HOW TO DEVELOP A MARKETING MIX - A CLASSIC 4P CONCEPT
CRITERIA FOR MAIN ELEMENTS
In the previous article, we discussed how technological and societal changes have influenced the evolution of the marketing mix (read here
in detail). In particular, we identified that in modern conditions most elements of the marketing plan or mix should meet the following criteria:
- positive impressions from any interaction with the brand
- contact and interactivity of marketing campaign elements
- personalization of product offerings and actions
- personification of relationships
Taking these criteria into account, let us consider which elements of the marketing mix or marketing plan consists of, and what strategies, approaches, and tools are most effective within each element.
Therefore, the marketing mix, according to the classic 4P concept, consists of four elements, for which companies choose strategies, approaches, or tools to promote their productss or services on the market - Product, Price, Place, Promotion
. PRODUCT Product strategy is a general, non-detailed approach or plan for providing a product with characteristics that, according to the manufacturer, are decisive for achieving the planned level of demand in current competitive conditions on a specific market.
Classically, companies prefer the following product strategies
- Production cost strategy - the simplest strategy that involves creating a product in the most efficient way and attracting consumers with the most competitive price. This strategy is most often used for markets of standardized products that have little difference between them and low consumer loyalty;
- Unique value strategy, which involves a comprehensive analysis of existing market offerings in relation to consumer needs, identification of unmet needs, and creating a product or service with unique characteristics to satisfy those needs.
- Alternative product strategy, which involves creating either an alternative to existing products on standardized markets or a new solution to an old problem for more technological markets;
- Product quality strategy, which involves creating a product of such quality that it surpasses existing competitive offerings by using higher quality raw materials, components, or production equipment;
- Service quality strategy, which involves creating powerful additional advantages in the form of quality service before, during, and after the sale of the product, when the product itself does not differ significantly from competitive offerings;
- Niche strategy, which involves focusing only on a specific limited target audience with clearly defined preferences and needs that are significantly different from the mainstream market;
- Category expansion strategy, which involves creating a fundamentally new product that attracts almost exclusively new consumers to the category of goods.
The list of strategies is not limited to the options mentioned - each company independently determines and formulates its own strategy, possibly even combining or modifying options, based on the market situation at the current moment in time.
It should be noted that in modern realities companies should proceed from the fact that any product strategy must meet the criteria outlined at the beginning of the article. Accordingly, marketers agree that at least two approaches should be applied to product strategy development.
Firstly, consumer perception of the product is not limited to the product itself. Modern consumers consciously or unconsciously consider the entire ecosystem associated with the search, evaluation, selection, and servicing of the product as the product and relate their quality to the quality of the brand as a whole. This is the perception of quality in the modern world. Accordingly, the product strategy should include the development of a high-quality ecosystem that creates positive impressions at all stages, provides easy contact with representatives of the brand, ensures comfortable purchasing, guarantees convenient servicing, and creates prerequisites for further relations with the brand through, for example, an effective loyalty program.
Secondly, in some markets companies should plan their product in such a way as to provide individualization of offers or individualization of consumer actions in response to brand marketing activities. In other words, the brand should provide the consumer with the opportunity for choice to express their individuality. It should be noted that individualization does not mean creating a separate product for each consumer, but creating enough product options, accessories, and actions to ensure the necessary perception of the brand by the consumer. PRICE Price strategy is a general and non-detailed way of setting prices for a product, which a company chooses to achieve its current business goals such as entering a market, maintaining or expanding coverage, or maximizing profit in current competitive conditions in a particular market.
For the absolute majority of consumers, the price of a product reflects its quality. In other words, on the one hand, consumers have a certain idea of the quality of existing products and, accordingly, have an idea of the fair price level for such products. On the other hand, the price of a product is a signal to consumers about the expected quality of products that appear on the market.
However, markets are characterized by different levels of competition, products and even categories are at different stages of the life cycle (remember MP3 players, photo cameras, DVD, VHS), production capabilities can be significant or severely limited, complexity or ease of product copying, seasonality, crop yield, etc. - a huge number of factors that affect the choice of price strategy.
