1.4 The Marketing Strategy Process: Path to Profitability

The path to profitability starts with understanding the needs and wants of customers within the context of the marketing environment. First, customers are grouped into relatively homogeneous subgroups or segments so that customers within a group are similar to each other in the way they respond to the marketing effort directed toward them, which is called segmentation. Next, the company selects or targets segments to serve, which is called targeting. Then, the company positions its product offering for the target customers, which is called positioning.

The Marketing Mix—4 Ps

The 4 Ps of the marketing mix—product, place, price, and promotion—represent the building blocks of marketing strategy. Marketing managers are like business owners: they have products and services to sell, budgets to keep, and profits to make. The decisions marketing managers make regarding the marketing budget and profitability revolve around the marketing mix.

Product

Product refers to products or services. A product is a bundle of attributes in which each attribute and combination of attributes creates value for customers. Demand for a product is generated by customer needs.

Place

Place refers to where products are purchased. Place can be a wide variety of sales outlets, such as a physical brick-and-mortar store, a kiosk in a shopping mall, a counter in a movie theater, or a website on the internet.

Price

Price refers to the amount paid for a product. In many ways, the price is the most difficult element to get right in the marketing mix. Manufacturers are concerned with cost, whereas consumers are concerned with price. Being focused on cost can lead to prices that are too high, squelching demand, or prices that are too low, shrinking profitability.

Promotion

Promotion refers to many different marketing activities, such as advertising, public relations, sales promotions, trade promotions, personal selling, and digital marketing. Promotion and marketing encompass much more than television and print advertising!

Each element of the marketing mix requires the marketing manager to make choices. For example, if we add a new product, should it extend the brand into a new category (brand extension) or should it extend the line with a broader set of options (line extension)? Should a new product be premium-priced with many cutting-edge features or economy-priced with a trimmed-down feature set? Where should we sell the product? Should we limit ourselves to a few exclusive outlets or should we aim for wide distribution? Does the color and type of package matter? What should we put on the package to make it stand out so consumers choose our product rather than a competitor’s product? Should we price the product based on its cost to manufacture and distribute or based on customer value? What can we do to increase the perception of value a customer receives from the product? Which promotions will build sales without undermining perceptions of product quality? What are the best ways to build awareness and product interest? Which messages are best at driving product sales?

Crafting a cohesive marketing mix is the bread and butter of marketing management, and when it comes to the marketing mix, it is obvious that there are a lot of complicated decisions involved. Marketing managers try their best to get everything right; however, monumental disasters happen, like Pizza Hut’s Bigfoot, McDonald’s Arch Deluxe hamburger, New Coke, and Pepsi Slim. Just google “marketing flops” and read on in amazement! Experience, marketing research, consumer insight, and hard work all help marketing managers make good choices. Additionally, to avoid big misses, we recommend marketing through the eyes of brand champions, which we’ll talk about in the next section.