Whether you follow the 4Ps classically used to define your marketing mix or 7Ps or 5 Ps or 4 Es or any of the newer attempts to define the internal decisions faced as businesses plan future actions, using a marketing mix strategy guarantees profits for your business.
What is the marketing mix?
The marketing mix using 4Ps, as shown above, is an organizational tool used for strategic planning. To back up a little, marketing strategy involves both external elements that act on the operation and impact the success of your actions, such as the economy and consumer tastes, and internal elements controlled by the organization and combined in a way that maximizes profits. Hence, whatever construction of the marketing mix works best to guide your planning is the “best” marketing mix to use in developing strategy.
The reason the 4Ps survived through the years is their focus on the major decision areas available to marketers as they plan for future activities. I could waste time discussing why this construction is better, but it doesn’t really matter, so let’s just use that construction as we discuss building a marketing mix strategy.
Building a marketing mix strategy
Let’s start by stepping back to look at the definition of marketing. According to the definition of marketing accepted by the American Marketing Association in 2017:
Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
Inherent within this definition are the 4 Ps: product, price, promotion, and place (distribution). At the center of the definition is value for the stakeholders of an organization, namely its customers, partners (including employees), and society.
Thus, a marketing mix strategy recognizes that marketing is so much more than just advertising. In fact, all the advertising tactics, such as digital, broadcast, direct, and public relations, are only 1 element of the marketing mix — namely promotion. And, face it, that isn’t the only tool in the marketing box.
In fact, without a good product that’s available at the right price, right place, and right time, no amount of promotion will sell your products.
Let’s take a look at each of the elements making up the marketing mix and how using that tool in your marketing strategy guarantees profits for your business.
We could start anywhere, but I chose to start with the product element of the marketing mix.
When marketers talk about product, they mean both physical products, which we call goods, and service products, which are intangible. Now, strategies differ between goods and services, but today we’ll talk about marketing products, in general.
Marketing mix strategy for product involves creating products that solve problems for consumers since we know consumers buy solutions not products. Let’s take a moment to think about what that means.
Needs versus wants
Do you need a steak? No, but if you’re hungry (problem) you need food (solution). We talk about these as needs and you need food. As a matter of fact, food is an essential need and you’ll die without food for a week. But, long before you die of starvation, your body lets you know is an increasingly aggressive way, that you need food.
Maybe you WANT steak? Yeah, because they’re really yummy, unless you’re a vegetarian.
The difference between wants and needs is critical for marketing. People innately need things and there’s little we, as marketers, can do about needs. Our realm is wants. Our role is to create products that not only solve problems but do it in a way that consumers (at least some group of them) think is better than other solutions.
To follow our analogy through, as a vegetarian, you may want tofu to solve your hunger need, while another consumer may prefer steak or chicken.
If you want to know more about groups of consumers, which we call segments, you can read all about it here.
Often, a business develops multiple products, each aimed at a different market segment. For instance, Proctor and Gamble makes different laundry detergent for consumers that want different benefits from their detergent. Tide, for example, is designed for families who get their clothes dirty, while Cheer is designed for working professionals who want to protect their clothes since they spend a lot on them. Importantly, designing products for a particular market segment doesn’t mean you can skimp on minimal standards required by the entire market. So, in our detergent market, we still need to provide safe products that get out normal levels of dirt and odor.
No, cannibalization isn’t some social taboo. Instead, cannibalization is when a product produced by a brand competes with another product they produce — thus taking sales away from each other as consumers divide their purchases among the 2 brands.
So, why would a company do this? I mean, producing 2 products doubles the production costs and advertising costs. Does it make sense to produce 2 products?
In some cases, the answer is YES. If consumer groups actually have different wants, they’re going to choose the brand that meets their wants best. If that’s your product, then, yes, the sales may come from sales you would have made from your other product. However, if they choose a competitor’s product because yours doesn’t meet their wants, you now lost the sale for your product PLUS, you lost the potential sale of a product designed to meet their wants.
Undifferentiated versus differentiated products
Undifferentiated products are those where no significant differences exist. Think produce and you get the idea behind undifferentiated products. The average consumer doesn’t really care whether their banana came from farmer 1 or farmer 2 because they see the bananas as fundamentally the same. Undifferentiated products are difficult to market, as wants and needs intersect. Prices must be the same for all the bananas since consumers don’t care about bananas from different farmers and certainly won’t pay more for one banana over another. Commonly, undifferentiated products are marketed by growers coops or associations designed to promote the consumption of bananas rather than a specific banana.