The most important factor that determines the possible set of strategies is the degree of uniqueness of the product. There are three groups of products with corresponding strategies:
- Traditional products with no significant points of differentiation
--- Fair price strategy
, which involves pricing according to the consumer's perception of the quality of the product. This requires constant monitoring of demand and consumer perception to adequately assess the market situation;
--- Aggressive entry or expansion strategy
, where prices are set significantly lower than competitors, even at cost or lower. This is used only temporarily for quick entry into the market or temporary market share growth;
--- Price differentiation strategy
, which involves setting different prices for different market segments. This is used in cases where it is possible to either hide real prices from consumers in different segments or create differences between products for different market segments, or where consumers in different segments are consciously willing to pay different prices;
--- Premium price strategy
, where a product is sold with a high markup that is perceived by consumers as premium in exchange for premium quality, exclusivity or additional service advantages;
--- Constant low price strateg
y, which involves setting low but economically justified prices with a focus on consumers with low purchasing power. Usually, low prices are achieved through lower quality of retail equipment and limited service capabilities.
- Products with strong points of differentiation that are difficult for competitors to overcome
--- Price leadership strategy
, which involves a company's awareness of its own leadership positions in consumer perception due to real or abstract points of differentiation and setting the highest prices on the market with a focus on premium target audiences;
--- Follower strategy
, which involves a company's awareness of the impossibility of overcoming the leader's points of differentiation and being forced to set prices at a discount compared to the leader.
--- The "cream-skimming" strategy
, which involves selling a new product at significantly high prices. This strategy is used in the initial stage of the product life cycle immediately after launching a fundamentally new product that is not yet available on the market in order to maximize profit. The target audience at this stage is small and consists of premium consumers and brand enthusiasts. The product is usually either difficult to copy for technical reasons or protected by a patent, which allows the manufacturer not to worry about the rapid appearance of competitive offers;
--- Maximum coverage strategy
involves launching a new product at low prices in order to capture the maximum market share. This strategy is usually applied when competitors have the ability to relatively quickly copy the product or develop an alternative offer with similar characteristics;
--- Rational profit strategy
is a non-aggressive moderate strategy for covering broad segments of the market, but with an acceptable rate of profitability.
Pricing strategies are not limited to the above-mentioned options. Moreover, pricing strategy is generally a very flexible tool of the marketing mix that can be changed at any time according to market conditions and company decisions.
It should also be noted that even pricing strategies must meet the criteria mentioned at the beginning of the article. First and foremost, this concerns positive consumer experiences with the company's pricing policy. This is why we often see constant carousel discounts on certain products in grocery stores, various personal hygiene kits that cost much less together, progressive discounts depending on the quantity of the product, cashbacks, loyalty programs regarding product prices, and many other pricing policies and strategies that create positive impressions of buying a product at a slightly reduced price.
Personalization of relations with the consumer is also emphasized and strengthened with the help of pricing tools. Let's remember how many individual discounts and offers we have received recently by email or in an app on our phone, how many discounts and congratulations we receive on our birthday. This is how pricing creates positive impressions and supports personalized relationships between the brand and the consumer. PLACE Sales channel strategy is a general plan for distributing a company's product through selected sales channels in current competitive conditions in defined market.
Structurally, sales channels are divided into direct and indirect channels
. Direct channels include sales by the manufacturer directly to the end consumer through their own stores, company website, mobile applications, social media, telephone, mail, and personal meetings, etc. Indirect channels include all possible intermediaries - retail chains and stores, dealers and distributors, etc.
