26June2010
Product, Price, Place & Promotion
Almost every company on the planet sets out with the main objective of making money. This is generally done by producing 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 that a business can offer a product or service that is genuinely unique and cannot be supplied by anybody else. This means that your company will be competing with other businesses that sell a similar item 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 primary tool used by modern firms to draw potential customers to do business with them and not with their competitors. It is a very broad topic that is influenced by a great deal of internal and external variables, but when done right it can be the single business practice that could make or break a corporation. Any time spent on marketing will reap benefits, although spending this time efficiently can yield extraordinary results.
So where should you begin when constructing a marketing strategy for your own business? Well, each situation is different, and every business 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 express the fundamental building blocks of any marketing strategy. It reflects the fact that marketing is not a simple, blunt-edged business technique, but rather a delicate balance of different aspects 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 quickly associate the elements of marketing to the strengths of their own companies, and by doing so could very quickly form a tailored and effective marketing strategy.
Our company excels in providing Bed Linen and whilst we all believed our marketing plan was adequate we have seen improvements since using marketing mix ideas.
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 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.
Many people do not 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 job of the marketing department to discover ways to sell it, right?
Take the computer software market as an example. There are many established brands of both operating system and software application products in the market already, and since the market is fairly well saturated it would be very tough (and expensive) to “take on the big boys”. So how can 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 and Apple, it would be more effective to look at what types of product are desired in the current marketplace, and how feasible it would be to produce and sell them.
Once your products have been designed and created it is still a critical skill to be able to objectively review your own products to recognise the reasons that a customer would buy your product rather than a competitors’.
A different 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 currently in the market, or to make your 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 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 products in an incredibly competitive marketplace. Although these companies may have huge marketing budgets, the same concepts can be applied to all businesses.
“Product is paramount” is one of the main slogans applied within our chees graters organisation that tries to remind all employees that we expect top quality production.
Price
Another important factor in the marketing mix concerns the price of your products or services. This is not a simple case of carrying out market research to determine the highest price that your customers would pay (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 targets your business has. The potential advantages of an effective pricing strategy are surprisingly large!
Whilst 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 cheapest price to be the best price. In fact a price that is too low can sometimes turn customers away.
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 maximise your own profits. From a strategy point of view however, 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 cash as possible from the sector of the market which is price-insensitive and are going to be prepared to spend a premium amount of money to receive a product or service early on. Not only can this technique yield excellent economic 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 market where customers will often eagerly await the launch of a new mobile phone or computer games console. Makers 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 monetary benefits 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. So it is even more essential to get your pricing technique right.
Grabbing any of the on-line search market is extremely beneficial, so pick a term, just like helium ballons then assess if that phrase has an adequate search market for your needs.
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 successfully. In a nutshell, it describes the way in which you deliver your product to your consumer, and subsequently how you receive money from them.
The most common ramifications of place-based marketing are the physical locations in which your products are sold. For the majority of consumer products, this includes the distribution network between your production centres and shops and other outlets around the world. Since distribution of a physical product costs money it is important to determine your own priorities and adjust your distribution network accordingly.
With the increasing use of the Internet by your prospective customers, marketing strategies 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 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 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 comprehensive system. Promotion can be employed on a very individual basis or as a mass communication instrument, and whilst it can be an expensive undertaking it is often an essential one.
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 handing out 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 just as targeted advertising material posted through your door.
Another significant part of promotion involves branding, which will not necessarily yield more product sales directly, but goes back to one of the initial functions of marketing; getting customers to pick your product over those of your rivals.
Putting it into Practice
As previously mentioned each company is unique 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.