Marketing is one of the most fundamental concepts in business and understanding the basics gives you a greater chance to be successful.
You may have a great product, and provide the best service but without any marketing, none of the other stuff matters.
Regardless of what business/industry you are in, there are four core aspects, you must focus on from a marketing perspective, these are known as the four Ps.
The best part about mastering the basics is that anybody can do it. You don’t need to be a marketing guru, have a degree in marketing, or graphic design knowledge.
What is marketing?
Understanding people and making them happy.
Simple in definition but not so simple in execution. Fortunately, by integrating the four Ps you will learn to understand people and discover ways to make them happy and ultimately get people interested in your business.
Let’s dive in.
Clothes, vehicles, chocolate, books, cell phones, these are all products on the surface. But if we dig deeper a product is actually a dynamic complexity which businesses must understand for marketing success.
To a consumer, a product is nothing more than something that makes them happy. Customers make a purchase and use the product expecting it to benefit them in some way. Businesses must live up to consumer expectations and create a product that creates value for its users.
To create value (and profits), a business must manage the different levels of a product and its life-cycle. In this article, I’ll explain the three product levels and the product life-cycle so you can create a great product and prolong its success.
Three Levels Of A Product
The core value is the main reason customers are purchasing the product, it solves their pain points. The core value is the foundation of any product or service. You must ask yourself “Why do people want to buy this?” Why do people purchase cars? For the looks, maybe. For the brand, maybe. But ultimately people purchase cars as a means of transportation. Travel is the main purpose of a car.
After discovering why people want to buy a product you can start to create one. This includes adding features, creating a brand name, labels, packaging, and deciding product quality. Although consumers purchase products for one core reason, there are smaller factors that may influence a buyer that businesses must be aware of.
Let’s compare two cars, a Toyota and a Rolls Royce. Ultimately people purchase these cars to drive but each product captures a different type of buyer. A Toyota buyer most likely desires a reasonable price whereas a Rolls Royce buyer may be more concerned with brand name and quality. By understanding the actual product you can target the proper audience. Rolls Royce targets people with a lot of money and shows their cars in luxury malls. Do you think Rolls Royce would be successful if they marketed to the average person?
We identified why consumers buy a product and created an actual product but the journey doesn’t end here. There are additional features to be added such as warranties, after-sale service, delivery, and credit. Once again these are additional things that may influence a buyer’s decision to purchase a product. You may offer a product that solves a problem and it may be an amazing product but if you offer no warranty or have terrible customer service your chance for repeat customers is lowered.
My apartment in Bangkok was a great example of an augmented product. The price was a bit higher than the average but the management was amazing. They always smiled, upgraded me to a bigger apartment at no additional cost, and even gave me a gift when I moved out. Because of this, I wouldn’t even think twice about finding a place to live in Bangkok, I would go back in a heartbeat.
Remember, a product may be simple in the eyes of a consumer but a company must realize a product runs much deeper. It’s imperative to solve a problem and use that as the foundation of your product. After that, you can create a unique product and add value through various smaller features that support the core value.
Managing The Product
Now that we understand what a product actually is, we must learn how to manage it. Every product has its moment of greatness and its moment of decline. In order to get the most value from our product, we must change the marketing approach throughout the product life-cycle.
During the introductory phase of a product, not many people know about it so the goal is to make them aware. A good marketing strategy is to offer a trial so consumers have an idea of what is being offered. Typically the product during the introduction phase will be relatively basic and then more features can be added later in the life-cycle. If the product is novel there should be few competitors but the overall profits will be low from the research and development of the product.
People are aware of the product and realize it creates value. The sales number will start to increase but so will the competition. Because of competition, the goal is to maximize the market share and offer more key pieces of the product such as warranties and great customer service. This is where profits are really good because there isn’t too much competition and sales are high. The growth phase should be when the marketing budget is maximized because product awareness is trying to be created on a mass scale.
The product has peaked and profits are at an all-time high but so is competition. The product is recognized in the market and you can now begin to offer different models. The basic KitKat candy bar has been matured for a long time which has caused Nestle to introduce different variants such as green tea (which is delicious by the way).
Because competition is at an all-time high the market share must be defended which means marketing efforts must be made with a focus on product differentiation when compared to the competition.
