04 October 2019
DEFINITION: Business is the art of influencing customers. Marketing is about working out how.
The core to understanding marketing is to remember the customer makes the decision to buy your product, your competitor's product, or to buy nothing at all. Marketing is an attempt to influence that decision.
The 'marketing concept' proposes that in order to achieve the firm's objectives, the needs and wants of consumers should be anticipated and satisfied more effectively than competitors.
To achieve this, you must have a thorough understanding of who your best customer is, what choices they have, and how to get inside their head to develop a preference for your product or service.
At the very least you want your customers to buy your product or service on a logical level.
At best you want them to be emotionally attached.
The ultimate: they buy your product or service because it defines who they are
So, much of the marketing person's work is about developing this insight, shaping the product attributes to achieve a superior value proposition and then working out the most cost effective way to cut through the clutter to deliver the right marketing messages to create this emotional connection.
Does emotional connection work for all products?
I think we all understand how people make car buying decisions based on their own self-image. However, buying decisions are complicated by practical reality; I might see myself as a Ferrari person but I can't afford one and/or it might not be practical for taking the kids to school. Despite this, Ferraris seem to find customers to buy them.
What about buying concrete? Supplying concrete is a business; does the marketing manager of a concrete supplier need to worry about emotional connection with the people who place orders for concrete? The answer is "yes" but in a different way. This article will explain the specialized approach companies take to marketing of industrial products B2B Marketing: selling planes, trains and widgets.
Suffice to say when placing an order for any product (consumer or industrial) at some point a person will consider their confidence about making the right decision. It's an emotional response. The least successful method of achieving competitive advantage is to aim to have the lowest price. The practice of marketing is about hunting for ways to gain competitive advantage without always resorting to lowest price.
The person in a construction company or concreting contractor placing an order for 10 truck loads of concrete will be looking for a supplier who can deliver at the right price, meet the schedule, deliver the specified grade of concrete, and do it reliably. You don't want to be half-way through the pour and the last 5 trucks arrive late or not at all. Likely he/she will place the order with a supplier they trust (that's called branding) and they'll do this because they are an experienced, construction industry professional - it defines who they are.
The Marketing Triangle
The market dynamics is a broad term to describe the interplay between three players...
- The nature and attributes of your product or service
- What the customer needs to solve their problem
- What the competition is offering
Of course, both "the customer" and "the competition" are mostly more than one, making the dynamic more complex.
Inherent in this definition is the concept of competitive advantage, which is achieved by manipulating the Four Levers of the marketing model...
The Four Marketing Levers
The assist with understanding the Marketing Triangle, the customers' needs and the product offerings are dissected into four categories...
The Four Levers is traditionally referred to as the Marketing Mix or the Four P's.
The difference between marketing and promotion
Most people confuse 'Marketing' with 'Promotion'; as you can see from the above list (the four levers)...
Promotion is a subset of the total marketing concept.
Promotion specifically refers to a wide range of activities intended to build brand awareness and generate leads (for example advertising) or to transact the sale (for example direct selling). In traditional marketing theory all the many promotional techniques are referred to as the Promotions Mix.
Promotion is the most visible manifestation of marketing, and hence is often referred to as "marketing".
However, the danger is by thinking marketing only refers to the promotion component leads many firms to overlook the discipline of undertaking the development of a true marketing strategy, and hence miss the opportunity to develop a powerful value proposition.
Many marketing managers are more properly advertising managers because they have little say in the product strategy, pricing, and distribution decisions. That leaves only promotion. To be fair, in terms of management time, executing promotional activities is the largest component of a marketing manager's work. However, only having responsibility for the promotions strategy (and decision making power) weakens the organisation's ability to develop a competitive advantage.
Often R&D and manufacturing decide what the product is, finance decide the price (usually using a cost plus pricing model), the distribution strategy was set long ago and is rarely reviewed and the marketing manager is told "go get us some sales leads. This is your budget."
Total responsibility for the firm's marketing strategy doesn't need to be given to one person (a marketing manager), but should be reviewed in its entirety (Product, Price, Distribution and Promotion) through some regular process.
The marketing department
However, in large firms managing a portfolio of products, the responsibility for developing and implementing marketing strategy is assigned to a number of product managers (sometimes called "brand managers") who may each manage one important product or a portfolio. Their job entails recommending the marketing strategy, developing the marketing plan, and project managing its implementation. A group of product managers are supervised by the General Manager Marketing (sometimes called "Marketing Director" or "Vice President Marketing").
The product manager may set the marketing strategy annually but throughout the year is constantly monitoring sales results, competitor analysis, implementing promotions, briefing distributors and working on joint business plans, undertaking customer research, producing sales forecasts and management reports, and liaising with the sales department. The marketing strategy is constantly reviewed and adjusted in response to new data.
The product manager also has responsibility for ensuring the product specification maintains its attractiveness to the customer and keeps pace with new technology, changes in legislation, and any other external trend. The product manager will likely be working with product development specialists, manufacturing and others to make improvements or be working on the next new release.
