Practically 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 people money for it. This fundamental theory is fairly straight-forward, though it contains many intricate 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 supplied 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.
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 right it can be the one business practise that could make or break a corporation.
So where should you start when constructing a marketing strategy for your own company? Well, each situation is different, and each company 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 platform.
The Marketing Mix
The marketing mix was a phrase that was first coined during the 1950′s and is a phrase that is used to express the fundamental building blocks of any marketing system. It reflects the fact that marketing is not a simple, blunt-edged business technique, but rather a subtle balance of different elements of business operations.
The term was later developed to include the concept of “four P’s” that described the essential elements of the marketing mix. The formalisation of these P’s made it very clear for company 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 plan.
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Product
Although every aspect 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 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 adequately managed then your organisation will find it hard to make it through.
Several people don’t think that marketing has any place to play when it comes to the physical product that your business is selling. In fact, the typical train of thought very often bears the exact opposite sentiment. Surely it should be the other 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? This is not necessarily the case.
Consider the computer software market as an example. There are many established brands of both operating system and software application products in the marketplace already, and since the market is relatively well saturated it would be very tough (and expensive) to “take on the big boys”. So how can the principles of the marketing mix help in this circumstance?
Rather than creating an operating system and then trying to craft a marketing strategy to take on the likes of Microsoft or Apple, it would be far 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 mindful of the marketing mix early on in your product development period you can prevent business dead-ends at a later stage.
Once your products have been designed and created it is still a critical skill to be able to objectively review your own products to recognise the reasons why a customer would buy your product rather than a competitors’. The skill is called product differentiation and is one of the fundamental skills of the product part of the marketing mix cake.
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 already in the market, or to make your brand new product attractive to as many customers as possible. Once again, this method can be applied at all stages of product development.
The motor 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 great effect to sell their own goods in an extremely competitive marketplace.
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Price
Another key factor in the marketing mix concerns the price of your products or services. This isn’t a simple case of performing market research to determine 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. 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 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 always consider the cheapest 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 when devising a good pricing plan, key amongst which are the price sensitivity of your clients, what your rivals are doing and how can pricing maximise your own profits. From a strategy point of view though, pricing can be covered by two main principals; price skimming and penetration pricing. These are outlined below.
Price skimming
The main idea behind price skimming is to make as much money as possible from the sector of the market which is price-insensitive and will be prepared to spend a premium amount of money to receive a product or service early on. Not only can this approach deliver excellent 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 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 base of customers that would pay it.
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 rewards can be made 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.
Another thing to bear 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 create or carry out.
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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 effectively. In short, it describes the method in which you deliver your product to your consumer, and consequently how you receive money from them. It can be a great marketing approach when applied correctly.
The most common implications 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 manufacturing centres and shops and other outlets around the world. Since distribution of a physical product costs money it is important to identify your own priorities and alter your distribution network accordingly.
With the increasing use of the Internet by your prospective 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 whole distribution route in download-based markets such as MP3s) firms are now able to reach out to a huge pool of potential customers. Effective placing of your product or service can therefore deliver impressive financial 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 used on a very individual basis or as a mass communication tool, and whilst it can be an expensive undertaking it is often an important one. The primary concern of promotion is to deliver a specific message that will improve sales.
Advertising is one of the most common forms of promotion. Classically it would be done by posting on billboards, creating 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 seen a great increase in promotion via e-mail and the Internet, or just as targeted advertising material posted through your door.
Another important part of promotion involves branding, which will not necessarily yield more product sales directly, but goes back to one of the initial functions of marketing; getting customers to pick your product over those of your rivals.
Putting it into Practise
As previously mentioned every business is unique and will have different marketing needs. By using a mixture of the four P’s reviewed above you can take an effective view of your own marketing strategy.