consumer research, distribution, environmental analysis, four p's of marketing, market research, marketing, marketing mix, marketing plan, marketing planning, performance analysis, pricing, principles of marketing, product development, promotional strategy, segmentation, situation analysis
(originally published to Helium writing site, now gone)
Many principles of marketing need to be taken into account when trying to sell a product or service. These principles include an environmental or situation analysis of the firm’s internal and external environments, segmentation of the market, consumer and market research, product development, pricing, distribution, promotional strategy, marketing planning, and measuring the progress of marketing strategies and actions.
An environmental or situation analysis is where a firm looks at the organization itself, its collaborators, its customers, its competitors and the business climate. A firm needs to understand its internal and external environments. The company must know its capabilities, products, image, strengths and weaknesses, and culture. It should look at its suppliers, consultants and distributors, and their respective capabilities, strengths and weaknesses. It analyzes its existing and potential customers, the market such as its size and growth, what consumers want, what motivates them to buy, where and how they buy, and trends in consumer behavior.
The firm examines its industry, including each main competitor in terms of size, products, strategies, market share, and strengths and weaknesses. It also analyzes its business environment, including aspects of the political and regulatory situation that will impact on the firm and the market; the economic situation such as growth rates, cycles, inflation, and employment levels; technology; and the international environment.
Once a firm gets an overall picture of its operating environment, it segments the market. This is necessary as consumers are all different and they have different needs and wants. Sometimes mass marketing is feasible if a product is popular enough across a broad range of consumers. But often, specific segments of the market have to be targeted. A market segment has to be identifiable, accessible, substantial, have unique needs, and be durable.
Consumer markets can be segmented by geography (for example, by country, state, local area, city size, and population density), by demography (e.g. sex, age, family type, education level, occupation, income, social class, ethnicity and religion), by psychographic variables (e.g. lifestyle, interests, attitudes, opinions and values) and by behavior (e.g. brand loyalty, purchase frequency, benefits sought and readiness to buy). Industrial markets can be segmented by company type (e.g. industry and firm size), by behavior (e.g. purchase frequency, purchase procedure and ease of dealing with), and by location (e.g. distance and transport costs). Most businesses are likely to target certain segments, and these will depend largely on the results of the firm’s environmental or situation analysis.
Consumer research will need to be conducted. This allows firms to monitor consumer behavior and preferences. The research can include ad tracking, advertising research, new product research, customer research and feedback, consumer research (including by telephone using random sampling techniques, mail out, focus groups, in-depth interviews and shopping center intercept), mystery shopper surveys, product and branch profitability studies, pedestrian counts and measuring queuing time. Most of this is primary research, whereas analysis of the environment might involve mainly secondary research, that is, using sources already published or otherwise available. Many firms keep all this information in some sort of marketing information system by whatever name.
A firm then needs to come up with an appropriate marketing mix, or combination of product, price, place (or distribution) and promotion, which are sometimes called the four p’s of marketing:
– Product issues can include a brand name, trademarks, functionality of the product, differentiation, quality, safety, packaging, repairs, warranties and accessories.
– Price is determined by costs, competition, market share, consumer demand, substitutes, price elasticity of demand, type of market (e.g. monopoly, perfect competition) and the objectives of the firm. The object might be to increase profits (use a higher price) or gain market share (use a lower price). Aspects of pricing can include a pricing strategy (e.g. skim, aggressive, penetration), a recommended retail price, discounts, seasonal differences and bundling.
– Place or distribution includes distribution channels, branch network, inventory management, warehousing, transport, use of wholesalers and retailers, and of course the internet.
– Promotion is about advertising (e.g. television, outdoor, newspaper, magazine, radio, internet, direct), word of mouth, point of sale, public relations and publicity.
More p’s have been added to make an extended marketing mix in recent decades, such as personalization, participation, peer to peer and predictive modeling. Services marketing also has people, process and physical evidence.
It’s a good idea to put all these things into a marketing plan. This is a written document setting out details of a firm’s marketing objectives. It will include analysis and description of many or all of the issues discussed above, and may include advertising schedules. Marketing planning is usually an annual process and should link to the firm’s overall business plan. A marketing plan may include sections analyzing the internal and external environments, consumer analysis, market research, product strategy, pricing, distribution, promotional strategy and implementation of the plan (e.g. personnel, finances including the marketing budget, and results monitoring).
Lastly, it is important to measure progress of marketing strategies or actions. Sales targets may be set, including by product, branch and month. Other performance analysis might include market share, advertising recall and financial analysis. The results of this performance analysis may lead to reviews of various aspects of the marketing process, and inform the following year’s marketing plan.
With markets becoming more competitive all the time, and often saturated, it is necessary to use these marketing principles effectively in order to achieve planned sales levels and to stay ahead of competitors.