Almost every business on the planet sets out with the primary objective of making money. This is usually done by producing some form of product, or offering a service, and then charging people money for it.
First of all, it is a very rare case that a business can offer a product or service that is truly unique and cannot be provided 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 customers, who only want to spend their cash once. So how can you boost the chances of them spending money with you?
Marketing is the main tool used by modern firms 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 single 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 start when creating a marketing strategy for your own business? Well, every situation is different, and every company 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 called 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 describe the fundamental building blocks of any marketing system. 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.
The term was later developed 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 quickly relate the elements of marketing to the strengths of their own companies, and by doing so could very quickly form a customised and effective marketing system. The four P’s are Product, Price, Place and Promotion.
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Product
Whilst every element of the marketing mix is a requirement, the “product” element mentioned as one of the four P’s is possibly the most crucial 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 customers are going to spend money with you. If this part is not correctly managed then your company 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 actual product that your company is selling. In fact, the typical train of thought very often bears the exact opposite sentiment. Surely it should be the opposite way around – your production department creates an item for sale and then it is the task of the marketing department to find ways to sell it, right? This is not always the case.
Consider the computer software market as an example. There are many well-known brands of both operating system and software application solutions on the marketplace already, and since the market is fairly well saturated it would be very tough (and expensive) to “take on the big boys”.
Rather than creating an operating system and then trying to craft a marketing strategy to rival the likes of Microsoft and Apple, it would be far 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 products have been fashioned and created it is still a critical skill to be able to objectively review your own products to identify the reasons that 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 customers as possible. Once again, this technique 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 products in an extremely competitive marketplace. Although these companies may have substantial marketing budgets, the same concepts can be applied to all businesses.
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Price
Another important factor in the marketing mix relates to the price of your products or services. This isn’t a simple case of carrying out market research to figure out the top price that your customers would spend (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 goals your company has. The potential advantages of an effective pricing strategy are surprisingly large!
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 customers take into account when they are making a purchase. It is also worth noting that customers do not always consider the lowest 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 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 boost your own profits. From a strategy point of view though, pricing can be covered by two main principals; price skimming and also penetration pricing.
Price skimming
The main idea driving price skimming is to make as much money as possible from the segment of the market which is price-insensitive and are going to be prepared to spend a large amount of money to get a product or service early on. Not only can this approach yield great economic advantages, but it can also advertise an exclusive and high quality image of your product.
This pricing technique is very often 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 geared towards gaining a large market share at a short-term cost so that monetary benefits can be made long into the future. It can be a risky strategy, but when employed correctly it can create revenue streams for many years to come.
Yet another thing to keep 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 vital to get your pricing technique right.
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Place
Place is the portion of the marketing mix that is often overlooked by companies, but it is still a significant part of selling your product effectively. In short, it describes the method in which you provide your product to your customer, and subsequently how you collect money from them. It can be a fantastic marketing technique when used appropriately.
The most typical 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 network between your manufacturing plants and shops or 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 accordingly. This is the principal use of this element of the marketing mix.
With the growing use of the Internet by your prospective customers, marketing techniques have had to take into account how they use the Internet to help distribute their products. By using the Internet as a point of contact (or even as an entire distribution route in download-based markets such as MP3s) companies are now able to reach out to a huge pool of potential customers.
Promotion
When you mention 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 employed on a very individual basis or as a mass communication tool, and whilst it may be an expensive undertaking it is often an essential one. The primary concern of promotion is to deliver a certain message that will boost sales.
Advertising is one of the most common 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 coming 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.
Another significant part of promotion involves branding, which may not necessarily yield more product sales directly, but goes back to one of the preliminary functions of marketing; getting customers to choose your product over those of your competitors.
Putting it into Practice
As previously mentioned each company is different and will have different marketing requirements. By using a mixture of the four P’s reviewed above you can take a good view of your own marketing strategy.