Almost every company on the planet sets out with the main objective of making money. This is generally done by producing some form of product, or offering a service, and then charging people money for it.
Firstly, it is a very rare case that a company can offer a product or service that is truly unique and cannot be provided by anybody else. This means that your business will be competing with other businesses that sell a similar product 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 firms to draw potential customers to do business with them and not with their competitors. It is a very extensive 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 benefits, although spending this time correctly can yield extraordinary outcomes.
So where should you begin when constructing a marketing strategy for your own company? Well, every situation is different, and every business will have its own set of strengths and weaknesses 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.
The Marketing Mix
The marketing mix was a phrase that was first coined during the 1950’s and is an expression that is used to describe the fundamental building blocks of any marketing strategy. It reflects the fact that marketing is not a straightforward, blunt-edged business tool, but rather a subtle balance of different aspects of business operations.
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 quickly associate the elements of marketing to the strengths of their own companies, and by doing so could very rapidly form a personalised and effective marketing plan. 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 perhaps the most critical of all. It identifies the physical product or intangible service that your company 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 part is not adequately managed then your company will find it hard to survive.
Several 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 common train of thought very often bears the precise opposite sentiment. Surely it should be the opposite way around – your production department creates a product for sale and then it is the job of the marketing department to find ways to sell it, right? This is not always the case.
Take the computer software market as an example. There are many established brands of both operating system as well as software application solutions in the market already, and since the market is fairly well saturated it would be incredibly tough (and expensive) to “take on the big boys”. So how could 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 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 cycle you can prevent business dead-ends at a later time.
Once your goods have been fashioned and created it is still a vital 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’. The technique is called product differentiation and is one of the fundamental 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 typically used to either extend the lifecycle of a product currently in the market, or to make your brand new product attractive to as many consumers as possible.
The car industry uses this technique very effectively by offering different engines, trim packages and interior options with the cars that they sell. 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 companies.
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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 determine the highest price that your customers would pay (although that can be a useful tool to use), but rather using the price of your products as a strategic weapon designed to achieve any particular targets your company has. The potential advantages of an effective pricing plan are surprisingly substantial!
Whilst it may seem obvious, it is still worth pointing out that price has always been, and likely 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 lowest price to be the best price. 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 strategy, key amongst 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 primary principals; price skimming and penetration pricing. These are outlined below.
Price skimming
The principal idea driving price skimming is to make as much cash as possible from the sector of the market which is price-insensitive and will be prepared to spend a large amount of money to receive a product or service early on.
This pricing technique is frequently used in the consumer electronics industry where customers will often eagerly await the launch of a new mobile phone or computer games console. Makers could set nearly any price they wanted to and there would still be a loyal base of customers that would pay it.
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 rewards 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 setting a price for penetration it is still critical to not give a poor impression of your product by aiming for too low a number.
Yet another thing to bear in mind is that “price” is the only 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’s often not addressed by companies, but it’s still an important part of selling your product successfully. In a nutshell, it describes the way in which you provide your product to your consumer, and subsequently how you receive money from them.
The most typical implications of place-based marketing are the physical locations in which your goods are sold. For the vast majority of consumer products, this involves the distribution network between your manufacturing centres and retailers and other outlets around the country. Since distribution of a physical product costs money it is crucial to identify your own priorities and modify your distribution network accordingly.
With the increasing use of the Internet by your potential 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 place of contact (or even as a complete distribution route in download-based markets such as MP3s) firms are now able to reach out to a large pool of possible customers.
Promotion
When you mention the word “marketing”, many people immediately think of the promotional side of the marketing mix, although as we have seen, this is merely 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 may be an expensive 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, producing short clips for TV and radio or by physically distributing 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 simply as targeted advertising materials posted through your door. The potential for individualised advertising has never been so good.
Another important part of promotion involves branding, which will not necessarily yield more sales directly, but goes back to one of the preliminary functions of marketing; getting customers to pick your product over those of your competitors.
Putting it into Practice
As previously mentioned each company is different and will have different marketing needs. By using a mixture of the four P’s discussed above you can take an effective view of your own marketing strategy.