What are the variables a company must control to successfully implement a marketing strategy for each target market? What does “marketing mix” mean, what are its different models and how can it help organizations?
In this article, you will learn how to use and master a marketing mix to improve your business’ bottom line. This is an evergreen concept in the #MarketingPlan and determines the right company orientation toward a marketplace.
Let’s get started!
Table of contents
THE 4Ps OF MARKETING MIX
The marketing mix is the pillar of a marketing strategy and consists of a series of tools to guide a company through the ups and downs of its industry.
It drives decision making during the whole process of bringing a product or service to the market.
There are many models of marketing mix that have followed over time.
Let’s see what they are and how they have evolved.
The first model was presented in Basic marketing: a managerial approach by American marketing professor and author, Edmund Jerome McCarthy, in 1960.
McCarthy classified various marketing activities and grouped them under four dimensions:
Product;
Price;
Place;
Promotion.
That’s why it is called the 4Ps of marketing mix.
The image below depicts the 4Ps of marketing mix according to the earliest formulation of McCarthy.
Product
Product is what satisfies consumers’ needs and wants. It can be tangible (an actual product) or intangible (a service, ideas or experiences): what is being sold?
As you can see from the elements listed in the image above, it groups all the marketing decisions connected to the aspect, design and characteristics of a product/service.
What are the main components of a product?
Marketing and management of Kotler and Keller has identified five components that characterize a product.
The five product levels model gives an idea of how much a company can improve a product:
The potential product is what the product can become in the future. It includes all the upgrades and modifications that a business can make to increase its life;
The augmented product represents all the additional services and goods like installation, complementary products, after-sales or customer service, warranty, shipping, credits…;
The expected product represents the benefits and features the consumer expects. It changes according to each individual’s perception;
The actual (or generic) product is the basic item with essential features. This element is fundamental for startups, because in their early stages they must generate profit as soon as possible and might not have time or resources to develop a full and accessorized product. In this case, it’s called minimum viable product (MVP): a simple version with just enough features to satisfy early consumers and provide feedback for future improvements. Examples of variables can be the product’s quality, brand, design, packaging, characteristics...;
The core need and benefit is the main reason why a consumer should buy the product and represents the fundamental need or want to satisfy.
Let’s consider a hotel: the core is represented by a place to rest or sleep; the actual product can be towels, a bed, a bathroom and a closet; the expected product means taking for granted the presence of clean sheets and bathroom, a soft mattress and so on; the augmented product can be the Wi-fi, a free map of the town or room service; finally, the potential product can be made by placing new treats for guests in the rooms, including a spa or a gym and so on.
The same scheme may be shrunk in three parts and adapted for services:
Delivery process: customer role, time, staff... ;
Supplementary services: invoicing, order taking, exceptions, information, consultancy, safekeeping…;
Core service: it is the principal, problem-solving benefit customers seek.
In 1999, Christopher Lovelock and Jochen Wirtz grouped the best facilitating and enhancing elements to service delivery in the Flower of Service model which is described in their book Services marketing.
Facilitating elements:
Information guides consumers in the purchase process and educates them on sales conditions, terms of use, pricing and other useful details needed for a mindful purchase.
Order taking is a critical contact phase between company and consumers, because it represents how the company fulfills transactions (quality of the experience during the transaction process). It includes constant feedback on transaction progress, questions or other problems. If a customer is left without feedback, they will soon become frustrated;
Payment is the transaction itself and determines when a prospect becomes a client;
Billing must be clear, precise and sent on-time. People want to know how, when and what they are paying for.
Enhancing elements:
Consultation includes all the distinguishing characteristics of a proper tailored consultancy: consumers want to buy expertise, knowledge and a quality experience;
Hospitality stands for the refreshments and comfortable waiting area, and all those attentions necessary to make customers feel welcomed;
Safekeeping represents a business capability to keep customers’ records safe and private. A safekeeping failure can compromise the trust between seller and buyer;
Exceptions are also critical in services, because they make clients feel special and increase their loyalty/bond to the brand.
What’s one of the most critical aspects to consider in the product dimension of a marketing mix?
A fundamental factor that marketers should consider is managing their product/service through its life-cycle.