New product development
You need to think about developing new products so you stay current by satisfying changing consumer wants and needs. Below is a diagram showing how you go about developing new products.
Marketing mix strategy for product
When we think about marketing products, we’re normally thinking about differentiated products such as the detergent example above. Here, we have options for branding our products as somehow different from other brands that satisfy the same need. Now, I have the opportunity to charge a higher price because consumers want my product more than my competitor’s products.
This now leads us to a discussion of price and a major question facing all businesses is, how much should I charge for my product. Charge too high a price and you don’t sell as much product. Charge too little and you’re profits aren’t as good as they might have been. We call this an opportunity cost and it represents money left on the table. Because your price greatly impacts your profits, charging “the right” price is critical to your success.
Sometimes, firms approach pricing as an accounting problem. In other words, you must cover all your costs and make a little profit so you use those numbers to develop your price.
Unfortunately, that ignores the concept of value that real consumers use to determine how much they’re willing to spend. Value is:
measures a product or service’s worth and compares it to its possible alternatives. This determines whether the customer feels like they received enough value for the price they paid for the product/service. [source]
Since not every consumer finds the same worth in a product, we talk about perceived value for a group of consumers. A great example of perceived value is found in the airline industry. A business consumer visiting a customer attributes great value to the airline ticket since they must get to where their customer is to make the sale. Plus, the cost of the ticket is low compared with the benefit of the sale to his/her organization. Then, let’s look at a casual traveler visiting a friend. The cost of the ticket seems pretty high since the benefit of visiting a friend is pretty intangible. Plus, the causal traveler has the option to drive or take a bus so he/ she compares the ticket price against alternatives. If we change the reason for the causal traveler’s visit to one of attending a friend’s wedding or getting to an expensive resort where they’ll lose the fee already paid to the resort and now the perceived value of the ticket goes up.
Hence, pricing decisions must consider the perceived value of a product to a specific target market.
Marketing mix strategy for price
Some firms, just as they develop different products for different target markets, develop different price levels for different target markets. In our airline example, the company charges business travelers a higher price and casual travelers a lower price based on their perceived value. Implementing these differentiated prices is done through rules like Saturday night stays, that make it unappealing to business travelers.
Place is really a little wonky to make it fit within our 4 Ps construction. Place refers to distribution, which refers to everything involved in getting products from one place to the next. Thus place involves:
- channels of distribution
- managing payments between firms in a channel
For many products, distribution is a cost second only to the actual manufacture of the product. Hence, effectively managing your distribution costs means you make more from each sale or can offer products at a lower cost. That’s why megastores like Amazon and Walmart offer products at a lower cost than the local store.
Intensity of distribution
Some products do well when they’re available everywhere. Think about commonly purchased products like milk and bread. You’re not going to drive all over town looking for these products. You want them available everywhere you shop, including grocery stores, convenience stores, and even some department stores, like Target.
Now, compare that with something like an engagement ring. Buy your engagement ring from Target and your girlfriend isn’t likely to be impressed. We have trouble determining which engagement rings are high-quality and which are low-quality, so we figure a jewelry store like Tiffany only stocks high-quality rings so we go there to buy ours.
Channels of distribution
An aspect of digital marketing is the notion that you buy directly from a manufacturer rather than a retailer, thus eliminating the channel and costs associated as each channel member marks up the price, called disintermediation. Disintermediation ignores the fact that someone must perform the roles filled by channel members and those roles inherently involve costs. For instance, you still have to pay to move goods from one place to the consumer, which is much more costly (per item) when you move a few products versus a full truckload. You still have to store goods somewhere after they’re manufactured until consumers buy them and that means you must insure them against loss and move the product around the warehouse. Each of these elements adds cost. Hence, we still use channels of distribution even in a digital world.
Marketing mix strategy for place
In creating your strategy related to place, remember you want to reduce costs while still meeting customer wants in terms of where they want to buy your product.
Since most posts on this site deal with promotion, mostly digital promotion, I won’t take up more time today by going into promotion in depth. Suffice it to say that you must let your market know about your brand, where to get it, and how your product is better for their wants than competing products.