Almost every company on the planet sets out with the primary objective of earning money. This is usually 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 that a business can offer a product or service that is genuinely unique and cannot be supplied 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 make money from the same customers, 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 potential customers to do business with them and not with their rivals. It is a very broad topic that is affected by a great deal of internal and external variables, but when done right it can be the one business practice that could make or break a company. Any time spent on marketing will reap benefits, although spending this time efficiently can yield extraordinary results.
So where should you begin when constructing 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 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 subtle balance of different aspects of business functions. It got its name since it is similar to the ingredients list for a recipe.
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 relate the elements of marketing to the strengths of their own companies, and by doing so could very rapidly create a tailored and effective marketing system. The four P’s are Product, Price, Place and Promotion.
The “product” aspect of the four P’s can refer to any service, like novelty childerens bed linen services, or even any kind of non-physical service being offered for sale by a business.
Product
Whilst every aspect 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 identifies 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.
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 in the market already, and because the market is fairly 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 developing an operating system and then attempting to craft a marketing strategy to take on 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 vital skill to be able to objectively review your own products to identify 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 generally used to either lengthen the lifecycle of a product already in the market, or to make your brand new product attractive to as many consumers as possible.
The motor 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.
One quick and simple method to discover several stockists of great tractor toys who perform marketing effectively is to simply think of brand names related to a certain industry.
Price
Another important factor in the marketing mix relates to the price of your products or services. This is not a simple case of performing market research to determine 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 weapon designed to achieve any specific goals your business has. The potential advantages of an effective pricing plan are surprisingly large!
Whilst it may seem obvious, it’s still worth pointing out that price has always been, and probably always will be, one of the key factors that shoppers take into account when they are making a purchase. It is also worth noting that customers don’t always 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 customers, what your competitors are doing and how can pricing boost your own profits. From a strategy point of view however, pricing can be covered by two primary principals; price skimming and also penetration pricing. These are outlined below.
Price skimming
The principal idea driving price skimming is to make as much cash as possible from the segment of the market which is price-insensitive and will be willing to spend a large amount of money to receive a product or service early on.
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. Makers could set almost any price they wanted to and there would still be a loyal core 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 opposite end of the pricing spectrum, and is tailored towards gaining a large market share at a short-term cost so that financial benefits can be earned long into the future. It can be a risky strategy, but when employed correctly it can setup revenue streams for many years to come.
Yet another thing to keep 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 create or carry out. So it is even more vital to get your pricing strategy right.
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Place
Place is the part of the marketing mix that’s often disregarded by companies, but it’s still a significant part of selling your product effectively. 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 fantastic marketing technique when used correctly.
The most common implications of place-based marketing are the physical locations in which your goods are sold. For the vast majority of consumer products, this includes the distribution network between your manufacturing plants and shops and other outlets around the world. Since distribution of a physical product costs money it is important to determine your own priorities and adjust your distribution network appropriately. This is the primary application of this part of the marketing mix.
With the increasing use of the Internet by your potential customers, marketing methods have had to consider how they use the Internet to help distribute their products. By using the Internet as a point of contact (or even as a complete distribution channel in download-based markets such as MP3s) firms are now able to reach out to a huge pool of possible customers.
Promotion
When you mention the word “marketing”, most people immediately think of the promotional side of the marketing mix, although as we have seen, this is only one branch of a more comprehensive system. Promotion can be used on a very individual basis or as a mass communication tool, and whilst it may be a costly undertaking it is often an essential 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 distributing flyers or leaflets to potential buyers. With the arrival of the information age we have witnessed a great increase in promotion via e-mail and the Internet, or simply as targeted advertising materials posted through your front door.
Another important part of promotion involves branding, which may not necessarily yield more sales directly, but relates back to one of the preliminary purposes of marketing; getting customers to pick your product over those of your rivals. When all other parts of the marketing mix are equal it could be branding that sways a customer’s decision.
Putting it into Practice
As previously mentioned every company is different and will have different marketing requirements. By using a mixture of the four P’s discussed above you can take an effective view of your own marketing strategy.