The Fundamentals Of Marketing
Posted on March 9th, 2010 by admin
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 customers money for it. This fundamental theory is fairly straight-forward, although it contains many intricate details.
First of all, 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 company will be contesting 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 money once. So how can you improve the chances of them spending money with you?
Marketing is the main 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 number of internal and external factors, but when done well it can be the single business practice that can make or break a corporation. Any time spent on marketing will reap benefits, although spending this time correctly can yield extraordinary outcomes.
So where should you begin when creating a marketing strategy for your own company? Well, every situation is different, and every business will have its own set of advantages and flaws 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 framework. It is called the “Marketing Mix”.
The Marketing Mix
The marketing mix was a phrase that was first coined during the 1950’s and is an expression 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 tool, but rather a delicate balance of different aspects of business functions. It got its name since it is similar to the ingredients list for a recipe.
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 business managers and marketers to quickly associate the elements of marketing to the strengths of their own organisations, and by doing so could very quickly create a tailored and effective marketing plan. The four P’s are Product, Price, Place and Promotion.
When we were planning the release for our own diamond grinding range we applied concepts in the marketing mix to create a plan.
Product
Whilst every aspect of the marketing mix is a necessity, 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 customers are going to spend money with you. If this element is not correctly managed then your company will find it hard to make it through.
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 a product for sale and then it is the task of the marketing department to find ways to sell it, right? This is not always the case.
Consider the computer software market as an example. There are many established 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”.
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 feasible it would be to produce and sell them. By being aware of the marketing mix early on in your product development period you can avoid business dead-ends at a later stage.
Once your products have been designed and created it is still a vital skill to be able to objectively review your own products to identify 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 called product variation and is typically used to either extend the lifecycle of a product already in the market, or to make your new product attractive to as many customers as possible. Once again, this method can be applied at all stages of product development.
The car industry uses this approach 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 products in an extremely competitive marketplace.
One quick and easy way to recognise numerous stockists of great mod clothing that carry out marketing and advertising effectively is to simply think of brand names connected to a certain industry.
Price
Another key factor in the marketing mix concerns the price of your products or services. This is not a simple case of performing market research to figure out the top price that your customers would pay (although that can be a handy tool to use), but rather making use of the price of your products as a strategic weapon designed to achieve any particular goals your company has.
Although it may seem obvious, it is still worth noting 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 do not constantly consider the cheapest price to be the best price.
There are many questions that you need to ask yourself when devising a good pricing strategy, key among which are the price sensitivity of your customers, what your rivals are doing and how can pricing maximise 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 principal 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 willing to spend a large amount of money to receive a product or service early on.
This pricing technique is frequently 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 core of customers that would pay it.
Penetration pricing
Penetration pricing is at the opposite end of the pricing spectrum, and is geared towards gaining a large market share at a short-term cost so that financial benefits can be made 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 poor impression of your product by aiming for too low a figure.
Another thing to bear in mind is that “price” is the only part of the marketing mix that will generate income for a business. The other members of the four P’s will all cost money to produce or carry out.
Before our company started studying online marketing regarding plumbing apprenticeships there didn’t seem the clear choice of keyword to use as our primary focus.
Place
Place is the part of the marketing mix that is often not addressed by companies, but it is still a significant part of selling your product successfully. In a nutshell, it describes the way in which you provide your product to your customer, and subsequently how you collect money from them.
The most typical ramifications of place-based marketing are the physical venues in which your goods are sold. For the vast majority of consumer products, this includes the distribution infrastructure between your manufacturing plants and retailers or other outlets around the country. Since distribution of a physical product costs money it is important to identify your own priorities and modify your distribution network accordingly.
With the increasing use of the Internet by your prospective customers, marketing strategies have had to consider how they use the Internet to help deliver their products. By using the Internet as a point of contact (or even as a complete distribution channel in download-based markets such as MP3s) companies are now able to reach out to a huge pool of potential customers.
Promotion
When you mention the word “marketing”, many people instantly think of the promotional aspect of the marketing mix, although as we have seen, this is only one branch of a more comprehensive 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.
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 distributing 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 materials posted through your front door. The potential for individualised advertising has never been so good.
Another significant part of promotion involves branding, which may not necessarily yield more product sales directly, but goes back to one of the preliminary purposes of marketing; getting customers to choose your product over those of your rivals. When all other parts of the marketing mix are equal it could be branding that sways a customer’s decision.
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 an effective view of your own marketing strategy.