Price: The Most Important P in the Marketing Mix

    This article was last updated on June 2 nd, 2020nhận seo tổng thể
    school, we learn that there are 7 Ps in the marketing mix : sản phẩm, place, people, process, physical evidence, promotion, và price .Traditionally, each of these P’s has been an important way mập differentiate your company from the competition. Whether it was the chất lượng of your sản phẩm or the location of your store, these P’s served as sign posts telling your customers why they should buy from you .

    But vì each of these P’s still hold up in the 21 st century ? The short answer is yes, but the importance of each is changing .Today’s retail market differs vastly from the 1990 s & the 2 ngàn s, và the mạng internet has fundamentally changed the retail sector. Consumers now have the power phệ comparison shop instantly. The rise of trực tuyến mua sắm also eliminates the need for physical stores và opens up competition mập the entire mạng internet, not just the physical locations nearby .Thes e changes have a huge impact on the way shops should manage their marketing — & which P’s they should pay attention lớn in the marketing mix. As the mạng internet has levelled the trực tuyến playing field, one P has emerged as the clear focus for most consumers : Price .

    In fact, price is so important, McKinsey found that just a 1% improvement in pricing raises profits by 6%.

    That’s more influential than a 1.0 % reduction in variable costs ( which increased profits by 3.8 % ) or a một % reduction in fixed costs ( which yielded a 1.1 % increase in profits ) .In this blog post, I’ll explain how price became the most important factor in the marketing mix, và how shops can use pricing dữ liệu phệ increase their marketing lợi nhuận .

    Click here to download your free copy of Why Pricing and Marketing Go Hand-in-Hand

    Let’s look at the relevance of the 7 P’s in today’s trực tuyến marketing context :As you can see, the mạng internet has made all but two of the 7 P’s less important : Pricing và Promotion. How a person finds your hàng hóa trực tuyến, & how much the displayed price is, are the most crucial checkpoints for shops béo make a marketing trực tuyến .Considering this, it might seem lượt thích Pricing & Promotion chia sẻ equal importance in the marketing mix. But the reality is that Pricing stands far above Promotion because Pricing controls Promotion. In fact, pricing is the single most important factor lớn consider while managing your trực tuyến marketing sản phẩm ads on platforms lượt thích Google Shopping .To show how important pricing is Khủng marketing, let ‘ s look at a real-life example of the relationship between the two .In the graph below, you can see two metrics kết thúc the course of two months : a shop’s pricing & the number of units sold. The line graphs represent the price & the bar chart at the bottom shows the number of units sold .As you can see, this store applies two different pricing strategies in this period :Looking at the number of units sold during this period, it’s obvious the aggressive pricing strategy resulted in more sales. All other conditions staying the same, the simple change in price led bự a dramatic change in sales .It’s important phệ note that more sales vì not necessarily lead béo more bottom-line margin. Although there might be a high volume of sales, the prices ( và margins, as a result ) might be lower. But you can use this information strategically mập decrease prices on select items & draw lượt truy cập mập your trang web .Now that we’ve shown the importance of pricing in today’s marketing mix, let’s dive deeper & examine their interactions .There are two ways pricing influences marketing performance : budget & efficiency. The following graphic illustrates the relationship between the two silos :In this illustration you can see two things :The price of a hàng hóa trực tuyến determines how much margin that sản phẩm will make, a portion of which can be used for marketing. If the sản phẩm has high margins, marketers have more money phệ market a sản phẩm. However, if a sản phẩm has lower margins, there is less money for a marketing strategy .When you are priced lower than your competitors, the chance customers will nhấp chuột on your ad và buy your sản phẩm increases. Thes e higher click-through rates ( CTR ) và conversion rates are signs of healthy, effective marketing campaigns .So if a higher price creates a bigger marketing budget, but a lower price increases the effectiveness of your campaigns, there is a clear challenge. How bởi vì you find the right price that it optimal for both your marketing budget và efficiency ?This question gets more complicated when you consider that this balance is different for every single sản phẩm on the market. That’s because consumers value items differently và respond accordingly Khủng price changes .This is called the price elasticity, và it is a phenomenon that shops need phệ consider in their pricing strategies lớn optimize margins. For example, an increased price for a popular ti vi will most likely lead bự a significant decrease in CTR & conversion rate but an increased price for a TV wall mount ( often sold along with the ti vi ) may have negligible effects on nhấp chuột through và conversion rates. You can use this information mập pair items together strategically & maximize profits .

    As a result, you will need to adjust your marketing bids with each price change. Each time you — or one of your competitors — changes the selling price of a product, the CTR and conversion rate will also change for that specific product. But doing this manually is nearly impossible, which is why you need to find an integrated way of managing pricing and marketing. 

