When an entrepreneur launches a business, a major focus is usually on developing a marketing strategy which will drive sales and allow the business to thrive. However, some entrepreneurs do not understand what marketing “levers” or tools they have at their disposal in order to drive customers to purchase their product or service. The levers that can be pulled to develop or change your marketing strategy consist of the following: Product, Price, Place and Promotion.
In developing a complete marketing strategy, a business owner needs to make all decisions and changes with one person in mind, the customer. A successful marketing strategy will make orchestrated changes to each of the marketing P's in order to optimize the business’ strategic position within the market. I will now give a brief overview of the four P’s of marketing , and will post future articles addressing each of these four crucial marketing levers in detail.
Product
When deciding what type of product or service to offer you will need to make decisions regarding the specifications of the product, which might include the following:
- Will your product be a premium or more of a base product?
- How complex will your product be?
- What are the specific physical or performance specifications
- Will you bundle your product with complementary products? If so, do you release the complementary products now or later?
The decisions you make with regards to the product specifications, will directly influence the price charged, where the product is sold and how and through which channels it is promoted.
Price
The adjustment of price is one of the easiest marketing levers to adjust, which results in a quick response by the target market. There are many ways to calculate the price of a product or service. Some of the most common are:
- Variable cost + a percent
- Total cost + a percent
- Equal to competitors
- Market skimming
- Market penetration
Each of these pricing strategies will work well under unique market conditions and for specific types of products. However you decide to price a product, there are a couple of key factors that need to be taken into consideration. These are:
- How will the competition react to my pricing strategy?
- Am I covering my fixed and variable costs with this price and therefore will I make a profit?
- Am I out pricing the demand which will result in minimal demand for my overpriced product?
- Am I underpricing demand which will result in lost marginal revenue and make it difficult for my current operations to produce enough to meet demand?
- How will this price impact my other products and services? Am I going to take demand away from other profitable products?
- Will there be any legal considerations when setting this price? (i.e. predatory pricing)
Place
Where you offer your product or service is one of the most crucial decisions to make. As the marketing saying goes, “The 3 most important things in marketing are Location, Location, Location.” When deciding where your product will be offered, you must first ask yourself, “who is my target market and where do they typically shop for my specific product or service?”
In developing a complete marketing strategy, a business owner needs to make all decisions and changes with one person in mind, the customer. A successful marketing strategy will make orchestrated changes to all four in order to optimize the business’ strategic position within the market.
Promotion
The 4th and final P which is critical to success in the market place is promotion. Essentially promotion comes down to “how does my target market know about my product or service?” When thinking about promotions it is important to take into consideration how your target market wants to receive communication. What works for one business or industry might not work well for another. Some of the more popular forms of promotions include:
With all of these options, how can one know which is preferred over another? When determining a promotion strategy, there are a couple of questions that need to be asked:
- What is the most cost effective way to communicate to my target market?
- How will I track the effectiveness of my advertisement?
- How will I calculate an ROI for the money spent on advertising?
- Is there a way to utilize multiple channels in order to communicate a relevant and personalized message to a desired target market?
So there you have it, the 4 P’s of marketing: Product, Price, Place and Promotion. Each of the 4 P’s are critical to marketing success and are interrelated to each other. Remember, when determining your marketing strategy, the focus should be entirely on the end consumer. What type of product do they want to buy? What price are they willing to pay? Where do they shop? and What is the best way to advertise to them?