Marketing 101 in 5 minutes!
4P’s, 5C’s, STP!😕 ….Let’s take a step back and begin!
The idea of this blog is to understand why is Marketing needed at all. WhatsApp never required marketing and is today one of the most used apps. Tesla has zero marketing budget. Many of us deep down believe that if a product is good enough, it will sell itself. Marketing is just an expense and is not needed for a self selling, technically superior product. Well, let me introduce you to Better Mousetrap Fallacy! BMF is precisely the same belief that we discussed here. The notion that a technically better product would lead to better business!
Imagine, you had a better mousetrap design and all the facilities to host guests better, but would they be interested if they the price is too high or if they are not aware of the presence of better design with you at all! How long would it take before they came to know about you until other hosts would keep hosting these guests? The fallacy has its origins in the 19th century the USA when the plague was a huge problem and hotels (hosts) thought that just better design of mousetraps would lead to better business.
Now, Information Asymmetry and Cognitive Load is something that I want to bring up next.
Information Asymmetry:
A situation where different persons have different information about something. In the context of marketing, a seller has more information than a buyer about a product. A buyer would never know the exact value of a product or how much it costs the seller to make one such product. Neither does the buyer has enough resources to do so or the time. Imagine a seller doing that before buying every product she consumes. It is simply impossible. So, how does a buyer decide on the amount that he is paying is worth the product or not? Before I answer that, let’s look at another relevant concept.
Cognitive Load:
So, our brains can process only so much information. We can’t take into account a thousand parameters to decide in a limited time. (We need computers to do that). So, even if a buyer had all the information about a product, would she be able to decide very rationally?
So, how does one decide whether or not the price that she is paying is worth the product? We are bound to determine based on our biases and deploy some or the other heuristics. You can never tell whether iPhone selling at 1000 USD is cheap or not given its features.
But when you know Samsung sells at 800 USD with its features then maybe Apple could be worth the price. We don’t understand the absolute value of things, but we can easily compare and decide. This is one of the 100s of heuristics that we deploy on a day to day basis without any conscious effort. A good list of these heuristics can be found here.
Wait, we were talking about marketing! How are these related to marketing? Basically, every marketing effort is to make decision making easy, reduce efforts that are required in a purchase decision. When you see Nike shoes and instantly decide that they would be the best shoes on the planet, it is because you have seen all the best athletes on the planet wearing them. This is association bias or classical conditioning. They are of course other things at play here which we will see later.
Now, given this, the constraint to the companies is that they can’t associate themselves with everything. You can’t satisfy everybody’s every need. Saying is that “If you are everybody’s friend then you are no one’s friend.” So, it becomes imperative for these companies to figure out what distinct quality do they want to be associated with. This is called positioning. “A distinct space that a brand/product/company occupies in consumers’ mind is positioning.”
When Steve Jobs returned to Apple after 12 years, he reinforced the positioning of Apple. He wanted Apple to be associated with the change makers of the world. See this video.
Given your positioning statement, it will appeal only to a particular audience. A market can have any number of audience based on their behavior. Based on the homogeneity of the behavior of an audience, you call them a segment. So, based on age, children, adults, and olds are different market segments. Now, the specific segment to which your positioning appeals to is your target. Say, your product is chocolate and your positioning is based on evoking love, adolescence might be your target segment. That’s about STP!
STP is on paper. The target market doesn’t know yet about it. The next pieces in the puzzle are the 4 P’s namely product, pricing, placing and promotion. These 4P’s are derived from your STP. These 4P’s reinforce your positioning.
Product: Product is a bundle of utilities/benefits. It includes the entire experience around a product. Starbucks does not only sell you coffee but also the experience and ambience. Writing names on the cup is also a part of the product or feature of the product. Packaging is part of the product. The entire offering of the product is derived from the positioning statement. If you are a premium product, even the packaging and the way the salesman behaves should be able to justify the positioning statement. A Ferrari salesperson should act in a way that makes it customers feel that they are valued.
Price: Basically what are consumers willing to pay for your product. This willingness to pay is derived out of the perceived quality of the product or the value a consumer obtains from the product. Also, the price also acts as a proxy for the quality. With no other information, one would say a product with a higher price is of higher quality. So, while the price is a function of perceived quality, it also reinforces the quality at times.
Placing: How does your product reach to its consumers is what placing is about. The distribution chain! From the manufacturer to the distributor to wholesaler to retailer. Each of these players has its margin. If your product has huge demand, the margin would be less. If it has less demand, you will have to incentivize them to sell your product and hence the margins would be more. Distribution can be a huge competitive advantage as it cannot be replicated overnight while other P’s could be done with more ease.
Promotion: What story do you want to tell your consumers. Again, this will be based on positioning, and if done correctly, it will solidify your positioning statement the way you want it to. Advertising, sponsoring events, digital marketing, brand ambassadors are some of the ways how you promote your product. Pepsi sponsors sports tournaments because of its positioning that it is for the young.
What after these? Post sales activities. You seek for consumers’ feedback and make changes accordingly!
Is this all of it? No, obviously! Products have different levels and pricing alone has a thousand strategies. Products have their adoption curve and technologies/innovations have their cycle. Players might have first mover advantage and then there are competitors who are attacking to take your position. This is just the beginning of marketing, and I tried to answer “why marketing” and then extended to STP and 4P. Happy Reading!