The glitz and glamour of the product have fallen off in a specific market. In the decline phase sales decrease so the goal is to minimize costs and milk the product. Marketing efforts should be phased out because nobody wants to buy the product anymore, those who do want to buy it are most likely already aware and don’t require marketing to capture. When a product is in the decline phase it is good to enter a foreign market because you can capture a new group of people who view your product in a new way.
A great example of a product in the decline phase is movie discs. It’s incredibly easy and convenient to purchase a movie online with a streaming service such as Netflix or Amazon. The need for discs is declining and thus why you see low prices and no advertisements for them.
Products Are Complex
Now you understand what a product is and how to manage it. As I mentioned before, a product is much deeper than it would initially seem. In order for a business to be successful, it must understand how to make a value-creating product and learn how to manage the marketing efforts based on the stage of the life-cycle.
If You Have A Startup…
Have you created a product that includes all three product levels?
Do you know what stage of the life-cycle your product is in?
What is your strategy to manage your product?
How much would you be willing to pay for a bottle of water? $1, $3, $10? In a convenience store, you can buy Ice Mountain water for $1 or Fiji water for $3, which one do you buy? In a broad sense, you are getting the same thing, a bottle of drinking water.
Yet there are always people willing to spend more money on the same product. You see, price is king. It’s the first thing most consumers think about when making a purchase. Think about it, when you buy something that comes to your mind? Sure you may think about quality and brand name but I guarantee price is the main force driving your decision to make that purchase.
Because the price is such a crucial concept in business, companies must understand how to choose the right pricing strategy. This is especially true for startups because what they are offering is unknown and unproven. So, how can you choose the right price? There are multiple pricing strategies I will talk about but first I want to explain what a price is.
What Is A Price?
A price is a value a consumer is willing to give up in order to gain benefit from a product or service. Whether somebody spends $30 on shoes or $600, they are willing to give up that money to gain a benefit. Everybody is different when it comes to how much they are willing to give up therefore its imperative for companies to understand pricing strategies. Choosing a pricing strategy must not only complement the product being offered, but the target customer must also be considered. So, what are some pricing strategies?
The price is determined based on the costs associated with the product or service you are offering. Perhaps it cost you $50 to make a table and you sell it for $100. You don’t care about competition, you only care about what it cost you to make. This is a very common pricing strategy for startups or new products because they have a desire to be profitable in a less-risky way. Cost-based pricing is easier to measure and control because you are the sole determinant. The price is driven by the product, not the perceived value.
You set the price relative to the competition. It doesn’t matter what your profit margin is or what your product cost is. You sell a product or service to beat out the competition and capture a larger share of the market. You want to use this strategy in the growth and maturity stage of the product life-cycle because that is when the competition is at its highest, the goal is to defend market share.
Think about Coca-cola and Pepsi, both are soft-drinks with large market share and must compete to retain their market. If Pepsi decided to raise the price I guarantee Coke would dominate the industry even more. This strategy is great if you offer a product or service which is similar to the competition. Coke and Pepsi are similar, a fast-food restaurant and a five-star restaurant are completely different.
Price is determined by the customer’s perceived value of the product. This is why people are willing to purchase that $3 bottle of Fiji water compared to a $1 bottle. They believe the value they get from the water is equal to or more than $3. Maybe they feel a square bottle looks better or is more high-class.
This is why people go to Starbucks and spend $5 for a coffee when they can get it elsewhere at a fraction of the price. Starbucks has good service and if you walk around with Starbucks (at least in Thailand) people perceive you as high-class. This strategy is good to use when what you are offering is good quality. If you feel you offer great service or product, charge what you think is valuable for the customer, even if the price seems high. There is always somebody willing to pay that price, you just have to find the right person.
Set the initial price high and decrease value as the product gets older. This typically only works when the brand has a good reputation and customers know the product will be good. Apple uses this strategy when they release a new iPhone. During the first release period iPhones cost $700 and the Apple loyalists all flock to purchase one. Notice I said loyalists, they are only buying the phone at this price because Apple has already established itself as a reliable brand.
