Marketing 101 - The Essentials of Marketing
In articles and forums around the web, there is an obvious, common misconception of exactly what 'Marketing' actually is. Often people use the word marketing as though it were just another word for advertising. Some seem to think that Marketing is just another word for Promotion. Neither is true. Marketing is a far broader topic that holds promotion as a sub-function of marketing, and advertising as a sub-function of promotion.
Whatever your current understanding of marketing, from none to major, this essential primer should provide some interesting reading and should ensure that you have a good grasp of what marketing is, and how to use marketing to massively improve your business.
This won't be a quick post, so make yourself a drink, get comfortable, and prepare for a darned good read that may even change your business life.
So What Is Marketing?
In the broadest sense, marketing incorporates everything about understanding markets (both yours and the ones you have not yet made yours), bringing your product/service to a market, and even developing new markets.
To get to the real essence of marketing, as I've mentioned once or twice before, marketing is about producing what you can sell, rather than just selling what you can produce.
Marketing is basically the strategic part of business.
Marketing incorporates or impacts heavily upon all of the following activities:
So, now that you see how big and broad marketing truly is, I've probably just scared the heck out of you. Well, sip that drink and we'll start on how to get a handle on it.
Start at the beginning
The foundation of all good marketing is to know your market. That means your customers. The well marketed business is completely customer focused. They identify what the customer wants or needs, and then supply it at a price the customer is prepared to pay.
The customer is always right. That is the classic saying which has fallen from favour in recent years. However it is true. The customer is always right, provided that they are the right customer.
Placing the customer foremost does not always mean having excellent customer service. It means knowing what the customer's priorities are, and making them your own. With that said, providing value, the values that the customer values most, is where the whole secret lies.
To paraphrase Henry Ford: "Whoever focuses on how much they can give for a dollar, rather than how little, is bound to succeed".
Knowing your customers
The tricky part to this is that you really need to know who your customers are and what they want even before you can make them your customers. Bigger businesses literally do this by carrying out extensive market research to find the best balance of the 4 P's of marketing before they go any further.
I'll come back to the 4 P's in a moment if you are not already familiar with them. First however, I want to discuss ways that the small business, even the Sole-Owner business, can do market research. In fact, you probably did some of this yourselves. You ask people you know. "What do you think of this...?", "Would you pay $50 for a service that...", etc.
Do what market research you can, and if that means carrying your own clipboard in the streets, or means trying to find people in your target market to interview, then so be it. Every scrap you glean will stand you in good stead later on.
It is the data you get from knowing your customers, combined with the data from studying your competition in the market, that helps you to find a good mixture of the 4 P's
The Four P's of Marketing
The four P's of marketing are:
Product is what you are selling. Not just the physical product or the actual service, but all the customer benefits and values that the product represents. It is usually not important to have the best possible product. Cutting edge and feature packed products cost more. The key is to have the most valuable product in its price range.
Price is the amount that the customer must pay. This is the acid test of whether the features you added to the product were really valuable, or whether you might have been better to cut a few low-value features out and so be able to offer a lower price.
Place is sometimes thought unimportant to online business. However, many deals still go best with a handshake. Services can only be cost-effectively provided within a fixed travel-radius. Shipping costs matter. Place is still a vital concern. With the internet, all online shops are on the super-highway and equidistant to any customer, and yet people still look for local and regional suppliers. Financial and legal issues are still mostly set by place too. Where will you place your distribution centers? Would better placement of your business let you ship faster or more cost-efficiently?
Promotion is the P that everyone knows Marketing is about. Of course, we are not only talking about advertising in promotions, but also sponsorships, public relations, special offers, viral marketing, and so much more.
Every business, and every product or service, will need its own special blend of those four elements. The cheaper the product and the better your place, the lower the price you can offer. The more attractive a product is for the price, the further people will travel or the longer they'll wait, and the less promotion the product will need.
The 4 P's of marketing all inter-relate to create an overall mix that you can control, and in doing so, can find the optimum blend for your customers and market conditions.
Let's illustrate this with something you'll all know - a computer.
