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 have 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, and cell phones are all products on the surface. But if we dig deeper a product is actually much more complex.
Businesses must live up to consumer expectations and create a product that creates value for their users.
Let’s talk about product fundamentals.
Three Levels of a Product
The core value is the main reason customers are purchasing the product, it solves their pain points.
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 create 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.
Product Life Cycle
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
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.
Nothing is more important than price.
When people go shopping, the first question that always comes to mind is “How much does it cost?”
Understanding various pricing strategies is critical to success.
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 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 it’s 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.
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 of good quality. If you feel you offer a 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 are 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.
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 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.
A big part of marketing is where you sell products.
Whether you sell online or at a physical location, there are marketing strategies centered around both.
Let’s talk about it.
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 the consumer’s hands. Want to compete with Amazon shipping times?
Forget about it, you are 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, you want the customer to walk inside your business.
Creating a unique store experience allows you to control the perception of your brand. Businesses that 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 create 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. The H&M brand is recognized as hip and young and the actual store is no different.
Websites and apps 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 like WordPress, Wix, and Shopify.
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.
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.
Advertise on popular social media platforms like Facebook. Capitalize on algorithms by social media platforms to target an audience that is best suited for your product/service. Social media advertising is a great way to reach many people, but it can be expensive if your campaigns don’t work. You will need a budget to account for trial and error on your campaigns.
Using a service like Google, you can pay to have ads displayed on websites or on Google itself. This is incredibly powerful because you can reach a wide audience. Much like social media advertising, you may end up spending a lot of money to get your ads just right. Google is one of the best ads platforms but it’s also one of the most expensive.
Email marketing has historically had the highest conversions among marketing techniques. It all begins when somebody signs up to be on an email list. Once they sign up you can send out emails related to your product/service. You’re going to need to be persuasive enough to get somebody to sign up for the email list in the first place but once there in the odds of them clicking on future emails are high.
Consumers are always interested in saving money. Offering promotions can significantly boost purchases of your product/service to get it in the hands of consumers. This can be very powerful because if the consumer enjoys what you offer they will most likely be repeat customers.
Word of Mouth
Sometimes the best type of advertising is when clients spread the word to others. This is really popular in service industries like wedding photography. The best part about word of mouth advertising is that you aren’t paying for anything. By providing a good service to current clients will inevitably be beneficial for you.
Believe it or not, old school methods of advertising still work. Think of every time Apple releases a new product, they have a presentation showing their newest gadgets. In order to do this, you’re going to already need some sort of following that is interested in what you have to offer.