Practically every business on the planet sets out with the main 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.
First of all, it is a very rare case where a company can offer a product or service that is genuinely unique and cannot be provided by anyone else. This means that your business will be competing with other businesses that sell a similar product and you will both be trying to earn money from the same shoppers, who only want to spend their money once. So how can you increase the chances of them spending money with you?
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 extensive topic that is influenced by a great deal of internal and external factors, 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 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, each situation is different, and each industry will have its own set of advantages and weak points that must be taken into consideration, but there is a marketing rule that can be applied to almost any corporation to be used as a marketing framework. It is known as the “Marketing Mix”.
The Marketing Mix
The marketing mix was a phrase that was first coined in the 1950’s and is an expression that is used to express the fundamental building blocks of any marketing system. It reflects the fact that marketing is not a straightforward, 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 checklist for a recipe.
The term was later built upon 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 relate the elements of marketing to the strengths of their own organisations, and by doing so could very quickly create a personalised and efficient marketing plan. The four P’s are Product, Price, Place and Promotion.
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Product
Although every element of the marketing mix is a necessity, the “product” element mentioned as one of the four P’s is perhaps 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. If this element is not adequately managed then your organisation will find it hard to survive.
Many people don’t think that marketing has any place to play when it comes to the actual 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 other way around - your manufacturing department creates an item for sale and then it is the task of the marketing department to discover ways to sell it, right?
Consider the computer software market as an example. There are many well-known brands of both operating system and software application products in the marketplace 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 assist in this situation?
Rather than developing an operating system and then trying 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 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 would buy your product rather than a competitors’.
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 currently in the market, or to make your new product attractive to as many customers 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 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 products in an extremely competitive marketplace.
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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 using the price of your products as a strategic tool designed to achieve any particular targets your business has. The potential benefits of an effective pricing strategy are surprisingly large!
Although it may seem obvious, it’s still worth pointing out that price has always been, and likely always will be, one of the crucial 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 value.
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 competitors 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 also 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 willing to spend a premium amount of money to get a product or service early on. Not only can this technique yield excellent financial advantages, but it can also advertise an exclusive and high quality image of your product.
This pricing technique 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 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 other end of the pricing spectrum, and is geared 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 high risk strategy, but when employed correctly it can setup revenue streams for many years to come.
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 create or carry out. So it is even more vital to get your pricing strategy right.
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Place
Place is the portion of the marketing mix that’s often not addressed by companies, but it is still an important part of selling your product effectively. In a nutshell, it describes the method in which you provide your product to your consumer, and subsequently how you receive money from them. It can be a great marketing technique when applied correctly.
The most typical ramifications 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 production centres and retailers and other outlets around the country. Since distribution of a physical product costs money it is important to identify your own priorities and adapt your distribution network appropriately. This is the principal application of this element of the marketing mix.
With the growing 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 point of contact (or even as a complete distribution channel in download-based markets such as MP3s) companies are now able to reach out to a large pool of possible customers.
Promotion
When you say the word “marketing”, most people immediately 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 instrument, and whilst it might be an expensive undertaking it is often an essential one. The primary concern of promotion is to deliver a particular message that will boost 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 witnessed 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 product sales directly, but relates back to one of the initial purposes of marketing; getting customers to choose your product over those of your rivals. When all other pieces of the marketing mix are equal it can be branding that sways a customer’s decision.
Putting it into Practice
As previously mentioned every business is unique and will have different marketing needs. By using a balance of the four P’s reviewed above you can take a good view of your own marketing strategy.