POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

Lopez, Quezon Campus

THE PRICE IS RIGHT: MARKET SIMULATION

BACHELOR OF SCIENCE IN BUSINESS ADMINSTRATION

MAJOR IN MARKETING MANAGEMENT 2

Submitted by:
Flavier, Ace Godwin Z.
Indrinal, Jorlan C.
Nacional, Lovely Joy A.
Napiri, Aira Jane A.
Nesola, Mica Ella M.
Pellejera, Princes May E.
Sibulo, Angela M.
Silvala, Byron Lester
Villaflor, Ma. Angelica Pauline P.

Submitted to:
Silaya, Altagracia M.

October 14, 2024

Introduction
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Lopez, Quezon Campus

This activity is designed to explore the development of pricing strategy for products

within the competitive landscape of the market, considering various factors such as demand,

competition, cost structures, and perceived customer value. In this market simulation, our team

will be responsible for formulating pricing strategies for two unique products: Savory Rolls and

Yakulade. Through engaging in this simulation, we aim to gain a deeper understanding of how

pricing decisions can impact overall profitability, market share, and brand positioning.

Market Scenario: Bread Rolls and Yakulade

1. Product Description

 Savory Rolls:

A golden, crunchy, bread rolls filled with savory options like tuna and

cheese, hotdog and cheese, and ham and cheese. Each roll is made fresh daily,

ensuring a crispy exterior and a soft, flavorful interior. The convenience of this

snack makes it perfect for busy individuals seeking a quick and satisfying meal.

 Yakulade:

Yakulade represents an innovative blend of health and refreshment,

combining the well-known probiotic benefits of Yakult with the zesty freshness of

lemonade. This beverage is designed not only to quench thirst but also to promote

digestive health, appealing to consumers who are increasingly health-conscious

yet desire flavorful alternatives to conventional soft drinks.

2. Production Cost Per Unit

 Savory Rolls:

The estimated cost per unit for bread rolls is PHP 14.47, which

encompasses all necessary expenses such as ham, hotdog, cheese, bread, tuna,
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Lopez, Quezon Campus

mayo, breadcrumbs, egg, cooking oil, packaging materials, gas, and labor. This

cost structure allows us to maintain a competitive edge while ensuring the quality

of the product remains high.

 Yakulade:

For Yakulade, the production cost per unit is estimated at PHP 22. 5. This

includes the purchase of yakult, lemonade, water, ice, packaging, and labor costs.

By optimizing our supply chain and ingredient sourcing, we aim to keep these

costs low while maintaining product quality.

2.1. Production Cost Calculation for Savory Rolls and Yakulade

2.1.1. Savory Rolls

Direct Materials Cost (PHP)

Hotdog 30

Ham 50

Tuna 50

Cheese 50

Bread 150

Egg 50

Breadcrumbs 150

Cooking oil 120

Sauce (Mayo and Ketchup) 80

Packaging 28

Gas 50 for 2 hours

Direct Labor Cost (PHP)

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Lopez, Quezon Campus

Labor Cost 60 for 2 hours

Calculation of Total Production Costs for 60 Savory Rolls:

Total Production Cost =Direct Materials + Direct Labor

Total Production Cost =8 0 8+ 6 0=86 8

Number of Units Produced: 60 savory rolls

Production Cost Per Unit:

Total Production Cost

Production Cost p er Unit =
Number of Units Produced

PHP 86 8
Production Cost p er Unit = =PHP 1 4 . 47
60

Calculation of Labor Cost:

Overall Labor Cost=Total Hours Worked × Hourly Wage Rate

Overall Labor Cost=2 ×30=60

Overall Labor Cost

Labor Cost p er Unit =
Number of Units Produced

PHP 60
Labor Cost p er Unit = =PHP 1
60

2.1.2. Yakulade

Direct Materials Cost (PHP)

Yakult 600

Lemonade 125
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Lopez, Quezon Campus

Water 20

Ice 200

Packaging 130

Direct Labor Cost (PHP)

Labor Cost 50

Calculation of Total Production Costs for 50 Servings of Yakulade:

Total Production Cost =Direct Materials + Direct Labor

Total Production Cost =1 , 07 5+50=1, 12 5

Number of Units Produced: 50 servings of yakulade

Production Cost per Unit:

Total Production Cost

Production Cost per Unit=
Number of Units Produced

PHP 1 , 22 5
Production Cost per Unit= =2 2 .5
50

Calculation of Labor Cost:

Overall Labor Cost=Total Hours Worked × Hourly Wage Rate

Overall Labor Cost=1 ×5 0=5 0

Overall Labor Cost

Labor Cost per Unit =
Number of Units Produced
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Lopez, Quezon Campus

PHP 5 0
Labor Cost per Unit = =PHP 1
50

3. Target Market

 Savory Rolls:

Our primary target market for savory rolls includes college students (ages

18–25), faculty, and non-teaching personnel of Polytechnic University of the

Philippines Lopez, Quezon Campus who prioritize convenience and affordability.

This demographic tends to lead busy lifestyles, making quick and satisfying food

options highly desirable.

 Yakulade:

The target market for Yakulade consists of health-conscious individuals

aged 18-35 who appreciate the balance of taste and wellness. This group includes

students, fitness enthusiasts, and young professionals who actively seek beverages

that offer health benefits without compromising flavor.

