 4,539.42 2,238.79 6,778.21
2018 4,539.42 2,277.29 6,816.71
2019 4,539.42 2,316.46 6,855.88
2020 4,539.42 2,356.31 6,895.73
2021 4,539.42 2,396.83 6,936.25

Market Share

Determination of the market share will serve as basis of marketing

strategies of an organization. It will define the extent of market that is needed to

be satisfied by the product. Based on the percentage of the population who

demanded for Oyster Mushroom, only 90% are considered as competitors since

10% of the respondents abstained from answering. It is determined that 8% are

direct competitors while 82% are indirect competitors. It is to be noted that the

researchers still considered the supply coming from indirect competitors since it

poses a significant margin as against the direct competitors. Shown in Table 17

below are the farm locations of the direct competitors.

 Table 17

Location of the Farms Where Respondents Purchase Their Mushrooms

n=49

Responses Number of respondents Percentage

Argao 2 4%

Liloan 1 2%

Manila 1 2%

Total 4 8%

In computing the market share, the researchers deduct from the demand

the supply of the competitors. The table below shows the current and projected

market shares.

Year Demand Supply Market share

2016 7,229.21 6,740.35 488.86
2017 7,269.81 6,778.21 491.60
2018 7,311.11 6,816.71 494.40
2019 7,353.12 6,855.88 497.24
2020 7,359.85 6,895.73 500.13
2021 7,439.32 6,936.25 503.07

Marketing Strategy

Establishing a good marketing strategy is important and it must be drawn

from market research and focus on the marketing mix in order to achieve

maximum profit and sustain the business. The 4Ps of marketing is the model
suggested for enhancing the marketing mix the way in which to take the Oyster

mushroom to the target market. It helps to define the marketing option in terms of

price, product, promotion, and place so that the Oyster mushroom meets the

specific need or demand of the customers.

Product

A product is an item that is produced to satisfy the needs of a certain

group of people. It is important to have the right type of product that is in demand

for the market. The proposed project will engage in cultivating and distributing

Oyster mushrooms. Oyster mushroom is one of the easiest exotic mushrooms to

grow and it can grow on a variety of waste products, such as rice straw and wood

chips. What is needed is just to set up a growing area, where humidity and light,

being important factors in cultivating the Oyster mushroom, can be controlled.

Also in growing the mushroom, specific steps are followed and special attention

to cleanliness is necessary to avoid contamination.

Based on the survey conducted shown in Table 9, 82% of the respondents

preferred mushroom to be freshly delivered. The proposed study recommend

therefore that the farmhouse is to be located in Cebu City to be able to serve

customers the best quality of mushrooms. Provided that there are only limited

suppliers of fresh mushroom in Cebu City, cultivating fresh Oyster mushroom

would become a good business.

Packaging
 A packaging is a wrapping material around a consumer item that serves to

contain, identify, describe, protect, promote and otherwise make the product

marketable and keep it clean. It is one of the most important factors in marketing

strategy because it attracts the consumers to buy

the product.

The proponents recommended that Oyster

mushrooms be placed in a Styrofoam covered by

a cling wrap, as shown in the picture. This is to Figure 30

protect the texture, shape and freshness of the Oyster mushroom. It also keeps

the product clean and free from unwanted particles while being stored and

delivered to the customers. The prospective implementers may put the logo of

the business at the center of the packaging so that customers can identify the

them as the supplier with greater ease.

Promotion

Product promotion is one of the necessities for getting the brand in front

of the public and attracting new customers. Regardless of a companys product

or service, a strong set of promotional strategies can help position the company

in a favorable light, not only with current customers but new ones as well.

The proponents suggested that the Oyster mushroom be promoted

through adopting an advertising campaign. This can be done by creating a social

media website, after-sale customer surveys and sample Oyster mushroom

giveaway to selected restaurants in Cebu City.

Personal Selling

In todays marketing practices, personal selling has much important

role to play since salesmanship is already considered as an indispensable

technique to promote product as well as to increase sales. It is best tool

for two-way communication. The owner can provide necessary information

to the customer about Oyster mushrooms, and also can collect information

from customers. Customers can actively involve with the owner to solve

his or her doubts and objections. Moreover, personal selling focuses on

personal needs of customers. It is comparatively more effective and result-

oriented.

Social Media

Social media websites such as Facebook, where a business can

promote the product in a more relaxed environment, is direct marketing at

its best. Social networks connect with the potential customers that can

view the company from a different perspective. Rather than seeing the

business as trying to sell something, netizens view a company that is in

touch with people on a more personal level. This can help lessen the

divide between the company and the buyer, which in turn presents a more

appealing and familiar image of the business.

Product Giveaways

Product giveaways is suitable for introducing the company as a

new distributor in the market. Giving away product samples will entice the
 target market into trying the Oyster mushroom. Once they can examine

the product up close, there is a great probability that they would buy

especially if the qualities that they are looking for are present. The product

will be given to selected Korean, Chinese and Japanese restaurants in

Cebu City. The selected restaurants will have half kilo of Oyster

mushrooms as giveaways.

After-Sale Customer Surveys

Contacting the customers by phone or through mail after a sale is a

promotional strategy that puts the importance of customer satisfaction

first. The owner will make survey calls to customers to gather information

that can later be used for marketing by asking questions relating to the

way the customers perceive the Oyster mushrooms.