I am going to create a great computer to sell. Using marketing for strategic business, I know I need to research my customers' values, and look at what my competition are supplying.
I find a gap in the market in two respects - first I see that almost all computer 'packages' are far too low on memory by default. Second, most computers are still pretty ugly, though great improvements have been made. I'm locating this business in the city, so I know there are plenty of people and businesses that can buy my machines, and that delivery costs will be cheaper because of that.
Okay, so offering at least 1Gb of memory in every PC is my first product development decision. (You do know that Windows XP won't run at full speed if you have less than 1Gb of memory, right?). Now, that means my machines are either going to be more expensive than my competitors, or I am going to have to cut out some other feature that offers less value.
I could go for a cheaper Graphics card for example, and so develop the computer for the no-nonsense user who wants reliability and performance for serious work, and isn't going to be playing many if any games.
Or I could save some on the processor, and offer a slower but more stable machine that my competitors. The thing is not to just guess, but to know what features customers assign the most value to. In actual fact, this is why most computers you buy in the shops are given inadequate memory - people value other things more highly, and have suffered all the increased likelihood of windows crashing and freezing up for all these years because they were more concerned with a big graphics card and surround-sound speakers, than in supplying Windows with the memory it actually needs (1Gb, remember).
Okay, I decide on a mix of components, some brand name, others generic, and create a PC that will be valued pretty well by customers. I find that I can offer really beautiful cases and matching keyboards in unusual colours (because my brother is a real artist with an airbrush) so I add that too. I now have a unique product that is as valuable as I can get it while not being far above the price of what else is available. I've done the market research to confirm that people will pay that little bit more for the truly beautiful colours and individual look that our custom cases and keyboards offer.
Now I put the price on it. I'd been considering price all along the design process as you noticed, but now is when I decide whether I can cut my margins a little to sell more, or whether I increase my margins so that I'm covered if my brother decides that painting all those cases is hard work and he wants more money.
What I'm actually doing here is betting my business on my belief that the value of the product to my customers is greater than the price tag I'm putting on it. I have now got the mix of product, price and place sorted and now need to add enough promotion to make it work.
A lot of that promotion may include educating my customers so that they realise how important it is for a PC to have enough memory. I can run an education campaign to help them learn that the vast majority of crashes on Windows are due to memory handling errors, and that by having 1Gb of memory, they will be a full 90% less likely to suffer a crash than a user with 256Mb of memory - (All pretty accurate, btw).
The rest of the promotion is to have some advertising that shows of the attractive cases and beautiful colours, inspiring some of the desire that I know the artistic work by my brother will arouse. I go for a couple of big posters at the railway station, some flyers on the high street where my shop is, and place some posters in the windows of some cafes where I know lots of office workers buy their lunch.
I spend quite a bit on some stunning pictures to use in the posters and on my website of course, and pay for some user testing (I know a guy at Site-Report.com) to ensure that the 'extra reliability' I am branding on is going to be supported and reflected by my website. I definitely don't want any unforeseen irony of an unreliable website. There's the basis of my Promotion in place. I'll also use SEO and SEM too, because they offer unbeatable value.
In fact, I decide to sort out shipping for orders from outside the city and oversees. That way I don't have to be so careful to exclude non-local surfers and shoppers. The shipping costs will push up the price massively for those orders of course, but though I'll have a lower conversion rate on shipped orders, I'll have a wider customer base to compensate. I still have superb value on the local business, so my thought for Place is going to pay off.
If the product really does appeal massively to customers, I may find that ongoing promotion isn't needed as the viral marketing effect of customer telling lead takes over. Of course, I may decide that means I'm under-charging, and raise my prices, so that I need to spend a little more on promotion, but not as much more as the higher margins are giving me.
Now that, dear friends, is the essential beginnings of marketing.
There's a lot more to say, but I'm all typed out for now, and there are others who can contribute more and different perspectives and information to this explanation of marketing and how to use it. I'll gladly hand over to them.
Edited by Black_Knight, 12 December 2005 - 10:03 PM.