Almost every business on the planet sets out with the primary objective of making money. This is usually done by manufacturing some form of product, or offering a service, and then charging people money for it. This fundamental principle is fairly straight-forward, although it contains many intricate details.
Firstly, it is a very rare case that a business can offer a product or service that is truly unique and cannot be supplied by anyone else. This means that your company will be competing with other businesses that sell a similar item and you will both be trying to make money from the same customers, who only want to spend their cash once.
Marketing is the main tool used by modern businesses to draw prospective customers to do business with them and not with their competitors. It is a very broad topic that is influenced by a great deal of internal and external variables, but when done well it can be the single business practice that can make or break a corporation. Any time spent on marketing will reap rewards, although spending this time efficiently can yield extraordinary results.
So where should you start when creating a marketing strategy for your own company? Well, every situation is different, and each business will have its own set of advantages and weaknesses 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 term that was first coined in the 1950’s and is an expression that is used to express 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 idea of “four P’s” that described the essential elements of the marketing mix. The formalisation of these P’s made it very easy for company managers and marketers to quickly associate the elements of marketing to the strengths of their own companies, and by doing so could very rapidly form a tailored and effective marketing system. The four P’s are Product, Price, Place and Promotion.
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Product
Although every element of the marketing mix is a requirement, the “product” element mentioned as one of the four P’s is possibly the most critical of all. It identifies the physical product or intangible service that your business will be offering, and at the end of the day it is the reason that buyers are going to spend money with you. If this element is not adequately managed then your company will find it hard to make it through.
Several people do not think that marketing has any role 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 find ways to sell it, right?
Consider the computer software market as an example. There are many established brands of both operating system and software application products in the market already, and because the market is relatively well saturated it would be very tough (and expensive) to “take on the big boys”. So how could the principles of the marketing mix help in this situation?
Rather than creating an operating system and then trying to craft a marketing strategy to rival the likes of Microsoft and Apple, it would be more effective to look at what sorts of product are sought after in the current marketplace, and how viable it would be to manufacture and sell them.
Once your goods have been fashioned and created it is still a critical skill to be able to objectively review your own products to recognise the reasons that a customer should buy your product rather than a competitors’. The technique is called product differentiation and is one of the fundamental skills of the product part of the marketing mix pie.
Another form of this part of the marketing mix is called product variation and is typically used to either extend the lifecycle of a product already in the market, or to make your brand new product attractive to as many consumers as possible.
The car industry uses this approach very effectively by offering different engines, trim packages and interior options with the cars that they offer. They use the marketing mix to good effect to sell their own goods in an extremely competitive marketplace. Whilst these companies may have substantial marketing budgets, the same principles can be applied to all businesses.
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Price
Another key factor in the marketing mix concerns the price of your products or services. This is not a simple case of performing market research to determine the highest price that your customers would pay (although that can be a handy tool to use), but rather using the price of your products as a strategic tool designed to achieve any specific objectives your business has. The potential benefits of an effective pricing strategy are surprisingly large!
Although it may seem obvious, it’s still worth noting that price has always been, and probably 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 do not constantly consider the cheapest price to be the best value. Actually a price that is too low can sometimes turn customers away.
There are many questions that you need to ask yourself while devising a good pricing strategy, key among which are the price sensitivity of your clients, what your rivals are doing and how can pricing boost your own profits. From a strategy point of view though, pricing can be covered by two primary principals; price skimming and penetration pricing. These are outlined below.
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 technique yield excellent economic benefits, but it can also advertise an exclusive and high quality image of your product.
This pricing technique is very often used in the consumer electronics market where customers will often eagerly await the release of a new mobile phone or computer games console. Manufacturers could set almost any price they wanted to and there would still be a loyal core of customers that would pay it.
Penetration pricing
Penetration pricing is at the other end of the pricing spectrum, and is tailored towards gaining a large market share at a short-term cost so that financial rewards can be earned long into the future. It can be a high risk strategy, but when employed correctly it can setup revenue streams for many years to come. When setting a price for penetration it is still essential to not give a poor impression of your product by aiming for too low a number.
Yet another thing to keep in mind is that “price” is the only part of the marketing mix that will generate income for a business. The other members of the four P’s will all cost money to create or carry out. So it is even more vital to get your pricing technique right.
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Place
Place is the component of the marketing mix that is often disregarded by companies, but it is still a significant part of selling your product successfully. In short, it describes the method in which you deliver your product to your consumer, and consequently how you collect money from them. It can be a great marketing technique when applied correctly.
The most common ramifications of place-based marketing are the physical venues in which your products are sold. For the vast majority of consumer products, this involves the distribution infrastructure between your production centres and retailers and other outlets around the country. Since distribution of a physical product costs money it is crucial to determine your own priorities and alter your distribution network accordingly. This is the primary use of this element of the marketing mix.
With the increasing use of the Internet by your prospective customers, marketing techniques have had to take into account how they use the Internet to help distribute their products. By using the Internet as a place of contact (or even as an entire distribution channel in download-based markets such as MP3s) companies are now able to reach out to a huge pool of possible customers.
Promotion
When you mention the word “marketing”, many people immediately think of the promotional aspect of the marketing mix, although as we have seen, this is only one branch of a more complete system. Promotion can be used on a very individual basis or as a mass communication instrument, and whilst it can be a costly undertaking it is often an important one.
Advertising is one of the most common forms of promotion. Typically it would be done by posting on billboards, producing short clips for TV and radio or by physically handing out flyers or leaflets to potential customers. With the arrival of the information age we have seen a great increase in promotion via e-mail and the Internet, or just as targeted advertising material posted through your front door.
Another significant part of promotion involves branding, which may not necessarily yield more sales directly, but relates back to one of the preliminary functions of marketing; getting customers to pick your product over those of your rivals. When all other pieces of the marketing mix are equal it could be branding that swings a customer’s decision.
Putting it into Practice
As previously mentioned every company is unique and will have different marketing requirements. By using a mixture of the four P’s reviewed above you can take an effective view of your own marketing strategy.
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