Business Strategy: Marketing
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 customers money for it.
Firstly, it is a very rare case that a company can offer a product or service that is truly unique and cannot be provided by anybody else. This means that your enterprise will be contesting with other businesses that sell a similar item and you will both be trying to earn money from the same customers, who only want to spend their cash once. So how can you increase the chances of them spending money with you?
Marketing is the main tool used by modern businesses 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 number of internal and external factors, but when done right it can be the one business practice that could make or break a company. Any time spent on marketing will reap rewards, although spending this time efficiently can yield extraordinary outcomes.
So where should you begin 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 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.
The Marketing Mix
The marketing mix was a term that was first coined during the 1950’s and is a phrase that is used to express the fundamental building blocks of any marketing strategy. It demonstrates the fact that marketing is not a straightforward, blunt-edged business tool, but rather a subtle balance of different elements of business functions.
The term was later built upon to include the concept of “four P’s” that described the critical elements of the marketing mix. The formalisation of these P’s made it very clear for company managers and marketers to swiftly associate the elements of marketing to the strengths of their own organisations, and by doing so could very quickly form a tailored and effective marketing system. The four P’s are Product, Price, Place and Promotion.
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Product
Although every element of the marketing mix is a requirement, the “product” element mentioned as one of the four P’s is perhaps 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.
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 precise opposite sentiment. Surely it should be the opposite 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? This is not always the case.
Take the computer software market as an example. There are many well-known brands of both operating system as well as software application products in the market already, and since the market is fairly well saturated it would be incredibly tough (and expensive) to “take on the big boys”. So how can the principles of the marketing mix assist in this circumstance?
Rather than creating an operating system and then attempting to craft a marketing strategy to rival the likes of Microsoft and Apple, it would be more effective to look at what sorts of product are sought after in the current marketplace, and how viable it would be to produce and sell them. By being mindful of the marketing mix early on in your product development cycle you can prevent business dead-ends at a later time.
Once your goods have been fashioned and created it is still a vital skill to be able to objectively evaluate your own products to identify the reasons that a customer would buy your product rather than a competitors’. The technique is called product differentiation and is one of the fundamental skills of the product part of the marketing mix cake.
A different 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 customers as possible. Again, this technique can be applied at all stages of product development.
The car industry uses this technique 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. Although these companies may have huge marketing budgets, the same concepts 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 carrying out market research to figure out the highest price that your customers would spend (although that can be a useful tool to use), but rather using the price of your products as a strategic tool designed to achieve any specific targets your business has. The potential advantages of an effective pricing plan are surprisingly large!
Although it may seem obvious, it’s still worth noting that price has always been, and probably 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 always consider the lowest price to be the best price. In fact 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 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 however, pricing can be covered by two main principals; price skimming and penetration pricing.
Price skimming
The principal idea behind price skimming is to make as much money as possible from the sector of the market which is price-insensitive and will be willing to spend a large amount of money to receive a product or service early on. Not only can this approach deliver great financial advantages, but it can also promote an exclusive and high quality image of your item.
This pricing technique 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. Manufacturers could set nearly 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 firm 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 made long into the future. It can be a risky strategy, but when used correctly it can create revenue streams for many years to come. When setting a price for penetration it is still essential to not give a bad impression of your product by aiming for too low a figure.
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 produce or undertake.
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Place
Place is the part of the marketing mix that’s often overlooked by companies, but it’s still a significant part of selling your product effectively. In a nutshell, it describes the way in which you provide your product to your consumer, and consequently how you collect money from them.
The most typical ramifications of place-based marketing are the physical locations in which your products are sold. For the vast majority of consumer products, this involves the distribution infrastructure between your production centres and retailers or other outlets around the world. Since distribution of a physical product costs money it is crucial to identify your own priorities and alter your distribution network accordingly. This is the primary use of this part 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 whole distribution route in download-based markets such as MP3s) companies are now able to reach out to a large pool of possible customers. Effective placing of your product or service can therefore yield impressive financial results.
Promotion
When you mention the word “marketing”, most people immediately 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 tool, and whilst it might be a costly undertaking it is often an essential one. The key concern of promotion is to deliver a particular message that will increase sales.
Advertising is one of the most typical 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 seen a great increase in promotion via e-mail and the Internet, or simply as targeted advertising materials posted through your front door. The potential for individualised advertising has never been so great.
Another significant part of promotion involves branding, which will not necessarily yield more sales directly, but relates back to one of the preliminary purposes of marketing; getting customers to pick your product over those of your competitors.
Putting it into Practice
As previously mentioned every company is different 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.