Place

Placement and distribution is a very important part of product mix. It is of

utmost importance to understand the target market inside out to discover the

most efficient positioning and distribution channels that directly speak with the

market. Considering the preference of 82% of the respondents for fresh

mushrooms as shown in Table 9 and 31% demand for freshness as improvement

from their existing supplier illustrated in Table 15, the proponents recommended

the farmhouse to be located in Sibucay, Busay, Lahug Cebu City. Given the
scarcity of the distribution of fresh Oyster mushrooms in Cebu City, it would be a

competitive advantage for the proposed business who are from other

municipalities, cities and provinces. Shipping fee would be less costly that would

lead to lower mark-up price. Another advantage is the delivery time, it would be

faster to deliver from Lahug to anywhere within Cebu City, which would only take

30 minutes to an hour travel time depending on the traffic condition. Moreover,

customers can easily visit the farm house and purchase directly, availing of the

gate-price.

Channel of Distribution

Distribution channel is a chain of business or intermediaries through which

the product passes until it reaches the end customer or the market. It has at its

center transportation and logistical considerations. A well-planned distribution

channel strategy would enable an organization to sell to customers in

geographical areas or market sectors that the direct sales team cannot reach.

Upon comparing the cost of dealing though indirect distribution channel

with cost of setting up own network, it has been concluded that the most

appropriate distribution system to be used is direct. Since Oyster Mushroom is

easily perishable, the harvested produce must go directly to the customer with no

middlemen involved. Customers shall order Oyster mushroom by giving a call or

leaving a message or personally place an order at the farmhouse. All orders will

be delivered every Monday, Thursday and Saturday. The produce will be stored

in the refrigerator and will be delivered by the driver to the customers, applying
the necessary controls. Figure 2 shown below illustrates the business channel of

distribution.

Figure 31
Channel of Distribution

Restaurant B
C

Restaurant D

Restaurant A
E
Farm House

Modes of Delivery

The mode of delivery is the means of transportation that is used when an

order is delivered from the main house to the buyer. Determining the most

appropriate mode of delivery is a critical part of making transactions with

customer efficient. Motorcycle with delivery box or compartment at the back, as

shown in the picture, is to be used to deliver Oyster mushroom to customers for

the reason that the quantity of mushroom estimated per delivery date is only ten

kilograms. Another reason is motorbikes are often cheaper to run than cars. The

Japan International Cooperation Figure 32

Agency (JICA) in their Roadmap Study for Sustainable Development in Metro

Cebu 2015 interim report identified traffic

congestion on road links and intersections where

vehicles run at less than ten kilometers per hour.

A series of Commuter City Challenges organized

by the Motorcycle Industry Association in 2014

demonstrated how commuting by motorcycle can be up to 2.5 faster than other

forms of transportation. Therefore it is quicker, cheaper and more advantageous

to use motorcycle than car or delivery truck.

Pricing Policy

Pricing is a very important component of a marketing plan as It determines

the business profit for survival. Adjusting the price of the product has a big

impact on the entire marketing strategy as well as greatly affecting the sales and

demand of the product. Since the business is just starting and has not made a

name yet, it is unlikely that the target market will be willing to pay a high price or

even a price similar to the pricing level of the competitors.

In order to achieve the pricing objective, the proponents used the cost-

plus pricing method. In this method, the price is based on the cost of cultivating

the Oyster Mushrooms plus the certain target profit margin. With this method, it
will be more flexible for the business to respond with the changes in the supply or

demand, technology, or with the existence of competitors.

Pricing

In determining the price of the Oyster mushroom, the proponents

considered the price of the suppliers from Argao and Liloan as benchmark.

Both suppliers were selling the produce for Php300.00 per kilo and to gain

competitive dominance, the introductory price is set to be Php250.00 per kilo

for one year. The percentage set by the proponents is 87.82% of the total

cost. It is 16.67% lower than the competitors price. A low introductory selling

price is essential to gain and increase its share in the market. The computation

for the price of Oyster Mushrooms per kilo is shown in the next page.

Table 18

Pricing and Schedules

 In line with the projected inflation rate in the Philippines which is to

trend around 3.80% in 2020, it is recommended to increase the price

by 4% every three years starting 2018 as shown in Table 19 below.

Such increase is specifically assumed increases in product and period

costs.

Table 19
 Projected Selling Price of the Oyster Mushroom

Year Present Selling 4% Increase Projected

Price Selling Price
2018 250.00 4% 260.00
2019 260.00 4% 270.40
2020 270.40 4% 281.22
2021 281.22 4% 292.46
2022 292.46 4% 304.16

Terms of Payment

The term of payment would be cash on delivery upon first purchase.

Customers may purchase on account provided that they have already

established a good credit standing. The required minimum purchase is two

kilograms. This is based on the survey conducted that the average mushroom

consumption per week is five kilos. The recommended frequency of delivery is

three times a week to maintain the freshness that is preferred by the majority of

the respondents considering that Oyster mushroom can only be preserved for an

average of one week. Customers may still purchase Oyster mushroom by visiting

the farmhouse, in this case the term of payment will be cash basis for first time

buyer and may be sold on account for existing customers who have patronized

the proposed business for at least a year; however, the customers shall make

orders ahead to guarantee the availability of stocks. The credit term for sales on

account would be 2/7, n/30.