Where Can I Buy It?

The 3rd ingredient of the Marketing Mix is PLACE. Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store, as well as virtual stores on the Internet. It is also the mechanism through which goods and/or services are moved from the manufacturer/service provider to the user or consumer.

There many factors that a manufacturer has to decide of what strategies it will use in placing its products. Will it use direct or indirect channels? Single or multiple channels? What type of intermediary will it use? How many intermediaries at each level to use? Which companies to use as intermediaries to avoid intrachannel conflict?

Marketing Mix- Place

Marketing Mix- Place

Aside from the strategies to be used, the manufacturer will also have to consider some factors in choosing a distributor (intermediary). Such as the knowledge of the distributor of the target consumer and segment, the compatibility of the manufacturer and the distributor in terms of policies, strategies and image, the track record of the distributor and training and support the distributor will require.

There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseas distributors, direct marketing (from manufacturer to user without an intermediary), and many others.  The wholesalers are the ones who break down ‘bulk’ into smaller packages for resale by a retailer. They buy from producers and resell to retailers. They take ownership to goods and provide storage facilities. The wholesaler will also often take on some of the marketing responsibilities.

On the other hand, the retailer has a much stronger personal relationship with the consumer. The retailer will hold several other brands and products and will often offer credit to the consumer. The retailer will also give the final selling price to the product.

Agents are another distribution channel. An agent will typically secure an order for a producer and will take a commission. They do not tend to take title to the goods. This means that capital is not tied up in goods. Agents can be very expensive to train. They are difficult to keep control of due to the physical distances involved, and can be difficult to motivate.

The Internet has a geographically diverse market. The main benefit of the Internet is that niche products reach a wider audience. Using e-Commerce technology provides easy payment and shopping. In today’s market, there is a paradigm shift in commerce and consumption which benefits distribution via the internet.

Determine the Place Where They Can Buy It,
Samuel Carrara

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How Much Is It?

Now that you have a product to sell, the next problem is what price are you going to sell it for? There are many factors to consider when deciding on a price for a product but the most important factor is the willingness of the customer to buy the product for a certain amount.

Although competing on price is as old as mankind, the consumer is often still sensitive for price discounts and special offers. Price has also an irrational side; something that is expensive must be good. Let’s discuss the four main policies or  strategies in putting a price on a product. Another important factor is that you want your customer to choose you based on value, let others race to the bottom in a price war.

Use a high price when there is something unique about your product or service. This strategy is used where you have a substantial competitive advantage. Such high prices are charged for luxuries such as traveling in a private jet or taking a vacation at the Atlantis Resort in the Bahamas.

The price charged for products and services is set artificially low in order to gain market share. Once this is achieved, the price is increased.

This is a no frills low price. The cost of the marketing and manufacturing are kept at a minimum. Supermarkets often have economy brands for soaps, canned goods, etc.

Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply.  For example, a company introduced an environmentally sustainable plastic. The company will sell the plastic at a high price, for which other companies will eventually produce the plastic. By the time there are other companies producing the plastic, the original producer will decrease its price and others will eventually follow. This is also known as “stair step.”

Marketing Mix- Price

Marketing Mix- Price

Determining a price for a product is not limited on those strategies alone. There are still other policies/strategies that can be used to price a product:

This strategy is used when the marketer wants the consumer to respond on an emotional, rather than rational basis. For example, when a container of cleaning spray is priced at $2.99 rather than $3.00. The penny “lost” is made up quickly with volume as people see the two dollars and miss that it really is three dollars.

Where there is a range of products or services the pricing reflect the benefits of parts of the range. For example a beauty salon, a basic manicure could be $10.00, basic manicure with high-end nail polish $13.00 and basic manicure with hi-end nail polish and 15 minute hand massage $15.00.

Companies will attempt to increase the amount customers spend once they start to buy. Optional extras increase the overall price of the product or service. For example movie houses will charge for optional extras such as guaranteeing a seat of your choice. These “upsells” increase the total profit on the sale drastically as the initial sale already covered your fixed costs.

Where products have complements, companies will charge a premium price where the consumer is captured. For example Gillette will charge a low price for its MACH 3 starter packs and recoup its margin from the sale of the MACH 3 disposable blades (regular and Turbo).

Here sellers combine several products in the same package. This also serves to move old stock. For example a supermarket can bundle a shampoo, conditioner and hair serum (old stock).

Pricing to promote a product is a very common strategy. For example a three pack of chocolate pudding Jell-O for $2.87, and then you will get a cup of their Cinnamon Roll Jell-O Pudding (new product) for free.

Geographical pricing is evident where there are variations in price in different parts of the world. For example strawberries when in season can cost $12.00 in California while when you buy the same strawberries in New York it will cost you $15.00. Cost differences can be attributed to affluence level of the customer, overhead costs, shipping, and may other factors.

