Risking the opportunity for growth is apparent when a young company attempts to grow fast, yet feels awkward in its direction of growth, and recognizes that it may be grabbing at straws in trying to follow a logical sequence. This is where the target market comes into play. You might say, “I already know my market.” But do you really? If you do, fine, but how do you establish yourself as a real player, a destination, a likely candidate that the end-user and/or jobber wants to deal with? You might develop the inner psychological strut of, I’m better than the next guy, or my company or shop has the exact whiz-bang wizard to end all the competition.
Sure, you have the right stuff or at least you conjure up the notion that you are operationally superior or at least adequate. But the reality is to master the steps and system of learning certain tools which enable you to develop the operational skill sets required to truly be on top of your game. So as your shop decides on its target market, establishes a position within that market, and develops a brand; it is ready to begin planning the details of its marketing mix.
Defining the Four Ps
Just as you open your shop each day, you deal with your product line, choose the proper pricing methods, develop promotion of your image and products, and determine the place (distribution) that encompasses your sales cycle. Understanding how to work the Four Ps to your advantage is essential in moving your business in a vertical direction at any stage of your development. Thus working with the Four Ps on a routine basis can result in coordination which stimulates business growth whether you are selling direct or selling through warehouse or jobber intermediaries.
Whether you’re a manufacturer, warehouse direct, jobber or retailer, the Four Ps can aid in determining how you look at these simple yet powerful words as primary methods of taking control of your business as well as your personal growth. The Four Ps’ connection to your marketing mix is the set of controllable tactical marketing tools that produce the response of what you want from your target market. So moving your marketing mix into these four categories is a process of taking the time necessary to better understand your company direction and incorporating it into your marketing and business planning.
Step One: Product
Your product, in the context of your marketing mix, is the product you offer your target market. Sounds simple but consider that it is the most important attribute to adding value in the minds of our target customer. As you prepare to sell your products, an important distinction should be made between the core product and the actual product. While the core product may be a suspension upgrade, the actual product which is what the customer buys may have as many as five characteristics: a quality level, features, design, a brand name, and packaging.
When first introducing a product to the market, you need to make sure that more than the core product is right. Attention also needs to be paid to the actual product, its features, design, packaging, and so on that constitute the collection of benefits that the customer ultimately buys. Anyone who has ever tried to remove a product from a frustratingly rigid plastic container knows that the way a product is packaged is part of the product itself. The quality of the product should not be compromised by missteps in other areas.
Step Two: Price
This is a critical part of the overall Four Ps. It is also the only element of the marketing mix that produces revenue; all other elements represent costs. As simple as it sounds, price sends a clear message to its target market. An example is the pricing strategy that Oakley positions as validated pricing. The company positions its sunglasses as innovative, state-of-the-art products that are both high quality and visually appealing. This position in the market suggests the premium price that Oakley charges. If Oakley tried to establish the position described previously and charged a low price for its products, it would send confusing signals to its customers. In addition, the lower price wouldn’t generate the sales revenue Oakley requires to continuously differentiate its sunglasses from competitors’ products in ways that create value for customers.
There are two popular pricing methods that are universal in scope. The first is cost-based pricing and the most common within most industries. This method determines price by adding a markup percentage to a product’s cost. The markup percentage may be standard for the industry or may be arbitrarily determined by the specific business. The advantage of this method is that it is straightforward, and it is relatively easy to justify the price of a good or service. This is typical where both manufacturing and install price set the standard and the competition complies.
The disadvantage is that it is not always easy to estimate what the cost of a product will be. Once a price is set, it is difficult to raise it, even if a company’s costs increase in an unpredicted manner. In addition, cost-based pricing is determined by what a company thinks it should receive rather than on what the market thinks a good or service is worth. It is becoming increasingly difficult for companies to dictate prices to their customers, given customers’ ability to comparison shop on the Internet to find what they believe is the best bargain for them.
The second cost-based pricing method is value-based pricing. This method is determined by estimating what consumers are willing to pay for a product and then reducing the price to provide a cushion or buffer. What a customer is willing to pay is determined by the perceived value of the product and by the number of choices available in the marketplace. Frequently, to make this determination, a company has to work backwards by testing the market to see what its target market is willing to pay. A company can influence its customers’ perception of the value through positioning, branding, and the other elements within the marketing mix. Most marketing experts recommend value-based pricing because it hinges on the perceived value of a product or service rather than cost-plus markup, which is a formula that ignores the customer.
A company can’t change premium prices without delivering on its positioning and branding promises and unless the circumstances are right. To charge a premium price, one or more of the following circumstances must be present:
- Demand for the product is strong relative to supply.
- Demand for the product is inelastic (people will buy at any price).
- The product is patent-protected and has a clearly defined target market.
- The product offers additional features that are valued (e.g., a strong warranty).
- A new technology is being introduced.
- The product serves a compelling need.
- The product is positioned as a luxury item.
Remember, the ability to charge a premium price is an issue that you should consider when developing its positioning and branding strategies.
Step Three: Promotion
Promotion is key especially when you consider that the target market perceives with immediate appeal or distain how you promote the merits of the product. Ultimately, the goal of these promotional activities is to persuade the buyer to purchase the product. This is especially vital in the role of the manufacturer’s representative who paints the picture and conveys the message hopefully with professional appeal and flair.
There are a number of these activities ranging from advertising to car show exhibits to business-to-business trade shows and of course the ever-important product review or product editorial clip such as those featured in every edition of Performance Business.
In a brief review, advertising is the awareness tool making points for the product to the buyer. It is a learning communicative and persuading tool, offering the following:
- Raise customer awareness of a product.
- Explain a product’s comparative features and benefits.
- Create associations between a product and a need.
One of the most creative tools is via print-style public relations, which offers a most cost-effective way to increase the awareness of the products a company sells. This is where manufacturers’ product reviews come into play specifically within the automotive aftermarket. There are a variety of factors one should consider. Obviously the publication is interested in your advertising business but consider it a two-way street. A product review is powerful because it conveys the approval of being in print in the public eye. Also, it promotes the product from the editorial eye and thus again sends a positive message to the buyer or retailer. It is usually difficult to garner such space in most publications and thus a good relationship is critical for both the publication as well as the manufacturer.
Step Four: Place
Place, or distribution, encompasses all the activities that move a company’s product from its place of origin to the consumer. A distribution channel is the route a product takes from the place it is made to the customer who is the end user. A variety of distribution channels are deemed critical to the overall success of the aftermarket manufacturer. Again, this is where the manufacturer’s rep, the media channels, as well as the overall promotion run a parallel path.
The first choice a company has to make regarding distribution is whether to sell its products directly to consumers or through intermediaries such as wholesalers and retailers. Within the automotive aftermarket world both choices are available, so the decision typically depends on how a company believes its target market wants to buy its product.
Thus, the specifics of the Four Ps represent a vital and effective method for ensuring that your business is on the right path each day. It is within this context that trial and error are minimized and that profits and strategies for growth are evident. The core to this exercise is to establish the methods best suited to your business while keeping in mind that no one step can be eliminated or thought of as unnecessary.
I recommend you study your business before your react; plan for the short and long term before you implement a specific course of action. Remember, position, pivot and shoot. If you think you can win without doing the Four Ps as well as not first positioning yourself being able to pivot as necessary, and then taking the shot you’re only fooling yourself. Plan your action and execute your plan.