Marketing is the study of relationships and the exchanges that occur within those relationships regarding information on products and services. We use marketing tools to define and instruct new product usage and customer purchase decisions. We use marketing messages to introduce and revitalize product features. Marketing connects the consumer with the producer.
The marketing mix is often called “The 4Ps of Marketing” and is made up of the following elements:
- Place, and
It is the interaction of these elements that creates an overall relationship of a product with the customer. Customers do not buy products or features; instead, consumers look for experiences that will solve their problems and will leave them satisfied. The marketing mix yields a deliberate set of decision for management to describe the brand relationship with the customer.
Of course, the most obvious interaction between a customer and manufacturer is through the product. Products may be available directly to consumers (B2C) or they may be sold business-to-business (B2B). Every product is different and it will go through various iterations as it works through the product life cycle.
Customers look at the core product, which is the actual benefit they derive from using the product. For example, the core benefit of a food product, like cereal, is to gain nutrition.
The next level of the product is the tangible product. Here the focus is on the physical features and unique selling proposition of the product. In the case of a service, the “tangible” product is the delivered service. The tangible product includes features, attributes, and packaging of the product. For a bottle of wine, the flavor, smoothness, and label decoration are all tangible elements of the product.
An augmented product encompasses additional value of the product. Companies may add complementary services to a product in order to differentiate themselves from the competition. These service might include installation, warranty, and after-sales customer service. It is within the arena of augmentation that firms can build market share and brand reputation. While a physical product can be copied or imitated, customer-facing market interactions cannot be. Organizations can use augmentation as a differentiator leading to repeat business through excellent customer service experiences.
Finally, the outermost layer of a customer’s experience with the product is the future product. All New Product Development Professionals (NPDPs), Professional Engineering Managers (PEMs), and marketers must be aware of the future and its impact on existing products. Customer needs and market trends can change rapidly. One way to successfully navigate the future is to monitor the product’s position in the product life cycle. Other ways to keep a product fresh is to continuously gather customer feedback on the degree of which to product solves the customers’ problems as well as to study emerging “jobs-to-be-done.”
Customers must sacrifice something to use a product. Organizations want that sacrifice to be less than the benefit that the customer receives and large enough to make a profit for themselves. Normally, the “sacrifice” a customer makes is financial – s/he spends money to acquire the product. However, customers also make sacrifices in learning how to use a new product and in choosing one product over other competitors.
Pricing models must allow the manufacturer to make a profit but must consider the maximum sacrifice a customer is willing to make in exchange for the perceived benefit of the product. One standard pricing model is called “cost plus pricing”. In this situation, the producer has a good handle on the cost to manufacture the product and adds a desired profit margin to establish the selling price. Normally, the mark-up is a percentage of the cost.
A second pricing model is “competitor-driven” or “going-rate pricing”. In this case, a product’s price is set in equilibrium with products offered by the competition. The market will have already established acceptable prices for a product category that reflect consumers’ trade-offs between needs, benefits, sacrifice, and supply and demand.
Other pricing models are designed to help a firm set the initial offering price for a new product. These include penetration pricing and price skimming. Prices of new-to-the-market goods are set at low or high values relative to the benefit/quality of the product in order to establish a strong market presence and early market share.
In the 4Ps of Marketing, place refers to the distribution channel and availability of the product for purchase. You might want to add the word “convenience” to the definition of place because today’s busy customers demand ease-of-purchase alongside measurable product benefits in the marketing mix.
Distribution decisions for products include whether to market directly to the customer or to use an intermediary. Many B2B products use direct, personal selling and do not involve intermediary brokers or wholesalers.
On the other hand, most consumer packaged goods – the kind of products that we buy weekly or monthly at the supermarket or drug store – involve multichannel distribution partners. Under these circumstances, a product is transferred from a manufacturer to inventory, to one or more wholesale distributors, and eventually to store shelves of a retailer. Each step in the supply chain adds complexity to the marketing relationship as well as adding cost since each partner expects to profit on their business activities.
Logistics are further complicated today by decisions of selling online or in physical retail outlets, called “click or brick” choices. For some products, the marketing decision will be to include both distribution channels for customer convenience. In other situations, a manufacturer will choose only online or only physical distribution. A company needs to consider the customer’s perspective regarding the environment, convenience, and pricing in making a “place” decision.
Finally, the fourth “P” in the marketing mix is the promotion of the product. Promotions summarize all of the communications between an organization and potential customers to build and sustain the marketing relationship. Communications involve advertising, publications, direct marketing, and sales promotions.
Product communications, or promotions, must reach and positively influence category opinion leaders. We see that reviews on Yelp or TripAdvisor influence new customers significantly in their decision to experience a particular restaurant, hotel, or resort. Some promotions are now fully digital with no investment in other advertising media. YouTube videos are used as direct marketing along with building communications to establish a general brand presence in a given market.
The Marketing Mix Decisions
New product development practitioners and engineering managers have a great deal of control over the marketing mix, especially for new products in the introductory stage of the product life cycle. Marketing is the primary method in which a manufacturer communicates with consumers and potential new customers. Four elements intertwine to build brand awareness and desire for a customer to choose one product over all other competitors.
The elements of the marketing mix are known as “The 4Ps of Marketing,” and managers must make varying decisions and investments throughout a product’s life cycle to address product features, pricing, distribution (place), and sales promotions. Products must solve real customer problems and deliver a benefit greater than the customer’s sacrifice (cost). Consumers should find the product convenient to purchase (place) and should be convinced of the relationship they have with the producer (promotion).
To learn more about the 4Ps of Marketing and the interaction with the product life cycle, you will enjoy a short e-book on The Product Life Cycle. Or you might like to learn more about innovation best practices in a new product development workshop. Please contact me at email@example.com or 281-280-8717 for more information. At Simple-PDH, it’s simple to study, learn, and earn!
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