4. Competitive Landscape

 Savory Rolls:

The competitive landscape includes local bakeries, street vendors,

established fast-food chains, and school cafeteria that offer snack options like

pandesal, doughnuts, and other fried snacks. Competitors typically price their

products between PHP 10 and PHP 20, depending on factors like size and filling.

Our competitive edge will be our unique flavor offerings and the freshness of our

products, appealing to customers seeking a high-quality experience.

 Yakulade:
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Lopez, Quezon Campus

In the beverage market, Yakulade faces competition from ready-to-drink

bottled iced teas, fruit juices, and probiotic drinks. Competitor prices for similar

beverages range from PHP 20 to PHP 50. Our differentiation lies in the innovative

combination of health and flavor that Yakulade offers, as well as strategic

promotional efforts to establish brand recognition and consumer loyalty.

5. Customer Willingness to Pay

 Savory Rolls:

Market research indicates that consumers are willing to pay a medium

price for our savory rolls, ranging from PHP 15 to PHP 20. This pricing reflects

the perceived value associated with freshness, variety, and the unique culinary

experience we provide. Our strategy will focus on communicating these value

propositions effectively to maximize sales.

 Yakulade

Customers express a medium to high willingness to pay for Yakulade,

with a range between PHP 30 to PHP 40. By implementing a charm pricing

strategy, pricing the drink at PHP 39, we aim to enhance its appeal, suggesting

quality while remaining competitively priced against other beverages. Marketing

efforts will highlight the product's health benefits, reinforcing its value

proposition.

Strategy Development: Pricing Approach

 Savory Rolls Pricing Strategy:

For savory rolls, we will adopt a cost-plus pricing strategy and bundle

pricing strategy, setting an initial price of PHP 20 per unit. For the bundle, three
 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Lopez, Quezon Campus

flavors in small sizes will be offered at the same price of PHP 20. This approach

ensures coverage of production costs while allowing for profit margins.

Markup Calculation:

Markup Price=Cost per Unit+(Cost per Unit × Markup Percentage )

Markup Price=1 4 . 47 + ( 1 4.47 ×0. 40 )=1 4 . 47 +5.7 88=20.25 8

 Yakulade Pricing Strategy

For Yakulade, we will utilize a charm pricing strategy, instead of PHP

40, we will offer it for PHP 39. This pricing not only positions Yakulade as a

premium beverage but also aligns with the consumer’s willingness to pay for a

product that combines health benefits with refreshment.

Markup Calculation:

Markup Price=Cost per Unit+(Cost per Unit × Markup Percentage )

Markup Price=2 2. 5+ ( 2 2.5 ×0 . 8 0 )=25.5+18=40.5

Market Simulation Adjustments

In this simulation, we will test our pricing strategies against various hypothetical market

conditions. Adjustments will be based on scenarios such as demand level increases by 100%,

demand level increases by 50%, and supply chain issues.

Scenario Savory Rolls Adjustment Yakulade Adjustment

Demand Increases by 100% Slight price increase to PHP Maintain PHP 39; increase
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Lopez, Quezon Campus

22 for single rolls; bundle production to meet demand

stays.

Demand Decreases by 50% Promotional bundle: PHP 55 Offer limited-time price drop

for three big rolls to PHP 35

Supply Chain Issues (cost Price increase to PHP 25 for Price increase to PHP 49 to

increase) single rolls maintain profitability

When demand increases by 100%, we will need to scale up production while maintaining

consistent product quality. For savory rolls, a slight price increase will help us leverage the surge

in demand, maximizing profits during peak times without alienating customers. Meanwhile, for

Yakulade, we will maintain the current price to sustain consumer interest and capitalize on higher

sales volumes, ensuring we meet the increased demand efficiently.

In contrast, if demand decreases by 50%, we will implement promotional strategies to

reignite interest and stimulate sales. Savory rolls may benefit from larger packs at reduced prices,

while promotional offers such as "buy one, get one free" will encourage more frequent

purchases. Yakulade could experience price reductions or strategic placement in health-focused

venues, reinforcing its appeal to health-conscious customers who are still willing to spend but

prefer cost-effective options.

In the event of supply chain disruptions that increase ingredient costs, we will need to

adjust our pricing strategies to accommodate rising production expenses. For savory rolls and

Yakulade, revising prices to reflect higher costs will be necessary, but we will maintain

transparent communication with customers to preserve trust and loyalty.

 POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
Lopez, Quezon Campus

Conclusion

This activity has given us a clear understanding of how to create and apply pricing

strategies in a competitive market. By closely looking at our target market, studying our

competitors, and figuring out the cost of making our products, we have developed pricing models

for savory rolls and Yakulade that keep both profits and customer satisfaction in mind. We

learned how important it is to balance these two factors to stay competitive and attract customers.

Throughout the simulation, we have also learned how market conditions, like changes in

demand or supply chain issues, can impact our pricing strategies. We have seen that it’s

necessary to stay flexible and make adjustments as needed. Whether it is offering promotions,

increasing production, or finding new ways to reduce costs, we have learned how to respond to

market challenges and opportunities effectively.

Overall, this experience has been a valuable lesson in how pricing decisions play a major

role in a business’s success. It has taught us to stay alert, listen to customer feedback, and adapt

our strategies to ensure we remain competitive while still meeting the needs of our customers. By

doing this, we can ensure long-term success in the marketplace.