As time goes on Apple will lower the price to $500 and more people will be willing to make the purchase. These aren’t apple loyalists but rather the early majority of customers who want a phone. As prices decrease Apple acquires a new group of customers, those who are called the late majority and laggards. Which group do you belong to? Do you purchase an iPhone on day one or wait a few years to get a better deal? If you are a startup this isn’t the way to price a product because you are offering an unknown and unproven product/service.
Set a low initial price to penetrate the market quickly. This works best when consumers highly price sensitive. Consumers simply don’t give a damn about quality, they just want a product at the best price.
A great example is Red Bull in Thailand, the country where it originated. At first, there was an energy drink that cost consumers 12 Baht (Baht is Thailand’s currency). Red Bull came into the market and charged 10 baht per bottle. A two baht difference isn’t a lot, but to price-sensitive consumers it is. Who exactly would that be? Taxi drivers! They need an energy drink to stay awake while driving and because they don’t get paid too much, every Baht they can save help. If a taxi driver buys 10 Red Bulls that is 20 Baht saved! This was the exact thought process of taxi drivers at the time. Red Bull lowered price just by a little bit and look how big of a brand it has become today.
Product Line Pricing
Does your company sell multiple products? If so, a good strategy is to categorize them and charge different prices based on those categories, otherwise known as product line pricing. An iPhone comes in different GB storage spaces such as 16 GB, 32 GB, and 64GB meaning Apple can charge different prices. As you may have guessed, this strategy works great if you produce the same product but have the ability to differentiate it even if by just a little bit.
Congratulations, you just purchased a phone! Would you like to add a protective case and a glass screen protector? This pricing strategy involves selling the main product with additional accessory products. This is a great strategy if your consumers are inexperienced because they have no idea what is necessary and what isn’t, the unconscious consumer will fall for anything. Is it unethical to sell additional products to an unaware consumer? You be the judge of that. Perhaps you just bought a computer and purchased additional warranties and virus protection. Although not necessary, these add-ons complement the main product/service being offered.
You have the main product but in order to use it, another product MUST be purchased. Think of a printer and ink. You can’t print unless you have ink, ink is the captive product and the printer is the main product. The difference between the captive-product and optional-product strategy is that the with the captive-product two or more products must be purchased whereas the latter the additional products are optional. A video game console and video games themselves are other great examples.
Bundle pricing indicates a group of products is purchased typically at a discounted price compared to if you bought those products individually. An example would be companies offering hotels and flights in one package such as Expedia. Sure, you can book the flight and hotel separately but together you can typically get a better deal. Restaurants also engage in bundle pricing by offering combo-style meals.
Offering the same product at different prices to different segments based on age, location, and time. Coca-cola in the USA is more expensive than in Thailand because US citizens overall earn a higher income. Imported products in Thailand such as cheese are much more expensive than in Wisconsin. Admission to Thai temples is free for Thai people but foreigners must pay a small fee. Giving elderly people or student discounts is another example of segmented pricing. Different segments have different needs therefore prices can be adjusted to satisfy those needs.
What Strategy Will You Use?
I know you are feeling overwhelmed with all these pricing strategies but I wanted to show you that there are multiple ways to price a product/service. Choosing the proper strategy can lead to efficiency and increased profits within your business. Don’t just guess the price! Take the time to analyze which strategy is right for your product/service.
Where Do You Want To Sell Your Product?
This is one of the most important questions founders must ask themselves before they start a business or launch a new product.
Do you want to sell at a physical location? Do you want to sell online? Do you want to sell online using your own E-commerce platform or a third-party platform? Where will the store be located? How will you decorate and layout the store?
The questions start to mount up very quickly and if you don’t have any sense of direction about PLACE, your business will be extremely dysfunctional.
There are three key components regarding “place” that every entrepreneur must consider, they are, type of marketplace, logistics, and store decoration.
Type Of Marketplace
When deciding where to sell a product the first question should be: Where does your target customer go?
If you are selling a product geared toward younger people, it makes sense to sell online because young people are tech-savvy and value convenience.
Are you targeting consumers who buy luxury goods? If so, you should open a physical store so they can actually see what they are getting before making a purchase.
To find out where customers go you must do market research. Look at competitors and observe market trends to determine where your target customer is making purchases.
The next question to ask is: Who can help make my product/service available?
Perhaps you make hand-made wallets and decide to sell online but you have no idea how to create an online store.
