Product, Price, Place & Promotion
Practically every company on the planet sets out with the primary 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.
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 anyone else. This means that your company will be contesting 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 money once.
Marketing is the primary tool used by modern businesses to draw prospective customers to do business with them and not with their competitors. It is a very broad topic that is affected by a great deal of internal and external variables, but when done well 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 start when creating a marketing strategy for your own business? Well, every situation is different, and each industry will have its own set of strengths and flaws that must be taken into consideration, but there is a marketing principle that can be applied to almost any corporation to be used as a marketing framework.
The Marketing Mix
The marketing mix was a phrase that was first coined in the 1950’s and is a phrase that is used to express the fundamental building blocks of any marketing strategy. It reflects the fact that marketing is not a straightforward, blunt-edged business tool, but rather a subtle balance of different aspects of business functions. It got its name because it is similar to the ingredients list for a recipe.
The term was later developed to include the concept 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 swiftly relate the elements of marketing to the strengths of their own organisations, and by doing so could very quickly form a personalised and effective marketing plan. 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 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 customers are going to spend money with you. If this part is not adequately managed then your company will find it hard to survive.
Many people don’t think that marketing has any role to play when it comes to the actual product that your company 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 a product for sale and then it is the job of the marketing department to find 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 solutions on the market already, and because 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 assist in this circumstance?
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 far 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 period you can prevent business dead-ends at a later stage.
Once your goods have been designed and created it is still a vital skill to be able to objectively review your own products to recognise the reasons that a customer should buy your product rather than a competitors’. The skill is called product differentiation and forms one of the basic 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 extend the lifecycle of a product currently in the market, or to make your brand new product attractive to as many consumers as possible.
The motor industry uses this technique very effectively by offering various engines, trim packages and interior options with the cars that they sell. They use the marketing mix to great effect to sell their own goods in an extremely 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 important 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 determine 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 specific goals your business has.
Whilst it may seem obvious, it’s still worth noting that price has always been, and probably 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 lowest price to be the best price.
There are many questions that you need to ask yourself while devising a good pricing plan, key among which are the price sensitivity of your clients, 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 behind 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 get a product or service early on.
This pricing technique 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. Manufacturers 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 money 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 made long into the future. It can be a risky strategy, but when employed correctly it can create revenue streams for many years to come. When setting a price for penetration it is still critical to not give a bad impression of your product by aiming for too low a number.
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 is often disregarded by companies, but it’s still a significant part of selling your product successfully. In short, it describes the method in which you deliver your product to your customer, and subsequently how you receive money from them. It can be a great marketing approach when applied correctly.
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 infrastructure between your manufacturing plants and shops and other outlets around the world. Since distribution of a physical product costs money it is crucial to determine your own priorities and adjust your distribution network accordingly. This is the primary application of this element of the marketing mix.
With the increasing use of the Internet by your prospective customers, marketing methods 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 an entire distribution route in download-based markets such as MP3s) firms are now able to reach out to a large pool of potential customers. Effective placing of your product or service can therefore deliver impressive economic results.
Promotion
When you say the word “marketing”, many people immediately 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 employed on a very individual basis or as a mass communication tool, and whilst it can be a costly undertaking it is often an important one. The key concern of promotion is to deliver a certain message that will boost 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 handing out flyers or leaflets to potential customers. 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 materials 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 choose your product over those of your rivals. When all other parts of the marketing mix are equal it can be branding that sways a customer’s choice.
Putting it into Practice
As previously mentioned each company is different and will have different marketing requirements. By using a balance of the four P’s discussed above you can take an effective view of your own marketing strategy.