Marketing - the 2nd of the 4P's

PRICE is the second P of the 4 P’s of marketing

This is one of the most important elements, as it is the only element that generates turnover. The other 3 P’s are costs – costs to produce, cost to distribute and costs to promote. Your price (or prices) must support all these other elements. It is difficult to get right, as it must reflect the supply and demand relationship. Pricing too high or too low can lead to a loss of sales. But – you can’t just price low to make sure you get every sale, if you can’t fulfil them properly. Pricing too low is a common mistake of the small business! I’ve lost count of the number of times I’ve told a business they need to put their process up.

Pricing needs to take account of:

Fixed and variable costs

Competition

Your objectives

Proposed strategies for positioning your products

Target customers and their willingness to pay

There are various pricing strategies that can be adopted:

Penetration pricing – low price to increase market share. Then increase the price later.

Skimming pricing – initial high price, the slowly lowers it to make the product more widely available.

Competition pricing – price matching or lower than competitors to gain market share.

Price by product line – different products have different price points. Similar products with different features enables a business to maximise turnover and profits

Bundle pricing – groups of products are priced at less than the sum of the individuals.

Psychological pricing – charging 99p instead of £1, for example.

Premium pricing – to show the exclusiveness of the product or service

Optional pricing – the business sells optional extras to maximise turnover and profits.

Cost based pricing – this is cost plus mark-up, which can work, especially where costs change often, but it’s a dangerous policy, as most businesses underestimate their costs.

The 3rd and 4th P's are Place and Promotion, and will be ehre soon. Then the extra 3P's of marketing services.

Marketing - the 4 P’s

Little understood by small businesses, mainly avoided if possible (that’s selling isn’t it? Ugh! I can’t sell..), but badly needed if you want to stay in business, and easier than you think!

Let’s start with your customers. There’s nothing like asking existing or potential customers what they want, then giving it to them. It’s a lot more certain than assuming you know better than your customers, who will tell you differently (and expensively). Customers want to be asked – they want to be involved, cared about, and listened to.

So a short introduction to some basic marketing ideas, starting with the 4 P’s. You may know all this, in which case, it’s short refresher, or maybe you can show it your colleagues, who may not know it. Everyone in a small business is involved in some way or other in marketing, so they all need to buy in to this.

What are the 4 P’s? A series of tools to help you achieve the marketing mix you want and achieve your objectives. It ALL starts with the market – customers. No customers = no business, so all your planning should start here.

Each P is a separate blog. The 4 P’s deal with products – for services you need another 3 P’s. Later! Although it should be apparent you need them all, as to some extent you are providing a service with the product.

Here’s the first P

PRODUCT

Who is the product aimed at?

What benefits will the customer expect?

How do you plan to position the product within the market?

What advantage will the product offer over its competitors?

Remember – marketing is about providing changing benefits to the changing needs of the customer – not just providing products or services.

Your decision about your product will include:

Design – will the design be the selling point, like the iPad?

Quality – this has to be consistent with other parts of the marketing mix. A premium price needs to have a premium product. But a cheap product needs a quality and cost that fits with the price.

Features – what will you add to increase the benefit to your market? Will you use a different pricing policy to match these additional features?

Branding – the value of a brand is huge, as they have the power of instant sales, and they convey a message of confidence and reliability.