PART II

Marketing Mix Decisions

Overview

You have completed a SWOT (Strength, Weakness, Opportunity, Threat) analysis of the current marketing situation facing the business. Your macro­environmental audit of the business identified its opportunities and threats while your marketing audit identified its strengths and weaknesses. The keys to SWOT analysis are to focus on quality, to describe key customers, to compete on strength, and to delegate weaknesses.

Competition

Your SWOT analysis guides the positioning of the business relative to its three types of competitors.

• Direct competitors offer similar products and services to similar customers.
• Industry-wide competitors offer similar products and services to different customers.
• Indirect competitors solve similar problems for similar ­customers.

Growth Strategies

Before deciding on the positioning of a business, consider the four business strategies for growing a business.

• Penetrate the current market
• Develop a new market
• Develop a new product or service
• Diversify by developing a new market and new product or service.

Positioning

Ideally, position the business to generate the greatest value for its key ­customers. The first step in positioning is to identify the major competitors of the business and to assess their competitive advantages, strategies, and market positions.

Next, identify market segments that these competitors do not adequately serve with their products and services. Rank them by their profit potential and evaluate their fit with the business. Then select the highest ranking market segment that is substantial, motivated, and easy to reach with promotions. Define these key customers as the target market of the business.

Finally, position the products and services of the business to serve this target market. In other words, the business should solve their problems of its key customers with distinctive products and services that are designed, distributed, promoted, and priced especially for them.

Life Cycle

Be aware that the positioning of a product, service, or feature changes over its life cycle. Some products and services such as buggy whips and typesetting are obsolete. Many innovations such as drones and bit currency were technically possible for decades before they caught on in the marketplace.

The life cycle for fads and technical innovations is usually shorter than that for traditional products and services. For example, WordPress developed templates for mobile devices, and this innovative feature became essential within a decade. Table II.1 shows how WordPress positioned this feature over its life cycle.

Table II.1 Website templates for mobile devices

Summary of Marketing Mix Decisions

Overview

The keys to marketing mix decisions are to offer treasures, to deliver delight, to trumpet empathy, and to price as valued.

• The business offers treasures to key customers and discontinues products and services they do not value.
• Its distribution consistently delivers delight to key customers of the business.
• Promotions of the business trumpet its empathy with key customers.
• The business prices its products and services by the value they provide key customers.

Products and Services

Aesop encourages us to offer different strokes for different folks. A wise business offers products and services that key customers will treasure and discontinues features, options, and product lines they do not treasure.

Key customers are willing to pay high prices to get exactly what they want. However, other customers are more sensitive to pricing and may switch to lower-priced competitors.

Research indicates that customers buy more when they are offered fewer choices. Too many features, options, and product lines tend to confuse them. The Pareto distribution predicts that 99 percent of the items produce less than half of the profits. The fifth key to enhancing profits is to offer treasures.

Distribution

Aesop describes how the consistency of the tortoise allowed him to win the race against the hare. He observes, “A naturally gifted man, through lack of application, is often beaten by a plodder.”

Distribution channels win the prize of customer loyalty by consistently delighting key customers. Franchises are successful because they understand exactly what their key customers seek and they develop systems to consistently deliver it to them. A wise business retains the top 20 percent of the distribution channels, adds similar ones, and discontinues other distribution channels.

Pareto discovered how to consistently predict results. Whenever scientists plot inputs and their results on logarithm scales, the data points consistently trace a straight line. This indicates that the Pareto distribution is a universal law of nature. The sixth key to enhancing profits is to deliver delight.

Promotion

Aesop said that an egotistical businessperson is “his own trumpeter.” Most prospects ignore such hyperbole because they seek personal benefits and lasting value from your business, not egotism. In contrast, effective promotions are empathetic with the benefits and value desired by key customers and prospects of the business.

When creating a promotion, start with the most important promotional decisions and select the most empathetic option for each decision. Then present a short list of possible promotions to some key customers and ask them to select their favorite promotion.

Conveying empathy will satisfy key customers, attract similar prospects to the business, and retain their loyalty. The seventh key to enhancing profits is to trumpet empathy.

Pricing

My cousin’s eBay business proves that one person’s junk is another ­person’s treasure. Aesop reminds us, “Utility is most men’s test of worth.”

The breakeven point is where the line of total revenue crosses the line of total cost. If a business sells fewer units than the breakeven volume, it loses money, but if a business sells more units, it earns a profit. When a business lowers its costs or raises its prices, the business needs to sell fewer units to breakeven. The more units it sells above the breakeven volume, the more profits the business earns.

If the business appeals to the masses, then charge a relatively low price, but if the business appeals to a select few, then charge a relatively high price.

Marketing research can reveal the value of your items to key customers. Charging too little will discredit a product or service’s value, whereas charging more will imply your item delivers more value and thus is worth more. The eighth key to enhancing profits is to price as valued.