You can take the time to create your own website using options such as WordPress, Squarespace, and Shopify or you can use a third-party platform such as Etsy. These are all companies that can help make your product available. All are great options but you must make the decision on which option provides the most value to your company.
Are your suppliers reliable?
Perhaps you don’t have physical inventory and you rely on somebody else to ship a product directly to a consumer, this method is known as dropshipping.
Can you trust that supplier to ship a good quality product on time? If not YOU will have to deal with the customer. As you implement vertical integration (ie. are involved in more steps from product creation to going into the hands of the consumer) you will need a physical location.
Understand where you are in the supply chain and discover who can help make bring your product/service to consumers.
Depending on who your partners are can influence where you sell your product.
Plan and manage the flow of products efficiently. Your physical store may be located far from suppliers and customers meaning your shipping costs and time will increase which can greatly reduce profits and customer happiness.
Let me tell you a story about convenience stores in Thailand. There are a few main players which are 7/11, Lawsons, and Family Mart. 7/11’s strategy is to place many stores located next to each other.
I kid you not, you can stand in one place and see three 7/11’s at one time. Lawsons and Family Mart decided to place their stores farther apart from one another which may seem like a logical strategy.
However, if you walk inside a 7/11 you will understand why it dominates Lawsons and Family Mart. The food is fresher!
Because of the close proximity, the food trucks can ship fresh goods to each 7/11 store very quickly, the logistics are simple.
Lawsons and Family Mart have a time-consuming shipping process meaning fresh goods arrive in longer intervals compared to 7/11. Logistics matter!
Another case is for the common dropshipping business strategy.
Most online sellers don’t have physical inventory, rather they partner with a Chinese supplier who holds inventory and ships goods directly to the consumer.
Everything seems great, right? You can purchase a product for $2 and sell it for $30, all you do is market to consumers.
What is the problem with this? Logistics!
It can take products from China anywhere from two weeks to several months to arrive in consumer’s hands. Want to compete with Amazon shipping times?
Forget about it, your finished unless you source products in a location where you sell.
Operate a business in a location that is profitable and makes sense for your business, product, and target customer.
Give customers a great first impression of your store by using a decoration that matches your brand image.
Create a smart store layout by placing popular products in the back to make customers spend more time in the store. Make sure your business has curb appeal, make the customer want to walk inside your business.
Creating a unique store experience allows you to control the perception of your brand. Businesses who aren’t doing anything to influence people with an in-store experience are missing out on a huge opportunity.
Good Example: Apple
Apple stores look very clean and modern just like their products. Apple uses large windows so people can see inside and employees friendly workers who are easy to spot in their blue shirts.
Physical stores allow users to try out Apple products before they make a purchase and overall creates a very pleasing store experience.
Good Example: H&M
H&M makes their products a little difficult to find by placing them in the back and mixing up outfits.
Why do they do this? So when people are on the search for clothing they are tempted to buy something else. Data shows that the longer a customer spends in a store the more likely it is they buy something.
On top of this, H&M is very bright and plays modern music-making the store seems very hip. The H&M brand is recognized as hip and young and the actual store is no different.
Bad Example: Bata
Bata is an example of a store that is relatively boring due to the generic layout and decoration. There is no vibrance to the store, no hip music playing in the background. The product may be okay but if I had a choice between spending time in Bata or HM, I would choose HM.
Websites Matter Too
Websites are no different. Make sure your website is easy to navigate and beautiful to look at.
Make everything responsive, it must look beautiful on a computer, tablet, and phone.
There are so many websites that are absolutely terrible to look at, they look as though they were created in the 1990s.
Don’t create a 1990s website, there are so many resources to create an amazing website. This website was created using WordPress and after taking the time to figure everything out I created a website I am damn proud of.
Don’t pay a web designer money to create a terrible looking website. With just a little bit of learning, you can create a better-looking one at a fraction of the price. Along the way, you will learn a thing or two about web-design and as the saying goes, knowledge is power.
Don’t Settle For Generic, Create A Meaningful Experience
Give a shit about your customers, give them the experience they deserve.
Planning everything out and creating something unique is difficult but everything will be worth it because your customer will be happy. Pick a place that is beneficial for your business both from a cost standpoint and a logistical standpoint, then make it amazing for your customers.
