The Fundamentals Of Marketing
Almost every company on the planet sets out with the main 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 genuinely unique and cannot be supplied by anybody else. This means that your company will be competing 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 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 affected by a great number of internal and external variables, but when done right it can be the one business practice that could make or break a corporation.
So where should you start when constructing a marketing strategy for your own business? Well, each situation is different, and every industry 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 known as 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 express the fundamental building blocks of any marketing system. It demonstrates the fact that marketing is not a straightforward, blunt-edged business technique, but rather a delicate balance of different elements of business operations. It got its name because it is similar to the ingredients checklist for a recipe.
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 relate the elements of marketing to the strengths of their own companies, and by doing so could very quickly create a personalised and effective marketing strategy.
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Product
Although every aspect 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 describes the physical product or intangible service that your business will be selling, and at the end of the day it is the reason that buyers are going to spend money with you. If this element is not adequately managed then your organisation will find it hard to survive.
Many people don’t think that marketing has any place 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 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 necessarily the case.
Take the computer software market as an example. There are many established brands of both operating system as well as 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 attempting 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. By being mindful of the marketing mix early on in your product development period you can avoid business dead-ends at a later time.
Once your products have been fashioned and created it is still a critical skill to be able to objectively review 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 is one of the basic skills of the product part of the marketing mix cake.
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.
The motor industry uses this technique very effectively by offering different engines, trim packages and interior options with the cars that they offer. They use the marketing mix to good effect to sell their own goods in an extremely competitive marketplace.
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Price
Another key 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 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 targets your company has. The potential advantages of an effective pricing plan 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 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 price. Actually a price that is too low can often turn customers 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 competitors 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 penetration pricing. These are outlined below.
Price skimming
The main idea behind price skimming is to make as much cash as possible from the sector of the market which is price-insensitive and will be willing to spend a premium amount of money to get a product or service early on.
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. Makers could set nearly any price they wanted to and there would still be a loyal core of customers that would pay it. By using this method as part of a pre-ordering strategy, a firm can help to smooth its own cash flow.
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 risky strategy, but when employed correctly it can setup revenue streams for many years to come. When establishing a price for penetration it is still important to not give a bad impression of your product by aiming for too low a figure.
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 produce or carry out. 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’s often disregarded by companies, but it’s still an important part of selling your product effectively. In short, it describes the way in which you deliver your product to your consumer, and subsequently how you collect money from them. It can be a fantastic marketing approach when used appropriately.
The most common implications of place-based marketing are the physical locations in which your goods are sold. For the majority of consumer products, this involves the distribution network 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 modify your distribution network appropriately. This is the principal use of this element of the marketing mix.
With the increasing use of the Internet by your potential customers, marketing techniques have had to take into account how they use the Internet to help deliver their products. By using the Internet as a place of contact (or even as a complete distribution route in download-based markets such as MP3s) firms are now able to reach out to a huge pool of potential customers.
Promotion
When you say the word “marketing”, most people instantly 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 used on a very individual basis or as a mass communication instrument, and whilst it can be an expensive undertaking it is often an important one. The primary concern of promotion is to deliver a particular message that will boost sales.
Advertising is one of the most typical 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 coming of the information age we have seen a great increase in promotion via e-mail and the Internet, or simply as targeted advertising material posted through your door. The potential for individualised advertising has never been so great.
Another important part of promotion involves branding, which will not necessarily yield more product sales directly, but relates 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 discussed above you can take an effective view of your own marketing strategy.
