Almost every company 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. This fundamental principle is fairly straight-forward, though it contains many specific details.
First of all, it is a very rare case where a business can offer a product or service that is genuinely unique and cannot be provided by anybody else. This means that your business 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 money once.
Marketing is the main tool used by modern organisations to draw potential customers to do business with them and not with their rivals. It is a very extensive topic that is influenced by a great number of internal and external variables, but when done well it can be the single business practise that could make or break a corporation.
So where should you start when constructing 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 during the 1950′s and is a phrase that is used to describe 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 delicate balance of different elements of business operations.
The term was later developed to include the idea 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 quickly associate the elements of marketing to the strengths of their own organisations, and by doing so could very rapidly create a tailored and effective marketing strategy.
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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 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 correctly managed then your organisation will find it hard to survive.
Several people do not think that marketing has any place 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 exact opposite sentiment. Surely it should be the other way around – your production 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 solutions on the marketplace already, and since the market is relatively 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 circumstance?
Rather than developing an operating system and then trying to craft a marketing strategy to take on the likes of Microsoft or Apple, it would be more effective to look at what sorts of product are sought after in the current marketplace, and how feasible it would be to produce and sell them.
Once your goods have been designed and created it is still a vital skill to be able to objectively evaluate 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 basic skills of the product part of the marketing mix cake.
A different form of this part of the marketing mix is called product variation and is generally 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.
The car industry uses this approach very effectively by offering different engines, trim packages and interior options with the cars that they sell. They use the marketing mix to good effect to sell their own goods in an incredibly competitive marketplace. Whilst these companies may have substantial marketing budgets, the same principles 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 isn’t a simple case of performing market research to figure out the top 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 tool designed to achieve any particular goals your business has.
Whilst it may seem obvious, it’s still worth noting 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 cheapest price to be the best value.
There are many questions that you need to ask yourself when devising a good pricing plan, key among 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 primary principals; price skimming and penetration pricing. These are outlined below.
Price skimming
The main 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 get a product or service early on. Not only can this technique deliver great financial advantages, but it can also advertise an exclusive and high quality image of your item.
This pricing strategy is very often 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 almost 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 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 high risk strategy, but when employed correctly it can setup revenue streams for many years to come.
Yet another thing to keep in mind is that “price” is the one 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 undertake.
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Place
Place is the portion of the marketing mix that’s often disregarded by companies, but it’s still a significant part of selling your product effectively. In short, it describes the way in which you provide your product to your consumer, and consequently how you receive money from them.
The most common ramifications of place-based marketing are the physical venues in which your products are sold. For the vast majority of consumer products, this involves the distribution network between your production plants and retailers and other outlets around the world. Since distribution of a physical product costs money it is crucial to identify your own priorities and adjust your distribution network appropriately.
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 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 mention the word “marketing”, most people instantly think of the promotional side of the marketing mix, although as we have seen, this is only one branch of a more complete system. Promotion can be employed on a very individual basis or as a mass communication instrument, and whilst it might be a costly undertaking it is often an important one. The key 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, producing 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 just as targeted advertising materials posted through your front door.
Another significant part of promotion involves branding, which may not necessarily yield more sales directly, but relates back to one of the initial functions of marketing; getting customers to pick your product over those of your competitors.
Putting it into Practise
As previously mentioned each business is different 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 plan.