Ah yes, promotion, the fun part of marketing. Promotion is the time to showcase your brand to the world.
Promotion is communication, interaction, and connects to consumer pain points.
You may have a great product, you may offer the best prices, you may have an amazing location but none of that matters if you don’t promote.
There are many ways to promote brands such as advertisements, public relations, personal selling, sales promotion, and online marketing. Rather than type a summary of each type of promotional tool you can use, I am going to show you amazing promotional techniques used by real companies so you can truly grasp the power and awesomeness of promotion. At the end of this article, I have an activity you can do to get your promotion creativity flowing.
What is it? Any paid form of non-personal presentation and promotion of a product or service.
Where? Public Transportation, Social Media, TV, Radio, Newspaper
Burger King: Google Home[/vc_column_text]
Look Burger King utilized technology to share information about the Whopper hamburger. This wasn’t the run-of-the-mill TV advertisement, Burger King capitalized on the trend of smart speakers. Because there is no way to stop Google Home people were forced to listen to every ingredient in the Whopper which in-turn could make the hungry. The only flaw is that Google Home referenced Wikipedia which of course anybody can change, but the idea was extremely clever.
Audi utilized newspaper ads to give Japanese people an idea of how small their car was. By giving an ad that unfolded into a full-size car allowed Japanese people to realize an Audi car was able to fit in their garage. Space is a pain point of Japanese people, there isn’t a lot of it so utilizing every inch is necessary. Audi said “Our car is small enough” with this ad.
This Kit Kat out-of-home advertisement was a unique way to get people to unplug from life and actually talk to each other. By creating a “no WiFi zone” people were able to simply talk and become friends while sharing a Kit Kat. This spread like fire and not long after Kit Kat generated a lot of PR value meaning people were aware of Kit Kat and what it was doing.
What is it? Build a good relationship with the public by creating a good brand image and handling unfavorable rumors/stories.
Apple: Steve Jobs Presentation
Steve Jobs was famous for his amazing speeches that captivated each viewer during the product introduction. This is very useful if your brand is well-known and has many followers. Just make sure everything goes right during the demo.
What is it? Personal interaction between a salesperson and a buyer to build a customer relationship.
The most clear-cut example would be a car salesman or a real estate agent. These sellers will convince you to make a purchase and during the process, a professional relationship will be created.
The importance of personal selling can’t be underestimated. A determining factor in a customer purchasing a product can do largely with the type of service being provided.
By selling in person as opposed to over email, there is a nice personal touch that comes along and that can be more valuable than the product itself.
What is it? Short-term incentives to encourage the purchase of a product/service.
JetBlue: Fly Babies
JetBlue targets the pain point most people have when flying and turns it into a good thing. Babies that cry are very annoying but not too bad when you get a 25% flight discount each time one cries. This is a promotion that is way outside the box. It’s not a boring TV ad, it hits the problem head-on in a unique way. I just wish I would’ve been on that flight.
Reebok: ZPump Fusion
Reebok created such an amazing promotion by having people move around and compete to get a pair of shoes. This campaign reflects the type of company Reebok is, a sports shoe company. Just look how receptive the competitors were, and to get a free pair of shoes at the end is simply outstanding. Would you ever have thought a company can promote their product like this in a train station? Absolutely brilliant.
What is it? Online interaction with the goal of capturing immediate consumer response and creating long-lasting relationships.
Ikea: Retail Therapy
Ikea has created a clever line of products titled “retail therapy.” They understand all relationships have problems and created clever names for each product that people can relate to. These problems are the most Googled meaning many people are able to relate. The above photo is a daybed called “My Partner Snores” for a single person just in case they are kicked out of the room for the night due to snoring. My girlfriend hasn’t bought this for me (yet).
There is an entire line of products with unique names people all over the world can relate to.
What Makes A Good Promotion Strategy?
After watching these promotional videos I hope you have discovered what sets them apart from the average promotion. A good promotion understands consumer pain points and works out a solution. There is an interaction between the promoter and consumer. Even though the Burger King commercial was on TV, it utilized Google Home to create an interaction. There is a clear message given to the consumer. In the Japanese Audi commercial the message was “Our car is small enough.” Lastly, the overall experience is good.
If you are able to incorporate all of these concepts in a promotion I guarantee consumers will be receptive.