The product life-cycle theory was formulated in 1966 by American economist, Raymond Vernon, who addressed US exports in an article called International investment and international trade in the product cycle.
According to this theory, a product/service has a limited life and its sales go through different stages of ups and downs. For this reason, offerings require distinct marketing, production, HR and financial strategies based on their specific life-cycle phase.
This theory breaks down a product/service life-cycle in five stages according to the revenue generated over time:
Development: companies develop new products and services all the time, but only a small percentage reaches the market after the validation stage;
Introduction: the offering is promoted and consumers become aware of its existence. Revenues are still low, but they are going to grow exponentially in the next phase;
Growth: the demand and awareness grow. Sales increase on par with profits and production costs decrease. Competitors enter the market with their version of the product/service;
Maturity: the offering is now well known, the demand tends to stabilize and sales slow down. The industry is characterized by a thick competition which pushes the company to decrease prices in order to maintain the leadership. The market saturates and the company must activate some differentiating strategies to acquire new consumers. According to Marketing and management of Kotler and Keller, it can expand the market (market modification), change or improve the quality, features or style of the product/service (product modification), and edit non-product-related elements such as communication, price and distribution;
Decline: as soon as the offering becomes obsolete, sales and revenues drop till it’s not convenient to continue making the product/service anymore.
This theory should make marketers recognize that people have different readiness to try new products/services. In 1962, the American communication theorist and sociologist Everett M. Rogers described the timing for innovation adoption in his work Diffusion of innovations.
The graph above is the product adoption curve which divides adopters in five groups:
Innovators are pioneers who love new ideas and test new products for a cheaper price. They allow companies to discover offering’s weaknesses;
Early adopters are visionaries or opinion leaders who seek new technology to acquire a drastic competitive advantage. They are usually less price-sensitive and appreciate personalized solutions and superior customer support;
Early majority is composed by pragmatists who buy a product/service only when its benefits are proven. They represent the mainstream market;
Late majority is made up by conservatives who avoid risk and prefer buying for a cheaper price;
Laggards are skeptics who resist the innovation and prefer convenience rather than novelty.
Companies must design a specific marketing strategy for each group of consumers, if they want to move their innovation through the product/service life-cycle.
Diffusion of innovations implies another method to tailor a marketing strategy for the purchasing process. It is called AIDA and works for both products and services.
In this article, I present an overview of this model, because in my digital marketing strategies I use the inbound methodology which is more complete and appropriate. The AIDA model is a brief version of the inbound methodology.
The AIDA acronym was first presented in 1898 by the American advertiser Elias St. Elmo Lewis who worked to improve advertising strategy and, in one of his writings, stated (source: The development of the hierarchy of effects: an historical perspective by Thomas E. Barry, 1987):
The mission of an advertisement is to attract a reader, so that he will look at the advertisement and start to read it; then to interest him, so that he will continue to read it; then to convince him, so that when he has read it he will believe it. If an advertisement contains these three qualities of success, it is a successful advertisement.
The AIDA model is often used as a framework for landing pages, sales pitch and other strategic assets, and it follows these rules:
Attract attention;
Maintain interest;
Create desire;
Take action.
Price
Price is the cost to buy a product/service. For a consumer, it represents the money to spend for attaining certain benefits; for the company, it is the money asked for the offering.
Price also refers to consumers’ perceived value and includes the sacrifice that they are willing to make in terms of time or effort.
Price is critical for a marketing mix, because it is the only element that generates profit. All the other marketing mix dimensions produce costs.
There are many factors that affect price, some of the internal ones are:
Fixed costs (they don’t vary based on the production output, e.g.: lease payments, insurance, property taxes, interest expenses, depreciation...);
Variable costs (they vary based on the production output, e.g.: employees, raw material, packaging...);
Companies objectives;
Production capacity;
Product life-cycle;
Brand.
Instead, external influencing factors can be:
Market coverage (percentage of the market covered with a marketing strategy);
Market share (resulting percentage from the difference between a company’s sales and the total amount of product/service sold in the segment);
Competition;
Target segment;
Economic context;
Demand;
Laws, regulations and taxes;
Substitutes;
Distribution channels (presence or absence of intermediaries);
Culture.
