There are three important marketing fundamentals that every business needs to follow.
As a business you have to:
It doesn’t get any simpler than that.
You can complicate it all you want (and a lot of people do), but marketing success comes from these 3 fundamentals. How well you know your customer, your product and your business the more successful you will be in marketing.
“Know your Product” is the next most import marketing essential that all businesses need to know and adapt in their marketing plans. This marketing essential is as simple as “knowing your customer”. You need to know what your product is all about, where your product is in the markets that you serve and what your products price is compared to everything else.
Your product is why your customers buy from you. Although I use the word products, services is interchangeable. Your business makes money when you sell your products and your products get sold because customers are buying.
Therefore the question you should ask yourself is what you know about your products so that you can either keep your customers buying, keep ahead of the competition or keep your business thriving.
What is your product?
The first thing about knowing your products is to understand “what” your customers are buying. This is a branding concern. Your customers expect consistency. They want to be able to order or purchase the same thing and get them same thing as they bought before. If your production process has a lot of variability then your products will not be uniform and your customers’ expectations will not be met.
For a restaurant, this is particularly critical because the cooks need to be able to replicate the customer taste experience. You might service one meal to a customer who enjoys it so much that they return another time. But if they don’t get that same experience, it is unlikely they will return a third time. You let them down.
The same can be said of any product. Do not substitute plastic for stainless steel because you can save money off of a few screws if quality is what brought you customers in the first place.
Unless you have a monopoly, you have to live with the realization that you have competitors. Therefore, do you know your competition well enough so that you can answer:
- Who they are
- Where they are
- How much their products cost
- What they have that you do not.
- What makes them different from your products?
These are just a few questions. If you do not have a complete understanding of your competitive landscape then your business is at risk.
It isn’t what your customers see in you that is important it is what they see in others that you don’t have and that they value.
Bottom line: Know your product inside and out.
Where is your product?
Many of you may understand the term product positioning. This is where you identify where your product is against your competition in regards to different attributes.
Here is an example. Let’s say you consider hamburgers and you want to tell someone who never ate a hamburger what the difference was between Wendy’s, McDonald’s, Burger King and Harvey’s.
To do this you need to find out what that person values. You might consider the way these fast food places cook their hamburgers, or what buns they use. You should be able to position them each with respect to each other. This is an easy exercise when you already know what the competition has. But what if it is a new product?
I will use another food example for this.
Let’s see what happens when McDonald’s wants to introduce full size t-bone steaks. Steak like you can eat at the Keg. We will assume that McDonald’s can order the right equipment and provide training to for staff to cook steaks (remember Mcdonalds pizza). Even though McDonald’s could cook a steak, most of you are thinking this is something that doesn’t fit well. The steak may taste as every bit as good as the Keg steaks but somehow it doesn’t feel right and so it won’t taste right. We eat with our eyes and our senses are accustomed to a lot of other sensory stimuli (ambiance, lighting, background music etc). A steak at McDonald’s won’t be the same as eating at the Keg.
What does this mean then?
Well something has to change for the “McSteak” to catch on. McDonald’s has to give into some other market attributes – such as huge discounts on price. They can’t charge $25 for a steak but maybe $10 could see a lot of customers wanting options to eat other than Big Macs. Nobody comes to Mcdonalds thinking to spend $25 on an item so McDonalds doesn’t put $25 items on its menu.
The point is what customers’ value about McDonalds versus the Keg differ. They both offer food. You eat with your eyes. It isn’t just the food that separates them there are many other attributes that customer’s value. Ask yourself what values your product satisfies to your customers.
Bottom Line: Unless your product is exclusive, you are not alone in your market.
How much is your product?
The price that you charge for your products sets your company’s profitability. Profitability allows you to earn money to reinvest, to make a living and to cover the cost of production and distribution. If you don’t think that is the case then just look at oil prices. The price of oil used to draw huge profits. Now the price of oil is so low that you can’t even produce it for the price it is being sold at. Price does establish a lot of things for a business other than just what customers want to buy it at.
When your product costs go up, as they will, you need to be able to have some price-elasticity. Price elasticity will show what the change in revenue is to the change in price. This is important. If you own a restaurant and food prices go up because of some weather related issue or farming issues such as beef prices are today -then your profits will decline unless you can raise the price you charge.
If you have a lot of competition your ability to raise price might lower your profits as your sales decline. This is negative price elasticity.
If you reduce the portion size of your menu items, then you reduce the quality and you are now affecting the brand and reputation negatively.
You have to consider what your customers value before you play around with price.
If you are entering a market that is already established, then the market price is what sets your pricing strategies. You either raise your price above the market or below depending on what your product has to offer and how customers value your product.
One time in my teens I was a cook making pizzas. Whenever someone ordered take out we cooked up small balls of pizza dough so the top of the box won’t crush on the pizza and have the cheese stick.
The owner of the store decided to buy small plastic stools (like you get now in take out) to save money and labour of not having to make pizza dough balls. So we stopped putting the dough balls on and customers started to complain. They liked to eat the dough balls. They sat on the pizza and absorbed the sauces and actually tasted great. Customers told us they came to us because we had these and nobody else did.
You need to find out what your customers value and what price you can charge. Long story short, from my marketing know how we eventually we raised the price of pizzas by $1.00 and included a free dough ball. Extras dough balls were sold for $0.50 each. We created a new revenue stream.
Bottom Line: over priced you lose sales, underpriced you lose revenue. Price is critical to your business
If you begin to make some money, then spend some money, especially if you have heavy competition. Hire a marketing consultant to organize market research.
If you need help with what you are doing and what you should be doing. Contact us today and let us show you how small changes can make big differences.
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