Practically every company on the planet sets out with the primary objective of earning money. This is generally done by producing some form of product, or offering a service, and then charging customers money for it.
Firstly, it is a very rare case that a business can offer a product or service that is genuinely unique and cannot be supplied by anybody else. This means that your enterprise will be competing with other businesses that sell a similar product and you will both be trying to earn money from the same customers, who only want to spend their money once.
Marketing is the primary tool used by modern firms to draw potential customers to do business with them and not with their rivals. It is a very broad topic that is influenced by a great deal of internal and external factors, but when done right it can be the single business practice that can make or break a corporation. Any time spent on marketing will reap rewards, although spending this time correctly can yield extraordinary results.
So where should you begin when creating a marketing strategy for your own business? Well, every situation is different, and every industry 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 company to be used as a marketing framework. It is called the “Marketing Mix”.
The Marketing Mix
The marketing mix was a term that was first coined in the 1950′s and is a phrase that is used to describe the fundamental building blocks of any marketing system. It demonstrates the fact that marketing is not a straightforward, blunt-edged business tool, 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 critical elements of the marketing mix. The formalisation of these P’s made it very easy 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 rapidly form a personalised and efficient marketing system.
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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 perhaps the most critical of all. It describes the physical product or intangible service that your company will be selling, 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 adequately managed then your organisation will find it hard to survive.
Several people don’t think that marketing has any role to play when it comes to the actual 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 other way around – your production department creates a product for sale and then it is the job of the marketing department to discover ways to sell it, right?
Consider the computer software market as an example. There are many established brands of both operating system and software application products 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”.
Rather than creating 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 sought after in the current marketplace, and how feasible it would be to produce and sell them. By being aware of the marketing mix early on in your product development cycle you can prevent business dead-ends at a later stage.
Once your goods have been fashioned and created it is still a critical skill to be able to objectively evaluate your own products to recognise the reasons why a customer would buy your product rather than a competitors’. The technique is called product differentiation and forms one of the fundamental skills of the product part of the marketing mix pie.
Another form of this part of the marketing mix is known as product variation and is typically used to either prolong the lifecycle of a product currently in the market, or to make your brand new product attractive to as many consumers 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 various 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. Although these companies may have huge marketing budgets, the same principles can be applied to all businesses.
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Price
Another key factor in the marketing mix relates to the price of your products or services. This isn’t a simple case of performing market research to figure out the highest 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 weapon designed to achieve any particular targets 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 do not constantly consider the cheapest price to be the best price.
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 customers, 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 penetration pricing. These are outlined below.
Price skimming
The main idea driving price skimming is to make as much cash as possible from the segment of the market which is price-insensitive and will be prepared to spend a large amount of money to receive a product or service early on. Not only can this approach deliver great financial benefits, but it can also promote an exclusive and high quality image of your item.
This pricing strategy is frequently used in the consumer electronics industry 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. By using this method as part of a pre-ordering strategy, a company can help to smooth its own money flow.
Penetration pricing
Penetration pricing is at the other 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 risky strategy, but when used correctly it can setup revenue streams for many years to come.
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 create or undertake.
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Place
Place is the component of the marketing mix that is often overlooked by companies, but it is still an important part of selling your product successfully. In short, it describes the method in which you provide your product to your customer, and consequently how you receive money from them.
The most common implications 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 plants and shops or 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 potential 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 channel in download-based markets such as MP3s) firms are now able to reach out to a huge pool of potential customers. Effective positioning of your product or service can therefore deliver impressive economic results.
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 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 may be an expensive undertaking it is often an essential one.
Advertising is one of the most typical forms of promotion. Typically it would be done by posting on billboards, creating short clips for TV and radio or by physically handing out flyers or leaflets to potential buyers. With the arrival 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 front door.
Another important 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 choose your product over those of your competitors. When all other pieces of the marketing mix are equal it could be branding that swings a customer’s choice.
Putting it into Practice
As previously mentioned each business is unique and will have different marketing needs. By using a balance of the four P’s discussed above you can take an effective view of your own marketing plan.