Wednesday, February 27, 2013

The Four P’s of Marketing

First Steps for New Entrepreneurs

There are four critical elements in marketing your products and business. They are the four P’s of marketing.

  1. Product. The right product to satisfy the needs of your target customer.
  1. Price. The right product offered at the right price.
  1. Place. The right product at the right price available in the right place to be bought by customers.
  1. Promotion. Informing potential customers of the availability of the product, its price and its place.
Each of the four P’s is a variable you control in creating the marketing mix that will attract customers to your business.  Your marketing mix should be something you pay careful attention to because the success of your business depends on it.  As a business manager, you determine how to use these variables to achieve your profit potential. 

Product

“Product” refers to the goods and services you offer to your customers. Apart from the physical product itself, there are elements associated with your product that customers may be attracted to, such as the way it is packaged. Other product attributes include quality, features, options, services, warranties, and brand name. Thus, you might think of what you offer as a bundle of goods and services. Your product’s appearance, function, and support make up what the customer is actually buying. Successful managers pay close attention to the needs their product bundles address for customers.

Your product bundle should meet the needs of a particular target market.  For example, a luxury product should create just the right image for “customers who have everything,” while many basic products must be positioned for price conscious consumers.  Other important aspects of product may include an appropriate product range, design, warranties, or a brand name.  Customer research is a key element in building an effective marketing mix.  Your knowledge of your target market and your competitors will allow you to offer a product that will appeal to customers and avoid costly mistakes.

If you are considering starting a new business or adding a new product, then make sure the product bundle will fit your business’s strengths and weaknesses, and that it will provide an acceptable risk/return tradeoff.  For instance, if your business is very good at timely response to customers, then timely service should be an important part of your product bundle.   Think long term about your venture by planning for the ways you can deepen and broaden your product bundle.

For instance, you may be able to take advantage of opportunities to add value through processing, packaging, and customer service.  Other future growth may allow you to offer your product to different customers.  Start-up businesses are most successful when they concentrate their efforts on one product or one market, like a restaurant or a car service center does.  

Later growth may occur in the same location or may be in different geographic regions.  A different type of growth would be a diversification of products, with your business offering related products.  Offering a whole range of products is most successful if the raw materials, production processes, and distribution methods are similar, which means you do not have to acquire new suppliers, skills and equipment, and distribution methods.

Price

“Price” refers to how much you charge for your product or service. Determining your product’s price can be tricky and even frightening. Many small business owners feel they must absolutely have the lowest price around. So they begin their business by creating an impression of bargain pricing. However, this may be a signal of low quality and not part of the image you want to portray. Your pricing approach should reflect the appropriate positioning of your product in the market and result in a price that covers your cost per item and includes a profit margin. The result should neither be greedy nor timid. The former will price you out of the market; pricing too low will make it impossible to grow.

Whatever your price may be, ultimately it must cover your costs, contribute to your image by communicating the perceived value of your product, counter the competition’s offer, and avoid deadly price wars.  Remember, price is the one “P” that generates revenue, while the other three “P’s” incur costs.  Effective pricing is important to the success of your business.

Place

“Place” refers to the distribution channels used to get your product to your customers. What your product is will greatly influence how you distribute it. If, for example, you own a small retail store or offer a service to your local community, then you are at the end of the distribution chain, and so you will be supplying directly to the customer. Businesses that create or assemble a product will have two options: selling directly to consumers or selling to a vendor.

Promotion

“Promotion” refers to the advertising and selling part of marketing. It is how you let people know what you’ve got for sale. The purpose of promotion is to get people to understand what your product is, what they can use it for, and why they should want it. You want the customers who are looking for a product to know that your product satisfies their needs.  To be effective, your promotional efforts should contain a clear message targeted to a specific audience reached via an appropriate channel.

Your target audience will be the people who use or influence the purchase of your product. You should focus your market research efforts on identifying these individuals. Your message must be consistent with your overall marketing image, get your target audience’s attention, and elicit the response you desire, whether it is to purchase your product or to form an opinion. The channel you select for your message will likely involve use of a few key marketing channels. Promotion may involve advertising, public relations, personal selling, and sales promotions.

Final Comment

The four P’s - Product, Price, Place, and Promotion - should work together in your marketing mix. Often, decisions on one element will influence the choices available in others.  Selecting an effective mix for your market will take time and effort, but these will pay off as you satisfy customers and create a profitable business.

Once you have a good marketing mix - the right product at the right price, offered in the right place and promoted in the right way - you will need to continue to stay on top of market changes and adopt your marketing mix as necessary.  Marketing is a part of your venture that will never end.

Stop Working For Others; Start Living On Your Terms

Entertainment Earth

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