1.7 Target Market + Marketing Mix = Marketing Strategy

Here is some important marketing math: When we add the target market to the marketing mix, we get to the core of marketing strategy—creating value for customers. The marketing mix comes together when we focus on a target market. We can focus on marketing through the eyes of brand champions and bringing “swing group” customers into the brand champion camp. Or, we can look for underserved customer targets and design a marketing mix to fill the gap in the marketplace.

Marketing Plan

One step beyond the marketing strategy is the marketing plan. Adding an itemized budget and a time schedule to a marketing strategy generates the marketing plan. For example, Little Caesar’s Pizza targets economy-minded single adults and families looking for a quick, satisfying meal they don’t need to prepare or clean up. Note that a target is comprised of a specific type of person in a particular usage situation. With this target in mind, Little Caesar’s offers two pizzas for the price of one (with minimal toppings and cheese) that customers can pick up from a low-rent storefront with little or no seating. Little Caesars' product, place, price, and promotion work together to deliver exactly what their economy-minded brand champions are looking for.

Building a Successful Revenue Model

Building a successful revenue model requires marketing managers to know how they will acquire customers, retain customers, forecast the amount purchased by typical customers, and calculate the margin earned per sale.

Customer Acquisition

Some questions that should be asked when thinking about acquiring customers are as follows: Which customers are targeted? How will they be made aware of the product? What is your unique selling proposition? How much will it cost to acquire a customer?

Customer Retention

Repeat purchases on many brands are only about one in three. Converting a person from trying the product to becoming a loyal product user is no easy task. Some product categories have high customer loyalty, such as smartphones. Other product categories have low customer loyalty, such as automobile insurance. What is the approach to keeping customers and encouraging customers to recommend the product to others?

Sales per Customer

If customer acquisition costs are high, then sales per customer must be high. Customers will need to purchase frequently and remain loyal customers for a long time. The sales per customer are impacted by the type of product. Consumable products are frequently purchased and are often habitual, meaning that once the decision to use the product is made, let’s say for laundry soap, in the absence of technological change, that same brand may be used for generations. Another type of product is durable products,which are often expensive and designed to last a long time. Durable products are purchased infrequently and trigger a series of complicated decisions each time one is purchased.

Margin

Margin is the difference between price and cost. It sounds simple, but it is a bit complicated. Retail price is not the same price a manufacturer gets paid for a product. Depending on the retail margin, the manufacturer's price to the retailer can be significantly less than the price paid by consumers. Also, costs include variable costs to manufacture and distribute the product, costs for the machinery to build the product, and overhead costs to pay for managers or rent machinery, or building space, etc. Margin is the critical element in a successful revenue model.

For example, with the invention of the Frisbee, inventors Walter and Lucille knew there was potential for a good business when they learned they could buy a cake pan for a nickel and sell it as a "flying" cake pan for a quarter. Successful direct-sales marketers know they must sell a product for five times what they pay for it.