At this point, the most important question should be what a company wants to achieve with its pricing policy.
Some of the pricing strategies could be:
Maximizing profits (revenues - costs);
Short-term survival: a company tolerates losses for a short period in order to win the competition or resist from an attack of competitors;
Maximizing ROI (profit ÷ costs);
Status quo: keeping the market stable;
Preventing new entrants: avoiding competitors to enter the market;
Cash flow;
Keeping a high quality of the product/service.
There are two variables that allow marketers to set a price: value and costs. A traditional approach considers the production costs as a starting point to make the price.
The cost-based pricing is good for commodities, but it can be counterproductive for different types of offerings. Let’s say that a company calculates the overall costs from making to selling a product/service and then adds a markup to make a profit. How can it know if the consumer would have paid more for that offering? Is the markup enough or could it be raised?
You see, this model generates the risk to underestimate the price.
The value-based pricing is the opposite and starts from the value perceived from consumers.
How much is the consumer willing to pay for the offering?
This model represents a modern approach to pricing and it is actually very effective for most products and services. Starting from the value attributed by the consumer allows companies to generate the right margins from the demand. Nevertheless, it requires an excellent knowledge of the target audience.
What is a pricing strategy?
Given a specific audience, a pricing strategy is a marketing action taken to set the best price for a product or service.
There are mainly five pricing strategies:
Price skimming: companies set a premium price to attract high-end consumers who don’t mind dealing with expensive prices;
Penetration pricing: companies set low prices to penetrate a competitive market. It can also be used to attract consumers who seek convenience;
Prestige pricing: it is a psychological strategy based on the principle that people make assumptions on the quality/price ratio and don’t buy if the price is too low. It happens with luxury brands, just think of a $10 Gucci bag: it doesn’t have value at all. People buy expensive and luxury brands to stand out and be recognized as members of a certain exclusive social class/category;
Competition-oriented pricing: companies study and apply competitors’ price;
Psychological pricing: companies set prices slightly lower the rounded number (e.g.: all prices that end with 9).
Promotion
Promotion includes all kinds of advertising, programs and activities (online and offline) to foster a product/service. It varies according to the segment served and marketing strategy adopted.
Place
Place is a marketplace where people can buy a product/service. It can be physical, like a store, or intangible, like an e-commerce, what matters is that it provides access to the product/service.
THE EVOLUTION OF MARKETING MIX:
7Ps, 8Ps, 4Cs AND 7Cs
About twenty years later, the community of economists and theorists started thinking of a more complete model to suit the complexity of services. The 4Ps of marketing mix is too simple to serve this purpose.
How have the 4Ps of marketing mix changed over time?
The 7Ps of marketing mix
In 1981, the professors Bernard Booms and Mary Jo Bitner published Marketing strategies and organizational structures for service firms where they presented the 7Ps of marketing mix.
This updated version added 3 dimensions to the original 4Ps: people, process and physical evidence.
People are fundamental in delivering any product or service. They represent everyone involved during the buyer’s journey, buyer themselves included: employees, partners, customers and even the relationships established among them.
Mood, character and behavior adopted during a service delivery affect the quality perceived by the customer. If the offering expects to satisfy more consumers simultaneously, they can influence their experience with each other. Just think of being at the cinema. If people start talking during a movie, you get upset and can’t follow the story anymore.
Some of the variables that affect this dimension are:
Employees recruitment and training;
Uniforms;
Scripting;
Queuing systems and wait management;
Handling complaints and understanding service failures;
Managing social interactions.
Processes are all the mechanism, planning and decision making that ensure a smooth delivery of a product or service. Some of the variables included are:
Designing processes;
Blueprinting (or flowcharting): it enables marketers to identify bottlenecks and contact point with customers;
Deciding between standardization versus personalization;
Locating fail-points, critical incidents and system failures;
Monitoring and tracking service performance;
Analyzing resources requirements and allocation;
Creating and measuring key performance indicators (KPIs);
Aligning with guidelines;
Preparing operational manuals.
