Marketing - the last of the 4P's

Here’s the last of the 4 P’s of marketing – PROMOTION

It all means nothing if the benefit of your product hasn’t been clearly communicated to your target market. This might be a mix of:

Public relations

Advertising

Sales promotion – a short term fix to increase sales, maybe with money off coupons

Personal selling

Direct mail

Internet marketing

You will need a well thought out message strategy. What message are you trying to convey and to whom? How will you deliver the message? Will it be through some branding, design or logos? The message should emphasise the benefit of the product and help the business in positioning the product.

Will you use a push or pull strategy perhaps? A push strategy is where the manufacturer concentrates marketing effort on retailers to convince them to stock the product. A pull strategy is where the business instead concentrates on consumers to create demand. Or some of both?

An old favourite – AIDA. It’s a communication model to aid selling. It’s an acronym for Attention, Interest, Desire, Action. When you are new in the market with your product, you first need Attention. Once you’ve done that how can you hold Interest, through stating benefits etc? Then how do you make your product Desirable? A demonstration, perhaps? The lastly, purchase Action – make it easy to purchase.

As your products move through the 4 stages of a product life cycle, you will need to promote them differently to ensure the best success and longest life of each product.

Introduction – new product, so you need to inform the target customers. You may need quite a bit of effort, with Push and Pull strategies at this crucial phase.

Growth – as the product becomes accepted, you need to work on a strategy of increasing brand awareness to encourage loyalty.

Maturity – brings increased competition, so the business needs to persuade customers to buy theirs and not a rival. Display differential advantage to the target audience to inform them of benefits.

Decline – use a strategy of reminding the customers of the product to slow down the inevitable. You may change the price to increase sales.

You will also want to ensure that you have different products at different stages of their product life cycles, to ensure you don’t have a sudden slump in sales, or cannot meet demand if there is a big increase.

There you are- the 4 P’s of marketing, in as short a form as I can manage it. Our strategy sessions focus a lot on marketing and the pricing conundrum. You just have to ask.

Marketing - the 3rd of the 4P's

Here’s the third P of the 4 P’s of marketing. It’s

PLACE

It means how you will distribute the product or service you have, not where you will base yourself. You must get the product to the user at the right place and at the right time – the right place and time for the user, that is. This means effective distribution or you will not meet your marketing objectives. If the business underestimates demand and customers cannot buy from you, then obviously profits will go down, but more importantly, reputation will be lost as customers will know not to try and buy from you again.

There are two types of distribution channel available – indirect and direct. Indirect means distributing your product via a wholesaler who may sell to a retailer then on to a customer. Direct means from you straight to customer. The direct channel gives you complete control over the product, and usually means better margins (you are not giving anything away to wholesalers or retailers), but your ability to sell in volume is limited.

There are three common distribution strategies available.

Intensive distribution – to distribute a low priced or impulse purchase like chocolates

Exclusive distribution – to a single outlet. Usually for high priced products and needs an intermediary to add detail into the selling process.

Selective distribution – a small number of retailers are chosen, and is commonly used to distribute items such as computers or household appliances, where customers shop around and manufacturers want a large geographical spread.

If a business decides on one of the later two strategies, then it should choose intermediaries who are experienced in the industry and have credibility amongst the target customers.

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.

“If things seem under control, you’re just not going fast enough” – Mario Andretti

Well, he was a racing driver. And it’s an interesting idea, when applied to success and failure. I recently attended a seminar on Valuing Failure, which is part of the RSA’s Failure initiative. This seeks to find what we can learn from failure – such an emotive word – and how we can use failure as a driver for success.

If we just play it safe, we will stay in our comfort zone, and succeed at what we know. Will that enable us, as business people (or just people) to survive long term? I suggest not, as change, being inevitable, will impact on our cosy existence. Competitors will nibble away at our market share, economic factors will change, and if we stay doing what we know, our businesses will gradually wither and die.

