Marketing is a very complex concept that involves a detailed process. The types of strategies for marketing focus on a target audience and are directly related to what is known as the 4 P’s of the Marketing Mix.
The Marketing Mix has been defined by many as the controllable variables a company puts together to satisfy its target market… If any parts of a Marketing Mix get out of balance, the target market will be insufficiently served. This model of the Marketing Mix was first introduced by Neil Borden when he published his 1964 article, “The Concept of the Marketing Mix.” Borden had first started using the phrase in 1949 and claimed that it came to him while reading a book by James Culliton on the activities of a business executive (netmba.com, 2009). The 4 P’s that the Marketing Mix consists of are product, place, promotion, and price.
The term product refers to tangible, physical products, as well as to services. A lot of thought and preliminary research goes into the type of product a company will manufacture, including product specifications, design, and production of the unit. The biggest concern for a business is that they are able to introduce their product at the appropriate time, when the consumer’s needs are greatest. A product will generally go through a life cycle, much like a human life cycle, consisting of four different stages: introduction, growth, maturity, and decline. After the developmental period, a product is introduced or launched into the market. At this stage, the need for immediate profit is not a pressure; the product is promoted to create awareness. In the growth stage, competitors are attracted into the market with very similar offerings.
Products become more profitable and companies may form alliances, joint ventures, or take each other over. The money spent on advertising is high and its focus is on building brand recognition. In the maturity stage, sales will grow at a decreasing rate and then stabilize. Producers will try to differentiate products and brands, while price wars and intense competition will occur. At the decline stage, there is a downturn in the market where there is intense price-cutting and many more products are withdrawn from the market. Profits can be improved by reducing the amount spent on marketing and product promotion. However, very few products follow such a prescriptive cycle. The length of each stage varies enormously and not all products will go through all stages (Lamb, Hair, & McDaniel, 2005).
Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual stores on the Internet. Place is also an important part of marketing. The product or service needs to be accessible to customers, especially its target market. Often times there are no need for an actual store location, as many very successful companies offer just online services or products. In these instances, products or services are much more convenient and cheaper to the customer because of the lower overhead costs.
Promotion represents all of the communications that a marketer may insert into the marketplace. This can include TV, radio, and print advertising, as well as coupons, direct mail, billboards, and online advertising. Often times we think of marketing as just the promotion or sales part, but the other 3 factors are often times just as important, if not more important. Promotion is the advertising of the actual product or service. One must consider who the audience is and what the best way is to target them. This could include television advertisements, radio advertisements, mailing and so on. There is no one best way to advertise, it really depends on the product and its audience. This is a very important aspect of marketing, and often times a good or bad promotional campaign can make or break a product or service (Perreault, Jr. & McCarthy,2005).
The final P in the marketing mix is Pricing, which is the most difficult element to determine. A Company’s requirement for net income and its objectives for long-term market control mostly influence a pricing strategy. In addition to the primary goal of making money, a company can have many different pricing objectives and strategies. Larger companies may utilize product pricing in a predatory or defensive fashion, to attack or defend against a competitor. If a product is of premium quality and has unique features and benefits, a premium price may be necessary to reinforce the premium brand image.
High prices confirm perceptions of high values in consumer minds. A good pricing strategy will also indicate guidelines for action in the case of price increases or decreases (managementhelp.com, 2009). A company may want to consider temporarily delaying necessary price increases driven by supplier and ingredient price increases, and instead, take affordable, smaller profit margins. If competitors are increasing prices and one company decided not to, this could be a temporary advantage for that company since sales volume may increase.
To set the best price for a product, a company will need to review the essentials of their business with an eye as to how they will affect price. A company must know their customer base, because the better a company understands the wants, needs, beliefs, and values of its’ customers, the easier it will be to accurately price their product. A company will then need to assess their competition and see how their product relates to those similar offerings. Next, a company will need to determine their production costs and develop a marketing plan, both for short and long-term. Distribution costs must be factored into the final price of the product, as well. Once these elements are considered, a pricing strategy can be more easily determined.
One very successful company that utilizes the 4 Ps of marketing extremely well is Netflix. The company almost singlehandedly brought its competitors to their knees. These companies, including Blockbuster have since recovered and began offering a similar service, but Netflix had the marketing plan in place and rolled it out so efficiently that it really caught its competitors by surprise.
Netflix is a little tricky when it comes to the product. It offers the service of movie rentals, but in a more convenient way than the traditional movie rental stores such as Blockbuster or Hollywood Video. In 1999, Netflix came up with an online movie subscription with no late fees. This gave people the convenience of receiving the movies they wanted to see right in their mailbox. No longer did you have to search through the isle for a movie that was already rented out.
Netflix does not offer a place where a customer can come pickup his or her order, instead everything gets conveniently shipped to each customer via United States Postal Service. This makes it convenient for just about anyone to use because there does not have to be a local store or shipping location around. Customers are able to place orders right online, which is a convenient and private way to pick the DVDs that they desire to view.
The promotion of Netflix was primarily done through television advertisements. They targeted television watchers, who for the most part also watch movies. Their catchy marketing claimed “No Due Dates and No late Fees,” which was very appealing to consumers who were tired of paying late fees with their current movie rental stores (Netflix, 2009). It also offered the convenience of “No shipping or handling charges,” which made it just as competitive as the other places.
The prices that Netflix charges its customers are very competitive to the current market of DVD rentals. They have different options to suit different needs. According to their website, they have a plan starting as low as only $4.99 per month. This plan allows viewing of up to 5 movies. For customers who want to watch more movies per month, they offer other plans also, such as the $17.99 a month plan that allows 3 movies to be out at a time. Once one movie is returned, another is sent out in its place. These different plans offer a wide variety of choices to fit different budgets.
Marketing is an important element for any business. By analyzing the four Ps of product, price, place, and promotion, an organization can achieve a successful marketing campaign. Whether the business is a small mom and pop organization or a major corporation, marketing can play an important role in its success. Understanding the marketing mix will put an organization on the road toward success and profitability.
http://www.netmba.com/marketing/mix/. Retrieved June 8, 2009.
http://www.managementhelp.org/mrktng/pricing/pricing.htm. Retrieved June 5, 2009.
Lamb, Charles W., Hair, Joseph F., & McDaniel, Carl. (2005). Essentials of Marketing (4th ed.). Mason, Ohio: South-Western.
Perreault, Jr., William D., & McCarthy, E. Jerome. (2005). Basic Marketing (15th ed.). New York: McGraw-Hill, Irwin.
http://ir.netflix.com/. Retrieved June 6, 2009.