Finally, physical evidence represents all the environmental elements that surround consumers during a service/product delivery. They are characterizing factors that can positively or negatively impact the delivery experience. For example: interior design, colors, layout, equipment, furniture or facilities.
This dimension also comprehends the experience before and after a transaction. For instance, invoices and souvenirs are physical evidence underlying the fact that the product or service was delivered.
Booms and Bitner stated that:
The physical evidence is the service delivered and any tangible goods that facilitate the performance and communication of the service.
It is the proof that a seller has provided (or not) what a customer was expecting. A physical evidence of an actual product is the good itself.
According to this framework, here are some variables:
Facilities (furniture, equipment, access...);
Spatial layout (functionality, efficiency...);
Signs (directional signage, symbols, other signs);
Interior design (furniture, color schemes, layout…);
Ambient conditions (noise, air, temperature...);
Design of material (stationery, brochures, menus...);
Artifacts (souvenirs, mementos...).
The 8Ps of marketing mix
According to Marketing and management of Kotler and Keller, marketing mix needs 8Ps to represent the modern panorama.
This model is based on the concept of holistic marketing (if you visit this link, you’ll find the detailed description at the end of the article): an interdisciplinary and interconnected subject founded on four pillars:
Relationship marketing;
Integrated marketing;
Internal marketing;
Performance marketing.
The 8Ps of marketing mix starts from the 4Ps model and adds people, processes, programs and performance.
I have already explained what people and processes are, but what about programs and performance?
Programs represents the integrated marketing aspects. Specifically, it enables marketers to consider a company’s overall portfolio of marketing activities before starting a new one. In this way, all marketing strategies and systems are integrated and supported by each other. This whole of marketing activities, offline and online, can successfully pursue multiple goals of the company.
If you want to further this point, you can find an in-depth documentation by following the link on “holistic marketing” that I’ve inserted before and read under the paragraph titled Integrated marketing.
Use the same link to discover more details about the performance dimension of marketing mix and read under the title Performance marketing.
In brief, performance represents all the financial and non-financial outcomes of a company. It represents implications that go beyond the classic revenue or profit concepts, in fact it includes elements such as:
Profitability;
Brand equity (monetary value of the brand itself);
Customer equity (total monetary life-time value of a company’s customers);
Social responsibility;
Legal responsibility;
Ethical responsibility.
The 4Cs of marketing mix
In 1990, the professor of advertising Robert Lauterborn shared a different approach to the 4Ps of marketing mix. In his work New marketing litany: four Ps passé: C-words take over published by the broadsheet newspaper Advertising Age (now become Ad Age), he presented the 4Cs of marketing mix: consumer, cost, convenience and communication.
Consumer means that companies should sell what prospects need and want. The starting point is the target audience and a preliminary in-depth study is necessary to make the best offering.
Cost represents the total cost of ownership for a product or service. The price is only a part of the costs borne by consumers. Lauterborn explains how other factors like time for accessing the offering (cost of time), effort for changing or implementing the new product/service or the choice for not selecting competitors’ products/services affect the purchasing cost.
The cost of conscience and guilt are also interesting.
The cost of conscience comes into play when consumers buy something that has social, ethical or other broader implications.
For example, a lot of consumers love IKEA’s fast-furniture: like fast-fashion in the clothing industry, it offers cheap furniture that can be easily changed as soon as another trend pops up. The fast-furniture culture has a huge negative impact to the environment. Jennifer Nini, activist and founding editor of Eco Warrior Princess has raised a legit question:
Can a company that relies on a low-cost, high-volume business model that encourages mass-consumption ever be sustainable?
In fact, IKEA is contributing to mass-deforestation and other social and environmental problems. As Ellen Rupell Shell wrote in her book Cheap: the high cost of discount culture:
IKEA designs to price, challenging its talented European team to create ever-cheaper objects, and its suppliers, most of them in low-wage countries in Asia and eastern Europe, to squeeze out the lowest possible price.
This is the cost of conscience.
The cost of guilt strikes every time a brand evokes guilt feelings in consumers’ minds. It’s not always a negative message, indeed marketers can present their offering as a solution for people’s guilt. An example is when parents feel guilty for not treating their children when they ask for candies at the supermarket.