Accordingly, the following sales channel strategies exist:
- Direct sales strategy, where the company does not use intermediaries at all. It is most often used for technically complex goods and services that cannot be sold or provided through an intermediary. For example, dental clinic services or rocket engines - intermediation is not relevant for such types of business;
- Multilevel marketing (MLM) strategy, which involves creating a network of independent sales agents on a commission basis for selling goods. It is most often used in industries where personal product recommendations play a significant role, such as cosmetics, hygiene products, home care, etc.;
- Indirect sales strategy, which involves selling the product only through intermediaries. It is most often used by large FMCG companies through two approaches to interaction with intermediaries - pull and push. Pull approach refers to influencing the end consumer through advertising and other communications to create high demand, which in turn encourages intermediaries to purchase the manufacturer's product. Conversely, product push approach involves only interacting with intermediaries by providing more attractive collaboration terms to encourage them to actively and persistently sell the manufacturer's product.
Each strategy has its own advantages and disadvantages in certain market conditions. The most important issue is the problem of combining direct and indirect sales. Intermediaries always view suppliers who actively use direct sales negatively and try to give preference to those suppliers who exclusively use the strategy of indirect sales. The reason for this is the direct competition between the intermediary and their own supplier, which is considered a situation that needs to be avoided. Therefore, companies that use a combination of direct and indirect sales always try to appease intermediaries by establishing and adhering to recommended retail prices (RRP) for all intermediaries, as well as manufacturers; selling exclusive versions and models of the product to specific intermediaries; special terms of cooperation with regards to payment deadlines, exchange and return of the product; joint advertising and other marketing support, etc.
However, large intermediaries, especially retail chains, often abuse their market power and try to get the most favorable terms of cooperation, sometimes even beyond reason. In such cases, the presence of a direct sales system is one of the arguments for the manufacturer not to become fully dependent on the intermediaries.
Given the criteria at the beginning of the article, in addition to the company's strategy, attention should be paid to the choice of each individual intermediary, since, together with intermediary services, the manufacturer's product partially takes over the intermediary's image, the level of its service, etc. Therefore, if the company cares about positive impressions, accessibility and interactivity, individualization of choice and personalization of relations, then each intermediary must be evaluated according to these criteria before starting cooperation.PROMOTION Promotion strategy is a general, undetailed plan or way of conveying a product's positioning to the consumer through selected communication channels in the current competitive conditions of the defined market.
Promotion strategies are divided into the following types:
- Traditional advertising strategy, which involves using traditional channels such as television, radio, print media, outdoor advertising, etc.
- Direct marketing strategy, which includes such tools as personal meetings and product presentations, phone calls, traditional mailings, referral programs, etc.
- Digital marketing strategy, which includes promoting a product through digital channels using websites and mobile apps, SEO optimization, all types of online advertising, social media pages and their promotion, email marketing, influencer engagement, webinars, etc.
- Point-of-sale promotion strategy, which involves using marketing materials, tastings, master classes, sample giveaways, merchandising of the product when consumers come into direct contact with the product at the point of sale.
- PR strategy, which includes organizing and participating in conferences, exhibitions, seminars, roundtables, and interviews, writing press releases, and using social responsibility marketing methods, etc.
It is very difficult to find a company that uses only one strategy from the above mentioned. Typically, the promotion strategy of most companies is a complex combination of various tools from different strategies, each of which performs a certain task in promoting a certain parity point or differentiation point. A comprehensive promotion strategy using different tools and channels should ensure effective positioning of the brand in the minds of the target audience.
It is also extremely important that all tools pass the test for compliance with criteria for positive impressions, accessibliity and interactivity, individualization of choice and personalization of relationships, as the promotion strategy tools are the very elements of the marketing mix that consumers encounter almost constantly.
Thus, we have considered what the marketing mix of a brand consists of in the classical sense according to the 4P concept. In the next article, we will consider other elements of the marketing mix that have found their reflection in the expansion of the concept to the 8P marketing mix
, and by some enthusiasts, even to the 12P.
Achieving the commercial objectives of a company through effective marketing requires a deep understanding of the market situation, consumer needs, the ability to analyze and explore alternatives, and a creative approach to problem-solving. Our company has extensive experience in defining optimal marketing strategies for our clients' businesses, creating a strong brand and market positioning, as well as developing a marketing mix and implementing the chosen strategy. You can familiarize yourself with the services and solutions our company offers on the "Services
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