By understanding your marketing mix through the five Ps of marketing, you can find ways to increase your company’s sales. Your sales not only rely on a differentiated Product, but also on the Price, the way you communicate with the Public, the Places where your product sells, and finally the People you target.
The 5Ps of Marketing:
Product: The tangible item or service provided by your company. This product has unique properties and to gain a strong place in the market, you must focus on the attribute that gives you a competitive advantage. As competitors begin to create substitute goods, your product begins to reach its maturity phase and eventually becomes obsolete. In order to stay afloat in a changing external environment, you must allow your product to change with new customer preferences and the innovations of updated technology.
Price: The raw inputs of revenue are quantity and price. Economically speaking, in general if you increase the price you lower the quantity demanded and conversely, decreasing the price will increase sales. Although both outcomes are equal, price is a factor customers use to judge quality. Products priced too low will signal the customer to expect low quality, while above market prices tend to show the product is better quality. Depending on the way you want your customers to view your product, the pricing models below will help you communicate your message.
- Penetration Pricing: Prices are set low to increase sales and market share, usually done during the introduction phase.
- Competition Pricing: Prices are based on competitors; firms often match or just undercut their competition. (Eg. Gas stations)
- Premium Pricing: Prices are set higher than industry average to show the exclusiveness or quality of the product. (Eg. Rolex, Tiffany’s, the Four Seasons, etc.)
Promotion: You may have the best product in the world, but if no one knows it exists you might as well start digging its grave. In business, promotion is the way you communicate the benefits of your product to the customer. Providing clear concise information will help the company avoid the communication gap and increase sales to your ideal customers.
Place: Each company must make a decision regarding how to distribute the product. Supply chain managers typically handle the day-to-day operations that affect transportation, distribution centers, and inventory management. By implementing lean systems, the company can save costs on idle inventory, shipping, and customer complaints. In addition, Place refers to the physical environment in which the product is sold. Some companies go through retailers, while others sell to businesses, and now with improved technology there are businesses that find it most profitable to operate solely online.
People: Your product is successful because it satisfies your customer’s wants or needs. It is important to remember that your product does not need to make everyone satisfied; it only needs to keep your target customers content. In a relationship like this, it is important to know your deal breakers. Likewise, not all customers are worth the headache, it’s actually okay to lose business with some customers. It is known from Pareto’s Principal that ‘80% of your business comes from 20% of your customers’. Focus on maintaining the 20% repeat customers; they make it possible for you to bring home the bacon!
Product, Price, Promotion, Place, and People! The perfect marketing mix.