Having a person dedicated to constantly monitoring the market and adjusting the marketing strategy leads to the development of sophisticated tools and methods and a highly responsive approach. This provides larger firms who can afford to employ marketing specialists a considerable advantage over smaller players.
Different businesses have a different approach to the concept of product management. The above explanation is oriented to a manufacturing organization. Large retailers and wholesale distributors for example employ "category managers" (sometimes called "buyers"); their product development responsibility consists of researching the best available products (often from global manufacturers) and negotiating/re-negotiating supply contracts and/or distribution agreements.
Wholesalers and retailers who sell products manufactured by others have a range of relationships with their suppliers. In some cases, the buyers have the power. Access to their retail outlet is critical to the manufacturer's success and they know the retailer has alternatives. This is particularly true of consumer goods sold through supermarket chains and hardware products.
However, in technical product markets often the manufacturer has the power and being appointed a distributor of a market leading technology brand is a prized achievement. In this situation, the wholesale distributor has two customers - their suppliers and their buyers. Keeping both happy while still making a profit is a juggling act.
Marketing Strategy Matrix
The marketing strategy matrix (depicted) shows the relationship between the Four Marketing Levers and the Marketing Triangle.
The development of a marketing strategy is achieved by undertaking sufficient research and analysis to inform writing succinct statements in each cell in the above matrix. After collecting a lot of research to understand the market dynamics, you want to distill this information into tight summarized statements to put in the grid so you can stand back, look at it, discuss it with colleagues, and make an informed decision.
The firm has no control over the first two columns (Customer & Competition), and must simply find out and report "what is"; however, the final column "Your Product or Service" is what the firm can control.
Exerting this control is called "marketing"
Developing a competitive advantage is about deciding how you will make your offering superior to the competition by better matching the customer's need than your competitors in one (or all of) Product, Price, Distribution, and Promotion.
Superiority in one (or all) will provide "leverage" over your competition hence why we refer to Product, Price, Distribution and Promotion as The Four Marketing Levers.
Developing the all important "emotional attachment" is a long term marketing objective where the planets are in perfect alignment between your Product, Price, Distribution and Promotion and the customer's perception of what best matches their need.
The principal concepts are...
- Market segmentation: not all people are the same. Segmentation means dividing the customers up into groups having common attributes, attitudes and behaviors. Thus, the market segment matrix above may need to be repeated for each market segment (if you're targeting more than one).
- Positioning: Matching the marketing mix (the four levers) to the requirements of the market segment. Some products are positioned as 'premium' and have product features and pricing to match, others are deliberately positioned as low cost alternatives. However, positioning can have many dimensions.
- Branding and image: Developing a firm product concept, recognition and awareness of your product and how it is positioned in the collective minds of the people making-up your target market segment.
- Promotion: Is the collection of communication tools and sales activities designed to inform the target market to help establish brand, image, value proposition and call to action required to make sales happen.
The difference between Marketing Strategy and Marketing Planning
A Marketing Strategy is not the same as a Marketing Plan.
However, clearly the two are linked; the marketing strategy informs the marketing plan.
The marketing strategy is a statement defining how the firm will achieve competitive advantage (as described above), the marketing plan is the proposed process and tasks for implementing the marketing strategy, typically including a timetable and budget.
The marketing plan typically describes the planned promotional activities, however it should include all aspects of the marketing mix, particularly where significant product development is required, and arrangements are needed to set-up distribution channels.
Marketing is multi-disciplinary
The setting of marketing strategy (making decisions about product, price, distribution and promotion) does not happen in a vacuum; it will involve discussion with other specialists in the organisation. A marketing manager or product manager needs to consider the practical realities of their strategic decisions.
The main consideration is the financial consequences of the marketing strategy.
Building the best product often means that it needs to be sold at a higher price to make a profit. However, if the market segment that the high spec product is designed for is too small, the volume of sales achieved may not be sufficient to recoup the R&D cost, manufacturing costs, and promotional costs to deliver an acceptable profit.
Hence, the development of the marketing strategy has to be guided by financial feasibility.
To obtain the cost inputs to build the feasibility model (depending on the product or service) may require working with product engineers and manufacturing managers.
The sales department will want input as well. The average sales cycle required (will it take 1 day or 3 years to close the average sale?), what adjustments to the sales plan will be required (is this a product that requires a dedicated focus or can they tuck it under their arm and sell it alongside existing product lines?) and if distributors are involved what is their view?
In any organization, each department (finance, manufacturing/operations, IT, customer service, sales, marketing, R&D, perhaps even HR) will have a view their department is the most important. Typically, they assume "without them, this organisation would cease to function." In fact, they're right. They're ALL right.
However, the customer has the final say. The marketing department's job is to understand the customer and ensure the entire organization is oriented toward better satisfying their needs than the competition. And do it profitably.