Almost every company on the planet sets out with the main objective of earning money. This is generally done by producing some form of product, or offering a service, and then charging customers money for it. This fundamental theory is fairly straight-forward, although it contains many specific details.
First of all, it is a very rare case where a business can offer a product or service that is truly unique and cannot be provided by anybody else. This means that your company will be contesting with other businesses that sell a similar product and you will both be trying to make money from the same shoppers, who only want to spend their cash once. So how can you improve the chances of them spending money with you?
Marketing is the primary tool used by modern firms to draw prospective customers to do business with them and not with their competitors. It is a very broad topic that is affected by a great deal of internal and external factors, but when done well it can be the single business practice that can make or break a company. Any time spent on marketing will reap rewards, although spending this time correctly can yield extraordinary outcomes.
So where should you begin when creating a marketing strategy for your own company? Well, each situation is different, and every industry will have its own set of strengths and weak points that must be taken into consideration, but there is a marketing principle that can be applied to almost any company to be used as a marketing platform. It is known as the “Marketing Mix”.
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 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. It got its name since it is similar to the ingredients checklist for a recipe.
The term was later developed 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 clear for business managers and marketers to swiftly associate the elements of marketing to the strengths of their own organisations, and by doing so could very quickly form a customised and effective marketing strategy. The four P’s are; Product, Price, Place and Promotion.
The “product” aspect of the four P’s could refer to any service, just like advertising sashes, or even any kind of non-physical service being offered for sale by a business.
Product
Whilst every element of the marketing mix is a requirement, the “product” element mentioned as one of the four P’s is possibly the most crucial of all. It describes the physical product or intangible service that your business will be offering, and at the end of the day it is the reason that customers are going to spend money with you.
Many people don’t think that marketing has any role to play when it comes to the actual product that your business is selling. In fact, the typical train of thought very often bears the precise opposite sentiment. Surely it should be the other way around - your manufacturing department creates an item for sale and then it is the job of the marketing department to find ways to sell it, right?
Take the computer software market as an example. There are many well-known brands of both operating system and software application products on the marketplace already, and since the market is fairly well saturated it would be incredibly tough (and expensive) to “take on the big boys”.
Rather than developing 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 types of product are desired in the current marketplace, and how feasible 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 why a customer should buy your product rather than a competitors’.
Another form of this part of the marketing mix is known as product variation and is typically used to either extend the lifecycle of a product currently in the market, or to make your new product attractive to as many consumers as possible. Once again, this method can be applied at all stages of product development.
The car industry uses this approach very effectively by offering various engines, trim packages and interior options with the cars that they sell. They use the marketing mix to good effect to sell their own goods in an incredibly competitive marketplace.
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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 carrying out market research to figure out the highest price that your customers would pay (although that can be a useful tool to use), but rather making use of the price of your products as a strategic tool designed to achieve any particular objectives your company has.
Although it may seem obvious, it is still worth noting that price has always been, and probably always will be, one of the key factors that customers take into account when they are making a purchase. It is also worth noting that customers don’t constantly consider the cheapest price to be the best value. Actually a price that is too low can often turn buyers away.
There are many questions that you need to ask yourself while devising a good pricing plan, 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 however, pricing can be covered by two main principals; price skimming and also penetration pricing. These are outlined below.
Price skimming
The principal idea behind price skimming is to make as much cash as possible from the segment of the market which is price-insensitive and will be prepared to spend a large amount of money to get a product or service early on. Not only can this approach deliver great financial advantages, but it can also promote an exclusive and high quality image of your product.
This pricing strategy is frequently 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 almost 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 firm can help to smooth its own money flow.
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 monetary benefits can be earned long into the future. It can be a risky strategy, but when used correctly it can create revenue streams for many years to come. When establishing a price for penetration it is still critical to not give a bad impression of your product by aiming for too low a number.
Yet another thing to bear in mind is that “price” is the one part of the marketing mix that will generate revenue for a business. The other members of the four P’s will all cost money to produce or undertake. So it is even more essential to get your pricing strategy right.
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Place
Place is the component of the marketing mix that is often disregarded by companies, but it’s still an important part of selling your product effectively. In short, it describes the way in which you deliver your product to your consumer, and subsequently how you collect money from them.
The most typical implications of place-based marketing are the physical locations in which your products are sold. For the majority of consumer products, this involves the distribution network between your manufacturing plants and shops or other outlets around the world. Since distribution of a physical product costs money it is crucial to identify your own priorities and adjust your distribution network accordingly.
With the growing use of the Internet by your prospective customers, marketing methods 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 large pool of potential customers.
Promotion
When you mention the word “marketing”, most people instantly think of the promotional side of the marketing mix, although as we have seen, this is merely one branch of a more comprehensive system. Promotion can be employed on a very individual basis or as a mass communication tool, and whilst it may be a costly undertaking it is often an important one.
Advertising is one of the most typical forms of promotion. Typically it would be done by posting on billboards, creating short clips for TV and radio or by physically handing out flyers or leaflets to potential buyers. With the coming of the information age we have seen a great increase in promotion via e-mail and the Internet, or simply as targeted advertising material posted through your door.
Another significant part of promotion involves branding, which may not necessarily yield more sales directly, but goes back to one of the preliminary purposes of marketing; getting customers to choose your product over those of your competitors.
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 reviewed above you can take an effective view of your own marketing plan.