This strategy is used where external factors such as recession or increased competition force companies to provide “value” products and services to retain sales. A great example for this strategy is the value meals at McDonald’s. (Though the value meal now seems to eat more money out of your wallet than it used to.)

With so many ways to price your product or service, which would you choose? I suggest to differentiate yourself from your competition.

How Much Is It?
Samuel Carrara

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Understanding Your Product

For some, a product is simply the tangible, physical entity that may be buying or selling. The product is more than just the plastic, metal, wood, electronics or other components that come together. There can be three levels of a product: the CORE product, the ACTUAL product and the AUGMENTED product.

Marketing Mix- Product

Marketing Mix- Product

CORE PRODUCT is the BENEFIT of the product that makes it valuable to you. For example, when you buy a car, you can travel anywhere at your convenience. Your convenience of traveling anywhere and anytime you want is the BENEFIT of buying a car.

ACTUAL PRODUCT is the tangible physical product. The car that you bought is the ACTUAL PRODUCT. With leather seats, an iPOD dock, sun roof, 17 inch mag wheels, etc.

AUGMENTED PRODUCT is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium. Using the same product, the car dealership gives you an offer to finance the car by paying 10% down payment and the rest will be payable in 12 months with 0%. Or if you decide to pay the full price of the car, the dealership will give you a 25% discount on all repairs and services. The financing of the car and the discount on the repairs and the services are the augmented products which the buyer will not have to pay for it but an added value of the car.

Which of these benefits does your target market really care about? Have you asked them? Your important benefit and theirs may not align.

Understand Your Product,
Samuel Carrara

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Marketing Mix- Like Baking a Cake

What is a Marketing Mix and why do I care?

The Marketing Mix is probably the most famous marketing term. The term became popular after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940’s after James Culliton had described a marketing manager as a “mixer of ingredients.”

Marketing Mix Overview

Marketing Mix Overview

The marketing mix set a set of controllable, tactical marketing tools that work together to achieve company’s objectives. These controllable tools are the four Ps of marketing: Product, Price, Place and Promotion. These four Ps are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment.

The goal is to make decisions that center the four Ps on the customers in the target market in order to create perceived value and generate a positive response. Think of it like baking a cake. Flour, eggs, sugar and butter are the ingredients for the cake. Mixing them with the right measurements will produce a not-too-sweet soft moist cake. But if you add more sugar or separate the egg whites and make soft peaks, the cake will turn out different – a sweeter and lighter cake.

Over the coming weeks I will go more in depth of each aspect of the Marketing Mix. I actually took a cake decorating class recently and have been experimenting with different cake icing flavors and what to decorate. Just when you think you have the “right” mix, your can add something different and see how your customer (target market) reacts to it. These split tests can help your marketing mix to better match your intended audience.

Marketing Mix It Up,
Samuel Carrara

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Recalibrate Your Business

I like running a few times a week anywhere from three to five miles at a time. Each month I’ve been running a 5 kilometer (3.1 miles) race. For Christmas my wife got me a Nike Plus (Nike+) to track my distance ran and to help improve my runs. Overtime as you get better the sensor needs to be recalibrated to more accurately measure your runs.

Example Nike+ Pouch

Example Nike+ Pouch

Lately I have had to run farther than normal for the Nike+ to show I have run a 5K. After the first time I went to recalibrate the sensor, I thought I was okay. The next day I had a 5K race and at the end the Nike+ said only 4.2 kilometers, way too short. Then I remembered that my youngest child a few days ago said, “What’s this,” as she was taking the sensor out of the pouch. I checked the sensor after the race and found out it was upside down!

I placed the sensor right-side up. Then I went to recalibrate the Nike+ again, it worked correctly this time. So now I should be good for my runs for awhile. Recalibrating applies to business also.

Regardless of how large or small your business is, you need to occasionally need to recalibrate the business (systems, customer service, order process).

Why would you need to recalibrate?

  • Brand image changed
  • Better technology available
  • Other new products you can cross-promote
  • More employees so different communication needed
  • As “copy-cats” abound, nichifying your products for the long-tail
  • Many more reasons are possible.

Taking all of these new aspects in mind, do these Action Steps:

  • Write down a brain storm of some changes that can be made to better meet the need of your target market.
  • Then order these changes by complexity and time required.
  • Immediately get the easiest three done to get some immediate impact for your company.
  • Then make a plan to do one more change each week or month.

Recalibrating is not a one-time event, any time your business changes drastically it is good to examine the changes. Also an “Annual Checkup” helps to increase efficiency of the business. What can you improve right now?

Samuel Carrara

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