The tools, or resources, of the marketing mix are used to sustain and develop brands. These tools have traditionally been referred to as the ‘4Ps’ of product, price, promotion and place, but there is growing recognition that the service elements of process and people are relevant to businesses of any kind. These tools have to be integrated to fulfil the vital functions of:
- Addressing the needs of the target market
- Creating the competitive advantage
- Supporting the brand positioning
- Determining the allocation of resources to achieve the objectives set.
The central tool in the mix should be determined. This may not necessarily be the physical product or central service offering, where it may be impossible to offer any competitive advantage. For instance, banks constantly fall into the trap of thinking that interest rates and account details are all that matter to customers, whereas speed, convenience and overall customer experience are likely to be much more powerful and productive variables to concentrate on. The division between products and services is, in any case, becoming increasingly eroded in many organizations. For instance, a subscription to Microsoft’s Office 365 product secures not just the initial software applications, but access to ongoing updates, improvements and protection. The service element of products is growing in importance, for instance through guarantees, low-price credit, repairs-at-cost, just-in-time delivery, offering training for customers’ staff, customer helplines, etc.
Every tool should have its own objectives and strategy. A Product strategy might contain such elements as:
- The benefits being offered to customers (as much in service as in physical product)
- Product specifications that support the brand positioning
- Justification of range breadth and depth, which may in time cease to meet market needs and be a drag on cost control
- Specification of improvements needed and actions to achieve them
- Identification of products for future rationalization
- A new product development strategy
- A diversification/acquisition strategy.
A Pricing strategy should be based upon the level that customers are prepared to pay and the positioning already established. This price should have nothing to do with the cost of producing the goods or services, but is derived from the customer’s perception of value for money. This value for money involves much more than the price; it includes the quantity, quality, service and image of the product on offer. Cost should act only as a determinant of margin acceptability, not determine the actual price set.
Pricing strategy should recognise a number of other factors, however. These include the elasticity of demand (if it can be determined); the degree of competition (the stronger the positioning, the weaker the threat); the power of distributors; or simply a short-term need for survival. Different strategies can be adopted for different market segments. In the provision of time-banded services such as travel, the pricing strategy should reflect the relative levels of supply and demand as the implementation time approaches (such as airline fares, advertising rates, room rates, etc.). Prices can also be camouflaged by offering packages of items such as those offered by mobile phone providers with a mixture of equipment, connection, line rental and call rates.
The Place strategy should again be based primarily upon convenience to customer rather than provider, although the optimum solution may need to be a carefully considered compromise depending upon such factors as the importance of particular customers and their value to the company. Logistical efficiency should not be allowed to dictate the strategy, however, as an important source of competitive advantage (for which it may prove possible to charge a premium) may be ignored. This is why ‘place’ is not a contrived ‘P’, standing in for the more obvious descriptor of ‘distribution’; ‘place’ recognises that customers want the right thing, at the right time, in the right place – how it gets there is largely not their concern.
In retail businesses, be confident that out of stocks and distribution problems are not causing sales figures to be misread and thus potential demand miscalculated (one can often see this effect in small shops). The advent of the internet has dramatically altered the possibilities for developing strategies that reflect customers’ desire for faster fulfilment, Amazon Prime being an obvious example of such a service. In BTB (business-to-business) sectors, JIT (just-in-time) services fulfil a customer need for a supply chain that optimises operational efficiencies.
The Process strategy should be based upon an intimate understanding of the interface between stages in the delivery process of a product or service; the existing problems and bottlenecks; and the opportunities to add value. In service industries the scope for improving the process is usually enormous – the experience at most world airports is a telling example. The most obvious and cheapest form of research – observation – is often ignored by company managers, convinced that they already know what happens and what their competitors do; usually they know only half the story and what they do know becomes rapidly out-of-date. Again, the aim is to look for ways to make improvements and add value for the customer; understanding the overall customer experience, and in particular the customer journey, is vital to uncovering these opportunities.
People are becoming an increasingly important part of any company’s offering, even for those not in service industries, where it is usually the most important element. Not only is it becoming increasingly difficult to find areas of competitive advantage elsewhere in the mix, but customer expectations of good service are rising all the time; those not offering it will go to the wall. Whenever an employee interacts with a customer, at a touchpoint, a potential sale can be made or broken. Some of these interactions are more powerful ‘moments of truth’, when customers become more positively or negatively engaged as a result of the experience. Staff can create a great experience, which is not an event, but the process of creating a customer environment of information, empathy, assurance and comfort. The single biggest reason for losing a customer is a poor experience with staff, however.
The final element of the marketing mix, Promotion (or marketing communication), is the tool that communicates messages about the organization, brand, product or service to its customers. It is the most visible element of marketing, but is frequently mistaken for marketing itself. Without a viable strategy involving a sound positioning, sources of genuine competitive advantage, and clear strategies for the rest of the marketing mix, money spent on communications is easily wasted. Nevertheless, promotion plays a vital role in the marketing process; sometimes through the creation of a compelling image, probably its pivotal role. Increasingly, with the wide variety of digital tools at the marketer’s disposal, the choice of channel to be deployed is more complex. Additionally, digital tools are substantially not – like the more traditional tools, such as broadcast and print media – one-way channels of communication, but facilitate a dialogue with customers. The choice of tools must be driven by a clear strategy, however, rather than the novelty of a new media channel.
Note that the marketing mix is sometimes referred to as the 7Ps, including an additional element of physical evidence. This latter element was created to reflect the fact that in service industries there is usually no tangible product for the customer to walk away with, thus requiring the development of physical reminders for the customer of the service they are purchasing/have purchased.