Nearly every company on the planet sets out with the main objective of earning money. This is usually done by manufacturing some form of product, or offering a service, and then charging customers money for it.
First of all, it is a very rare case where a business can offer a product or service that is genuinely unique and cannot be provided by anybody else. This means that your business will be contesting with other businesses that sell a similar item and you will both be trying to earn money from the same shoppers, who only want to spend their money once.
Marketing is the main tool used by modern organisations to draw prospective customers to do business with them and not with their rivals. It is a very broad topic that is influenced by a great number of internal and external factors, but when done right it can be the one business practice that could make or break a corporation.
So where should you begin when creating a marketing strategy for your own business? Well, each situation is different, and every industry will have its own set of advantages and flaws that must be taken into consideration, but there is a marketing principle that can be applied to almost any corporation to be used as a marketing framework.
The Marketing Mix
The marketing mix was a phrase that was first coined in the 1950′s and is a phrase that is used to describe the fundamental building blocks of any marketing strategy. It demonstrates the fact that marketing is not a simple, blunt-edged business technique, but rather a delicate balance of different elements of business functions.
The term was later built upon to include the concept of “four P’s” that described the critical elements of the marketing mix. The formalisation of these P’s made it very easy for business managers and marketers to swiftly relate the elements of marketing to the strengths of their own organisations, and by doing so could very rapidly form a personalised and effective marketing strategy. The four P’s are Product, Price, Place and Promotion.
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Product
Whilst every element of the marketing mix is a necessity, the “product” element mentioned as one of the four P’s is possibly the most critical of all. It describes the physical product or intangible service that your business will be selling, and at the end of the day it is the reason that buyers are going to spend money with you. If this part is not correctly managed then your company will find it hard to make it through.
Many people don’t think that marketing has any place to play when it comes to the physical product that your company is selling. In fact, the common train of thought very often bears the precise opposite sentiment. Surely it should be the opposite way around – your manufacturing department creates a product for sale and then it is the job of the marketing department to discover ways to sell it, right? This is not necessarily the case.
Take the computer software market as an example. There are many established brands of both operating system and software application solutions on the market already, and since the market is relatively well saturated it would be incredibly tough (and expensive) to “take on the big boys”. So how can the principles of the marketing mix help in this situation?
Rather than creating an operating system and then attempting to craft a marketing strategy to take on the likes of Microsoft or Apple, it would be more effective to look at what types of product are desired in the current marketplace, and how feasible it would be to produce and sell them. By being aware of the marketing mix early on in your product development period you can prevent business dead-ends at a later stage.
Once your goods have been designed and created it is still a vital skill to be able to objectively evaluate your own products to identify the reasons that a customer would buy your product rather than a competitors’. The skill is called product differentiation and forms one of the basic skills of the product part of the marketing mix pie.
A different form of this part of the marketing mix is known as product variation and is generally used to either lengthen the lifecycle of a product currently in the market, or to make your new product attractive to as many consumers as possible.
The car industry uses this technique very effectively by offering various engines, trim packages and interior options with the cars that they offer. They use the marketing mix to great effect to sell their own goods in an extremely competitive marketplace. Although these companies may have substantial marketing budgets, the same concepts can be applied to all businesses.
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Price
Another key factor in the marketing mix relates to the price of your products or services. This is not a simple case of carrying out market research to figure out the top price that your customers would spend (although that can be a handy tool to use), but rather making use of the price of your products as a strategic tool designed to achieve any particular targets your company has. The potential benefits of an effective pricing strategy are surprisingly large!
Although it may seem obvious, it’s still worth pointing out that price has always been, and likely always will be, one of the crucial factors that shoppers take into account when they are making a purchase. It is also worth noting that customers don’t constantly consider the lowest price to be the best price. Actually a price that is too low can sometimes turn customers away.
There are many questions that you need to ask yourself when devising a good pricing plan, key among which are the price sensitivity of your clients, what your competitors are doing and how can pricing maximise your own profits. From a strategy point of view though, pricing can be covered by two primary principals; price skimming and penetration pricing.
Price skimming
The main idea driving price skimming is to make as much money as possible from the sector of the market which is price-insensitive and are going to be prepared to spend a premium amount of money to get a product or service early on. Not only can this approach yield great economic benefits, but it can also advertise an exclusive and high quality image of your product.
This pricing strategy is very often used in the consumer electronics market where customers will often eagerly await the launch of a new mobile phone or computer games console. Manufacturers could set nearly any price they wanted to and there would still be a loyal base of customers that would pay it. By making use of this method as part of a pre-ordering strategy, a company can help to smooth its own cash flow.
Penetration pricing
Penetration pricing is at the other end of the pricing spectrum, and is geared towards gaining a large market share at a short-term cost so that monetary benefits can be earned long into the future. It can be a high risk strategy, but when used correctly it can setup revenue streams for many years to come. When establishing a price for penetration it is still important to not give a bad impression of your product by aiming for too low a number.
Yet another thing to keep in mind is that “price” is the one part of the marketing mix that will generate earnings for a business. The other members of the four P’s will all cost money to produce or undertake.
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Place
Place is the portion of the marketing mix that is often not addressed by companies, but it is still a significant part of selling your product effectively. In short, it describes the way in which you provide your product to your consumer, and consequently how you collect money from them.
The most common ramifications of place-based marketing are the physical venues in which your goods are sold. For the vast majority of consumer products, this includes the distribution infrastructure between your production plants and shops or other outlets around the world. Since distribution of a physical product costs money it is crucial to determine your own priorities and adjust your distribution network accordingly. This is the principal use of this element of the marketing mix.
With the increasing use of the Internet by your potential customers, marketing strategies have had to take into account how they use the Internet to help deliver their products. By using the Internet as a point of contact (or even as a whole distribution route in download-based markets such as MP3s) firms are now able to reach out to a huge pool of possible customers. Effective placing of your product or service can therefore yield impressive economic results.
Promotion
When you mention the word “marketing”, many people instantly think of the promotional aspect of the marketing mix, although as we have seen, this is merely one branch of a more complete system. Promotion can be employed on a very individual basis or as a mass communication tool, and whilst it might be a costly undertaking it is often an essential one.
Advertising is one of the most typical forms of promotion. Classically it would be done by posting on billboards, producing short clips for TV and radio or by physically distributing flyers or leaflets to potential customers. With the coming of the information age we have witnessed a great increase in promotion via e-mail and the Internet, or simply as targeted advertising material posted through your front door. The potential for individualised advertising has never been so good.
Another significant part of promotion involves branding, which will not necessarily yield more product sales directly, but goes back to one of the initial purposes of marketing; getting customers to choose your product over those of your competitors. When all other parts of the marketing mix are equal it can be branding that sways a customer’s choice.
Putting it into Practice
As previously mentioned every company is different and will have different marketing needs. By using a balance of the four P’s discussed above you can take an effective view of your own marketing strategy.