Convenience considers all the factors affecting the ease of buying and finding a product/service, and retrieving information about it. With Internet and other hybrid purchasing models, place is almost irrelevant.
Communication underlines a two-way nature of dialogue between a business and consumers. While promotion starts from a company with an outbound approach, communication is cooperative and represents a much broader range of interactions between seller and buyer.
An additional adaptation of this model to digital marketing is the 6Cs of marketing mix consisting of the 4Cs plus content and community.
Content and community stand for the great importance of feeding a strong and passionate community with relevant content.
The 7Cs Compass Model
In 1973, the professor Koichi Shimizu presented an alternative model to the 4Cs of marketing mix and finally depicted it in his first edition of Advertising theory and strategies published in 1989.
Shimizu’s 7Cs Compass Model is a framework tailored to master co-marketing variables.
What is co-marketing?
Co-marketing is a collaborative model of marketing where multiple companies can work together on a project and pursue a common goal. They unite to market, promote and communicate a shared offer in different channels (it can be a piece of content, a co-branded product/service or something else).
It differentiates from co-branding, because the latter is when companies combine their expertise or product/service characteristics to make a superior offering.
Shimizu co-marketing refers to a much broader range of activities and they include co-creative and commensal marketing.
Co-creative is a marketing strategy that involves consumers in the creative process. For example, companies can give away beta versions of their product/service and improve it with customers’ feedback. In the entertainment industry, co-creative is the marketing strategy adopted by all UGC (User Generated Content) platforms.
Commensal marketing or symbiotic marketing is when companies are able to establish mutually beneficial partnerships with other organizations or consumers. This concept was first explored in 1966, in Symbiotic Marketing published by Harvard Business School and written by Lee Adler who stated:
Symbiotic marketing is an alliance of resources or programs between two or more independent organizations designed to increase the market potential of each.
For example, in 2001 the cereal giant Kellogg and Müller joined forces and launched a new dairy product: a yogurt with additional cereals. Customers could open the yogurt, reverse the cereals inside and eat a new delicious mix.
This joint venture represented a great chance for both brands to expand their market. In fact, according to Marketing Week, Ken Wood (the then managing director of Müller) released:
We are delighted to have formed this partnership with Kellogg. This is a major opportunity for both companies to significantly increase their markets.
In 1986, Journal of Marketing issued Symbiotic marketing revisited by P. "Rajan" Varadarajan and Daniel Rajaratnam where they listed the different modes of symbiosis:
Equity position;
Licensing;
Technology exchange;
Joint venture;
Consortium;
Joint product development;
Joint technology development;
Marketing agreements;
Manufacturing agreements;
Joint product/service marketing;
Shared distribution facilities;
Joint sales organization;
Joint service;
Tie-in advertising and/or sales promotion;
Franchising.
Based on Koichi Shimizu, the 7Cs of Compass Model are:
Corporation: intended as a whole of competitors, organizations and stakeholders (C-O-S);
Commodity: co-created goods and services as I have already mentioned above (co-marketing);
Cost: as Robert Lauterborn defined it in his 4Cs of marketing mix;
Channel: marketing channels needed to transfer a product/service from the point of production to the point of consumption. They can consist of people, organizations and activities;
Communication: as Robert Lauterborn defined it in his 4Cs of marketing mix;
Consumer: like the cardinal directions N, S, E, W, they are needs, security, education and wants;
Circumstances: external uncontrollable environmental elements surrounding a company. The first is national (or international) environment which refers to political, legal and ethical factors. Then, there are social and cultural, economic and weather.
This marketing mix was criticized for including consumers, because they represent the purpose of marketing while all the other dimensions are tactics.
HOW TO USE MARKETING MIX FOR SUCCESSFUL MARKETING STRATEGIES
A marketing mix highlights the key dimensions to control in order to make a successful marketing strategy.
But what actually is a marketing strategy and how can it be built?
The image below represents the main four marketing strategies.
The first row of the image above represents the competitive advantage (C.A.) from the supply point of view: low costs and consumers’ perceived differentiation. The first column depicts the competitive advantage from the demand: industry and segment. In this scheme, industry is intended as a wider portion of the market compared to a segment.
