“Jill must bring in $400,000 dollars in revenue each quarter.” While the sales rep is concerned about meeting his or her sales goal, it is also important that products and services should have enough profit (also called “margin”) so the company makes enough money to stay in business – and ideally to grow.
The marketing group, while concerned with sales and profits, plays a very different, but complementary role to sales. Marketing is integral to the financial health of a company and must support the sales team. Pick up any book on marketing, and you will learn about the four Ps:
Product
Promotion
Pricing
Placement.
These are the marketing fundamentals, but true marketing can be very analytical, with spreadsheets, detailed market analyses, and estimated demand for the product. But first, let’s focus on the 4 Ps.
The 1st P – Product
It is not unusual for a Marketing Manager (sometimes called a Product Manager) to have the leadership role in the development of products and services. This will become apparent as our discussion unfolds.
Obviously, to have sales a company needs to have a product that has demand in the marketplace. The market is constantly churning with established products being bumped by newer products. Perhaps the newer product is cheaper, has better features, or has captured the imagination of the buying public. History is littered with products that were successful but ultimately replaced by a competitor.
All products exhibit a lifecycle. Figure 2.2 shows a typical product lifecycle. Notes about the product lifecycle:
Figure 2.2 Product Lifecycle. Lumen Learning, viewed 15 February 2021. https://courses.lumenlearning.com/clinton-marketing/chapter/reading-stages-of-the-product-life-cycle/.
Development stage –
Product/project is funded, and design of prototype starts
Prototype put through testing, and data collection
Review of data; evaluation of results
Changes in design and more testing
Final product handed over to manufacturing or external group for production
Introduction stage –
The product is new to the market and demand will increase with time
The cost per unit (or customer) is high
Few if any competitors
Sales are low and the product may be a money loser during the introductory stage
Growth stage –
Sales and revenue increase; the product is taking off in the marketplace
Competitors are becoming aware of your activity and may start to develop a competing product
Cost per unit (or customer) begins to decline
Profit margins increase
Maturity stage –
Sales, revenues, and profits peak
Cost per unit (or customer) is at the lowest point
Competitors are now actively nipping at your heels
Decline stage –
Sales and revenue decline, leading to a decline in profit margin
Cost per unit (or customer) is still low, but may rise with fewer units sold
Competitors start to fall away. A few will remain, but with a reduced market there are less sales and therefore profits to share. The product may become stable with steady sales but will not see the heavy growth or revenues seen in the growth stage.
Example of Product Displacement
In the late 1990s, Nokia produced cell phones that were widely used by the public – worldwide. Nokia, headquartered in Helsinki, Finland appeared to have a dominant position in the market. The Nokia 3210 (Figure 2.3) was compact, had many features, was very rugged and ergonomically comfortable to hold and operate. As a result, around 150-million units were sold. But, based on the previous discussion, we know that dominance in the marketplace can be upset by newer technology or lower-priced models with the same features. Along came the Apple 2G (Figure 2.4), which gained immediate acceptance by the public. The iPhone 2G had numerous apps, used a color touchscreen, and could connect with the internet in addition to all the things that the Nokia did (texting, photos, etc.).
Figure 2.3 Nokia Phone. Isaac Smith / Unsplash
Figure 2.4 Apple iPhone. Michal Weidemann / Unsplash
Some general characteristics of products include:
Features – nice displays (computer screens), user friendly operation (electric vehicles), the wow factor (new and innovative, nobody does this – Wow!), and a variety of models to fit various budgets (low, middle, and high-end). The Apple iPhone definitely had the “wow” factor. Thirty years later, there are now competitors to the Apple iPhone.
Specifications – a technical description or requirement of what the product can do. For example, if our new product is an electric motor for electric vehicles: the materials used to make the product (steel, stainless steel, etc.); the number of motor brushes and material; outputs –horsepower, torque; the range of temperatures for optimum operation, etc. If you pick up any standard-powered car brochure, specifications usually include items such as horsepower, torque, engine displacement, fuel requirements, etc. Specifications may sometimes be spelled out by the customer for special orders or custom applications.
Warranties and guarantees – will your company stand behind its new product?
Service Centers – what if I need service for my new scanner/printer? Where do I go? Is there a center nearby? Note: a service center can generate additional after-sale profits: think of automobile dealers and their service center networks.
What Marketing Cannot Do
