11.3 Developing a Marketing Mix

Product Strategy

Marketing strategy typically starts with the product. Marketers can’t plan a distribution system or set a price if they don’t know exactly what product will be offered to the market. Marketers use the term product to refer to goods, services, or even ideas. Examples of goods include tires, gaming systems, and clothing. Goods can be divided into business goods (commercial or industrial) or consumer goods. Examples of services would be hotels, hair salons, food delivery services, and accounting firms. Services can be divided into consumer services, such as lawn care and hair styling, or professional services, such as engineering, accounting, or consultancy. In addition, marketing is often used to “market” ideas that benefit companies or industries, such as the idea to “go green” or to “give blood.” Businesses often use marketing to improve the long-term viability of their industries, such as the insurance industry or processed food industry, which run strategic advertising campaigns and social media messaging to encourage consumers to view their industries favorably. Thus, the heart of the marketing mix is the good, service, or idea. Creating a product strategy involves choosing a brand name, packaging, colors, a warranty, accessories, and a service program.

Marketers view products in a much larger context than is often thought. They include not only the item itself but also the brand name and the company image. The names Ralph Lauren and Gucci, for instance, create extra value for everything from cosmetics to bath towels. That is, products with those names sell at higher prices than identical products without the names. Consumers buy things not only for what they do, but also for what they mean.

Pricing Strategy

Pricing strategy is based on demand for the product and the cost of producing that product. However, price can have a major impact on the success of a product if the price is not in balance with the other components of the 5Ps. For some products (especially service products), having a price that is too low may actually hurt sales. In services, a higher price is often equated with higher value. For some types of specialty products, a high price is expected, such as prices for designer clothes or luxury cars. For example, designer shoes are often marked up over 300 percent above the cost to produce because of the image factor associated with the higher price and the brand name. Special considerations can also influence the price. Sometimes an introductory price is used to get people to try a new product. Some firms enter the market with low prices and keep them low, such as Carnival Cruise Lines and Mitsubishi cars. Others enter a market with very high prices and then lower them over time, such as producers of smart TVs and tablets.

Place (Distribution) Strategy

Place (distribution) strategy is creating the means (the channel) by which a product flows from the producer to the consumer. Place includes many parts of the marketing endeavor. It includes the physical location and physical attributes of the business, as well as inventory and control systems, transportation, supply chain management, and even presence on the web. One aspect of distribution strategy is deciding how many stores and which specific wholesalers and retailers will handle the product in a geographic area. Cosmetics, for instance, are distributed in many different ways. Online retailers offer customers a variety of products for skin care and cosmetics at all price points. Urban Decay and Clinique are distributed through stores like Ulta and Sephora. Cover Girl and e.l.f. use mostly chain drugstores like CVS and other mass merchandisers such as Target. Redken products sell primarily through hair salons. L'Oréal uses several of these distribution channels. Birchbox, an online subscription box service, allows customers to try new and premium products. For services, place often becomes synonymous with both physical location (and attributes of that location such as atmospherics) and online presence. For example, an engineering firm would develop offices with modern, high-end interiors (to denote success). Place strategy for services also includes such items as supply chain management. For instance, that same engineering firm would be managing the supplies for ongoing operations and projects and sourcing those through various supply channels to deliver to their customers.

Promotion Strategy

Many people feel that promotion is the most exciting part of the marketing mix. Promotion strategy involves the tools and channels that a firm uses to generate awareness, and more importantly, demand for their product or services. These tools can include traditional advertising, public relations, fostering word of mouth through social media channels, sales promotions, and an online presence including e-commerce. These elements are called the promotional mix. Each element is coordinated with the others to create a promotional blend. An advertisement, for instance, helps a buyer get to know the company and paves the way for a sales call. A good promotional strategy can dramatically increase a firm’s sales.

Public relations plays a special role in promotion. It is used to create a good image of the company and its products. Bad publicity costs nothing to send out, but it can cost a firm a great deal in lost business. Good publicity includes tools such as announcements to build excitement about a firm's new product or news about the firm's most philanthropic endeavor. The impact is the result of much time, money, and effort spent by a public-relations department. Public-relations efforts are the least “controllable” of all the tools of promotion, and a great deal of effort and relationship-building is required to develop the ongoing goodwill and networking that is needed to enhance the image of a company.

Sales promotion is directed towards stimulating sales. It can include celebrity endorsements, trade shows, catalogs, contests, games, premiums, coupons, and special offers. It is a direct incentive for the customer to purchase the product immediately. It takes many forms and must adhere to strict laws and regulations. For example, some types of contests and giveaways are not allowed in all the states within the United States. Domino's pizza offers discount coupons and McDonald's has its annual "monopoly" game offering money and food prizes as examples of sales promotions in the fast-food industry.

Social media is a major element of the promotion mix in today’s world. Most businesses have a social media presence on various platforms, such as Facebook, Instagram, and TikTok. Social media is more powerful as a channel for getting the company’s message out to the target market (or general public) than traditional advertising, especially for some target markets. Companies (and even individuals) can use social media to create instant branding. Influencers play an important role in both sales promotion and public relations activities for companies. Through social media, influencers promote specific products, brands, or companies in general. They can also work against the promotion efforts of firms and direct customers to the competition. Consumers have come to rely on influencer opinions as they make purchasing decisions in nearly every category—from clothing to cars to travel destinations. E-commerce is the use of the company website to support and expand the marketing strategies of the 5Ps. It can include actual “order online” capabilities, create online communities, and be used to collect data from both existing and potential customers. Some e-commerce websites offer free games and other interactive options for their customers. All of this activity helps to build and strengthen the long-term relationships of customers with the company.

Not-for-Profit Marketing

Profit-oriented companies are not the only ones that analyze the marketing environment, find a competitive advantage, and create a marketing mix. The application of marketing principles and techniques is also vital to not-for-profit organizations. Marketing helps not-for-profit groups identify target markets and develop effective marketing mixes. In some cases, marketing has kept local theaters, museums, and other sites of cultural significance from having to close their doors. In other organizations, such as United Way, marketing ideas and techniques have helped managers do their jobs better. In the private sector, the profit motive is both an objective for guiding decisions and a criterion for evaluating results. Not-for-profit organizations do not seek to make a profit for redistribution to owners or shareholders. Rather, their focus is often on generating enough funds to cover expenses or generating enough funds to expand their services to assist more people. For example, a religious organization does not gauge it success by the amount of money that its members donate. The Museum of Science and Industry does not base its performance evaluations on the dollar value of the t-shirts sold in the gift shop. An organization such as the American Red Cross raises funds to provide basic services, but if enough funds are raised (beyond just the amount to cover expenses), those funds are used to expand services or improve current services.