    There’s no way Khủng properly kế hoạch how bự market a hàng hóa without eventually discussing promotion. Preliminary research helps bring a hàng hóa phệ a mới ra market, yet the process necessitates subsequent implementation .Discussing & planning promotion helps further define a marketing kế hoạch & marketing mix strategy. Customising marketing mix elements creates a quality marketing Model for each sản phẩm .The marketing mix consists of a number of factors under the control of a brand that influences customers phệ buy products. Some use the term, “ marketing mix ” interchangeably with the P’s of marketing. The P’s have evolved end the years, growing in number .The 7 P’s of marketing builds upon the traditional bốn P’s of marketing, hàng hóa, place, price, và promotion. Let’s further explore “ place ” in context as bự provide a bốn P’s of marketing example .Twitter is a popular mạng xã hội truyền thông platform. And, though it’s not a physical place, it serves as an example of a place mập study, find, và build rapport with customers .Identifying places where a brand focuses energy & resources is among the elements of a marketing kế hoạch. For, it may be more successful & profitable for one brand bự focus energies on Twitter while a competitor uses another platform or decides phệ neglect mạng xã hội truyền thông altogether phệ meet its marketing goals .Marketing mix variables should be defined per sản phẩm ; a strategy for selling smartphones is independent from one associated with canned fruit. However, methods, marketing channels, & messages may overlap .Similarly, a retail mix should differ from a marketing kế hoạch for wholesale goods. A product mix analysis helps differentiate và customise individual marketing plans for each hàng hóa. Some companies refer bự sales history while others analyse the performance of competitors before developing a marketing kế hoạch & promotional strategies .So, now that we’ve established the impact of pricing on marketing, let’s discuss how lớn take advantage of this phenomenon .Typically, shops use one of the following three methods of integrating their pricing và marketing information :Although pricing is the # một factor impacting trực tuyến marketing results, it is still rarely used as đầu vào for marketing management. Without pricing context, it’s hard phệ evaluate the performance of trực tuyến marketing campaigns .Let’s take another look at the earlier graph of historical pricing dữ liệu. The trực tuyến marketing department will probably be satisfied with the performance in the periods of aggressive pricing strategy, but wonder why conversion rates dropped during the margin-focused periods .If they had access béo pricing dữ liệu, they’d be able lớn understand why these changes occurred : during the aggressive pricing periods, there were more clicks on the hàng hóa because the price was low, but during the margin-focused periods the trực tuyến marketing was less effective because of a higher price. They ‘ d be able bự use that input đầu vào in future marketing campaigns & prevent wasted ad spend on out-priced products .If you manage your pricing và marketing strategies separately, you can still use the pricing dữ liệu as fixed input đầu vào for the marketing department. In the above examples of margin-focused và aggressive pricing strategies, the historical dữ liệu shows how this hàng hóa reacts mập price changes .With this information, the marketing nhóm can change bids bự match mới ra price levels, which will increase your ROIs. For example, if the price ratio ( which is your price vs. your competitor’s prices ) changes, the marketing nhóm can proactively change bids marketing lớn match the expected performance at the hot nhất pricing màn chơi .But this strategy isn’t foolproof. Marketing can only work with the pricing information they’re provided, a dữ liệu mix which requires a significant amount of work phệ find .When you fully integrate your marketing with Dynamic Pricing, the dữ liệu becomes powerful. At this point pricing is not just a fixed đầu vào for marketing. Instead, the selling price itself is also adjustable .With this dynamic input đầu vào, you can find the perfect balance between pricing, marketing budget, và marketing efficiency. This ensures marketing is effective, but also creates enough margin lớn ensure a healthy marketing budget .So, is this the đầy đủ answer mập pricing & marketing integration ?Unfortunately, it isn’t. The above example is a simplified situation, và it doesn’t fully cover all the intricacies of the relationship between pricing và marketing. To uncover that answer, we need Khủng go one cấp độ deeper. It will get a little murky at first, but all becomes clear soon .The combination of your marketing budget per sản phẩm ( the cost per action ) và the marketing effectiveness predict which cost per click bid is still profitable phệ sell a single sản phẩm .However, it does not yet predict the amount of lượt truy cập you expect mập generate for a specific hàng hóa end a given period. Without that lượng truy cập information, you can’t predict the overall bottom-line results your marketing campaigns will generate. In terms of overall turnover và profit of the trực tuyến chiến dịch, you are still in the dark .Adding lượng truy cập information illuminates this information và gives you a better decision-making framework phệ use .Below, we’ve added tam different lượng truy cập KPIs Khủng the Model :Now that this information is available, let’s go through it from the left phệ right in five steps và examine the interactions :

  1. The pricing màn chơi determines the maximum marketing budget per sản phẩm ( max cost per action ) & predicts the conversion rate of that sản phẩm at that specific pricing cấp độ
  2. The combined conversion rate & maximum cost per action roughly determine the maximum profitable CPC. If you have a CPA of € 10 & a conversion rate of 5 %, you are willing bự pay up lớn € 0,50 per nhấp chuột ( a max giá thầu cho mỗi lần nhấp chuột of € 0,50 )
  3. The maximum cost per click determines how many impressions you can buy
  4. The impressions & the click-through rate determine how many clicks you can generate. It’s important bự remember that the display price also affects the CTR .

  5. The clicks, together with the conversion rate và pricing màn chơi, lead béo the overall bottom-line performance .
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