Cost leadership
When a company targets the whole industry and keeps low costs (for both sides: seller and buyer, as described in the 4Cs of marketing mix), the resulting marketing strategy aims at cost leadership.
A cost leader is very efficient in manufacturing and logistics, it works with high volumes and standardized products. Usually, it has a preferential access to raw material and keeps strong relationships with suppliers. It gives incentives according to quantity-based objectives and focuses on low prices.
In a few words, a cost leader only uses one marketing mix.
Its targets are:
Taking control of the whole market (mass marketing);
Limiting the differentiation;
Producing high quantities;
Having low margins (besides, there is no other choice).
How can a cost leader minimize the 5 Porter’s forces?
A cost leader is not influenced by suppliers thanks to its high quantities of raw material purchased. It is not affected by substitutes thanks to its great sales volume and preferential access to raw material. It continuously tries to decrease costs and offer its products for a cheaper price.
Examples of cost leaders are Walmart, Auchan and IKEA.
Recapping the key elements of a cost leadership strategy:
Logistic and production efficiency;
High volume of standard products;
Preferential access to raw material;
Bonuses on quantity target achievements;
Focus on low cost and prices;
Aiming at mass market;
Poor differentiation and markup.
Differentiation
A differentiating marketing strategy aims at increasing brand’s esteem and making unique products/services. Companies which embrace this approach usually invest a lot of money in R&D (research and development) and marketing communication. They must be creative, keep innovating and focus on low quantities, but higher margins.
Differentiators must have multiple marketing mix according to the specific target audience and offering.
How can a differentiator minimize the 5 Porter’s forces?
A differentiator offers unicity and doesn’t copycat competitors. It sells a distinct and excellent experience for which consumers are willing to spend more. Finally, it generates high brand loyalty.
Examples of differentiators are Starbucks or Apple.
Recapping the distinguishing factors of a differentiation strategy:
Product unicity;
Prestige perceived;
Excellent communication;
Consistent innovation;
Low quantity, but high markups.
Focus on costs and focus on differentiation
The last row of the image represents two marketing strategies based on additional focus on the competitive advantage.
If a cost leader aims at a specific segment, it must be a master in lowering its costs in order to succeed (e.g. organic food, energy drinks and the like). That’s why “focus on costs”.
Instead, a “focus on differentiation” strategy aims at conquering a niche, so the offering must be special and its marketing mix totally tailored.
Ansoff’s growth marketing strategies
The mathematician and business manager Igor Ansoff published his book Corporate strategy in 1965 where he explained basic growth marketing strategies.
Market penetration is the strategy to adopt when a company wants to acquire more customers in the same market by using the same product/service.
It can lower the prices and generously invest in advertising, PR and communication. For these reasons, a market penetration strategy requires a huge amount of money.
A market development strategy is when a company wants to attack new markets with the same product/service.
The most common tactics are:
Partnering with companies which operate in a different industry, but target the same or similar audience;
Extending the use of the product/service to broaden the target audience.
A company can grow in the same market by making new products with a product development strategy. It has to invest in R&D and continuous field tests to validate new products.
Usually, the new creations are strictly connected with each other, because they have to target the same group of people. They can be either brand new or upgrades of existing products.
An example of product development can be a full line of supplements for running. You can have solutions for energy recovery, endurance, training and so on. Plus, you can let consumers choose between capsules or powder.
A differentiation strategy is when a company wants to expand in different markets with new products. Besides the R&D investments, it has to study a new target audience, acquire additional expertise and make personalized offerings.
This strategy is risky and expensive, that’s why companies can create joint ventures or merges to compensate the lack of skills, knowledge and equipment.
An example can be Dollar Shave Club which started by selling only razors and now, it covers the whole range of male beauty care: razors, shaving accessories, creams and butters, deodorants and wipes, and shower soaps.
CONCLUSIONS
Personalization and differentiation always lead to multiple marketing mix. Instead, approaching the market without considering consumers’ preferences requires just one.
What marketing strategy do you consider more appropriate for our modern times? A startup should have one or multiple marketing mix? Tell me yours in the comments below, I’m curious to hear you out!
