Practically every company on the planet sets out with the primary objective of earning money. This is usually done by manufacturing some form of product, or offering a service, and then charging people money for it.
Firstly, it is a very rare case that 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 item and you will both be trying to earn money from the same customers, who only want to spend their money once. So how can you improve the chances of them spending money with you?
Marketing is the primary tool used by modern businesses to draw prospective customers to do business with them and not with their rivals. It is a very broad topic that is influenced by a great number of internal and external factors, but when done right it can be the one business practice that can make or break a company.
So where should you start when constructing a marketing strategy for your own business? Well, each situation is different, and each business will have its own set of strengths and weaknesses 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.
The Marketing Mix
The marketing mix was a phrase that was first coined in the 1950’s and is a phrase 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 elements of business functions. It got its name because it is similar to the ingredients checklist for a recipe.
The term was later built upon to include the idea 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 swiftly 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 strategy. The four P’s are Product, Price, Place and Promotion.
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Product
Whilst every aspect of the marketing mix is a requirement, 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 offering, and at the end of the day it is the reason that buyers are going to spend money with you.
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 precise opposite sentiment. Surely it should be the opposite way around – your manufacturing department creates a product for sale and then it is the task of the marketing department to find ways to sell it, right? This is not necessarily the case.
Take the computer software market as an example. There are many well-known brands of both operating system as well as software application products in the marketplace already, and because the market is relatively well saturated it would be very 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 trying 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 viable it would be to manufacture and sell them.
Once your products have been designed and created it is still a critical skill to be able to objectively evaluate 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 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 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.
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Price
Another important factor in the marketing mix concerns the price of your products or services. This isn’t a simple case of carrying out market research to figure out the highest 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 objectives your company has.
Whilst it may seem obvious, it is still worth pointing out that price has always been, and probably 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 lowest price to be the best price. In fact a price that is too low can sometimes 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 customers, 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 also penetration pricing.
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 willing 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 market where customers will often eagerly await the launch 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 core 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 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.
Yet 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 portion of the marketing mix that is often overlooked by companies, but it is still an important part of selling your product effectively. In a nutshell, it describes the way in which you provide your product to your customer, and subsequently how you receive money from them.
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 involves the distribution infrastructure between your production centres and retailers and other outlets around the world. Since distribution of a physical product costs money it is important to determine 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 take into account how they use the Internet to help distribute their products. By using the Internet as a place of contact (or even as a whole distribution channel in download-based markets such as MP3s) companies are now able to reach out to a large pool of possible customers. Effective placing of your product or service can therefore yield impressive financial results.
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 merely one branch of a more comprehensive system. Promotion can be employed on a very individual basis or as a mass communication instrument, and whilst it may be a costly undertaking it is often an important one. The key concern of promotion is to deliver a particular message that will increase sales.
Advertising is one of the most typical forms of promotion. Classically 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 witnessed a great increase in promotion via e-mail and the Internet, or simply as targeted advertising materials 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 preliminary functions of marketing; getting customers to pick your product over those of your competitors.
Putting it into Practice
As previously mentioned each business is different and will have different marketing requirements. By using a balance of the four P’s reviewed above you can take a good view of your own marketing plan.