Marketing 101

THE MARKETING MIX
The Marketing Concept is predicated on the idea that there are four main components in a proper Marketing Mix:
1. The Product Strategy
2. The Price Strategy
3. The Distribution Strategy
4. The Promotion Strategy.

Usually referred to as the "Four Ps" (using "place" for "distribution" to make it fit).

In an ideal world, all products and services would be market-driven; that is, each of the four strategies would be developed from analysis of the marketplace rather than being driven by one strategy over the other three. But we do not live in an ideal world and, more often than not, product becomes the dominant (and driving) force. If that is the case, you need to be very clear about what your product is and you need to take pains to make it tangible. Be prepared to show and tell what the customer will be getting.

MARKET SEGMENTATION
Before clearly defining our various strategies, we need to know some things about the marketplace. That is where Market Segmentation comes in.

Proctor & Gamble spend millions of dollars every year defining, segmenting, and studying their various markets. Obviously, having the resources to do that would be desirable but it isn't strictly necessary and there are many good sources of secondary data available.

Market Segmentation involves defining one or more characteristics of the marketplace and dividing it up according to those factors. It is important to chose factors that are meaningful rather than just easy: many companies segment their markets according to arbitrary and company-driven characteristics, such as "location". Rarely will most of the potential clients in a given geographic region have sufficient similarities for such a segmentation to be meaningful, but it is often convenient for the producer to think of the market that way and so this fundamental mistake gets repeated.

Don't misunderstand me, location can be a very significant factor and, depending on the product/service under consideration, can highly impact the pricing strategy, promotion strategy, and (mostly) distribution strategy. But rarely will location alone suffice as a basis for meaningful Market Segmentation.

Imagine you had a product/service you wished to market to police forces, I think a segmentation based on location and size (i.e. number of officers) might be fruitful. To do such segmentation for a given geographic region, we would need to know:
- How many police forces are in the region
- Their manpower by force
- Location of their HQ.

Clearly, the strategies best suited to attract and service a five officer force located in the far reaches of the region will be different from those you would apply to attract and service a large, centrally located, police service.

Size/Location will impact your return and therefore your Pricing Strategy.

Size/Location will impact your ability to provide service therefore impacting both your product and distribution strategies

Size/Location may well impact your promotion strategy (On-site visits vs. Direct Mail vs. Advertising)

So, as a 'thumbnail' segmentation basis, Size/Location may well be a good starting place. Other characteristics may need to be brought in as information develops.

Once you have the numbers you require, divide up the Marketplace in logical segments (to keep with our police force example - Northern Forces with less than 10 officers, Northern Forces with 11-25 Officers, etc.) If you have four geographic regions (for example) and ten size categories (for example) you will end up with a grid of 40 segments that encompasses your entire market.

Then you need to describe and quantify each segment. (Example: there are seven Northern forces with less than 10 officers representing a total market share of less than 1%. Purchasing decisions made by this segment rest with the various Police Service Boards in consultation with their Chief of Police. Each force receives a complimentary copy of Blue Line Magazine. Their Chiefs tend NOT to attend annual Chief Conventions, etc.)

Once you have quantified and described each segment you will have a clearer idea if your segmentation basis is valid and whether you need to expand it, collapse it, or re-think it all together.

Now you know why P&G spend millions on this process!