To stop that we have to do something new – something we don’t know, or don’t know enough. This invites failure, which, if managed properly, should involve learning, adapting and ultimately succeeding in this new way.

Notice I said, “if managed properly”, which seems often not to be true. So often insufficient time and resource is put into discovering what boundaries should be put into place, what information needs to be assembled, and what plans need to be made before activity is started. And then failure often happens because that new activity was not managed to allow failure but avoid catastrophe – something which I try and build into any client strategy that we facilitate. The idea is that we can push through the failure, by learning, adapting and building – to a new bigger success zone. Danish physicist Neils Bohr defined as expert as “ a person who has made all the mistakes that can be made in a very narrow field”, and that has an insight into managing new things – make them very narrowly defined, so they cannot impact on the main business.

We may need to push hard and persistently, and sometimes we have to realise that there is no way through – or at least, not in that direction. “If at first you don’t succeed, try, try again. Then quit. There’s no point in being a damn fool about it!” WC Fields, this time. But if you do quit, just quit at that particular activity, don’t stop trying to innovate altogether. Just change direction.

However you think about it, surely there’s a learning point here that regularly exploring the boundaries of where you are, testing them hard, pushing through where you can, expands the capability of a firm to survive and grow (and the people running those firms too). It should produce a habit of Explore – Fail – Innovate – Consolidate – Explore – Fail – Innovate - etc. This produces an entrepreneurial mindset, and I think serial entrepreneurs exhibit these characteristics strongly. Innovation and entrepreneurship are ways of thinking that can be learnt just like any other. This is one insight into how that is done.

Innovators expect failure – it is natural and inevitable at some point in everyone’s life anyway. Innovators view failure as opportunity, learning and information. It is unhelpful for us as individuals and business people to stigmatise failure and ourselves as failures, if that prevents us from growing our businesses and ourselves. We simply need better strategies so we avoid catastrophes but allow failure – and its associated benefits.

How to get rich? Quietly!

Cast your mind back to when you were 25, earnings £250 a week, then on to 35 earning £500 a week. Maybe when you got to 45 you were earning £500 a day. Maybe not. But whatever it was, how much did you have left?

Probably about the same as now – not much. Because your expenses grew with your income. You needed that new car, better house, more clothes, holidays,..every rise in earnings came with a price tag. So that’s why lots of people with high earnings have no money. They aren’t rich – they just have high earnings. Which means that they have to earn at the level to stay still – stuck on the hamster wheel forever.

Let’s look at a couple, both working and earning well. Joint income of, let’s say, £90,000. If they were living off investments – 3% return? That’s capital of £3 million – invested, excluding the value of their house, which produces nothing. Hardly a lavish lifestyle, but to put £3m together needs a bit of luck and a following wind.

How to get rich then? Thanks to Bill Bonner and the Daily Reckoning (www.morefrombill.com) – he has the concept of financial escape velocity. This describes what has to happen to build up serious money. You might get lucky – you may live just where a developer needs to build and you get a ransom price or you might get some other lucky break, but it’s unlikely.

Or you might use compound interest. Sorry – it’s not an easy or quick solution, but it does work. Make a small investment, add to it, and keep doing it. Whatever it earns you reinvest in it. Compounding does the rest, over time. Later you may notice that your wealth has increased more than you thought – more than your expenses. Compounding is the first little trick.

Here’s the second. Don’t tell your family! Not because you don’t want to share it because you don’t trust them. Don’t tell them because you do trust them – to spend it. Don’t let a rise in your earnings attract a rise in their spending.

Compounding works in business too. I’m a firm believer in companies paying corporation tax. Not too much though! For two reasons – one is that then there will be some after tax reserves left in the company for the bad times, which stops the company going out of business, and secondly (you guessed) because of the benefits of compounding. If you take all the company’s earnings out, the company is at risk, and it won’t grow so fast. Let it grow and one day, you will find you’ve got to the point where your earnings are growing faster than your spending. Just don’t tell anybody.

Don’t worry about me knowing – I will already know, because that’s what we do!