Marketing Fundamentals

The Need and the Value

Before you can build a marketing strategy, you must first have a strong grasp of the market conditions. What is the underlying need among consumers that you are trying to service? Strategies that focus on harvesting an existing demand are always easier to execute than ones where you need to ‘teach’ the audience what they need. When you are operating in an entirely new market, you are in effect creating an entirely new category. This requires far more creativity, and frankly, far more cold hard cash to execute.

Another way to approach the market is to look at the underlying problems you can solve for the consumer. Consumers might not have an outright need for a product or service, but they may experience a certain problem, difficulty or challenge. In other words, the need is not explicit, but there is a need branching out from an existing problem; a need which you, the marketer, can satisfy!

For example: while few consumers actually needed the Apple iPod or iPhone, they were certainly experiencing the problem of the clunky, battery-devouring Walkman or the inconvenience of carrying a flip phone. People didn’t sense this need until they were shown the true convenience of Apple’s new products.

Products or services that tap into neither a direct problem nor an immediate need tend to be far harder to market and they also tend to be unsuccessful. This is unless the concept is absolutely ground-breaking and it uncovers substantial value for the consumer. Such cases are rare, however. While there was no explicit consumer need or even problem giving rise to Facebook, it is undeniably a raging success.

There is a very simple litmus test for the commercial viability of a product or service: a basic focus group test of how much consumers would be willing to pay for your service or product. Don’t ask whether they would buy the product (many respond favorably out of courtesy!), but rather let them specify a hard number themselves. This will give you a much better feel for the value at hand, how it varies by audience, and even why it might do so.

Remember: as a marketer, it’s not just you who sets the price; your prospective customers do too, with the choices they make. It’s a far too common mistake to simply dictate a price based on your own profit projections, competition, etc., and assume that the market will bear it. When crafting your marketing strategy, get first-hand price sensitivity data from your audience at any opportunity!

The Value Proposition: the Essence of Your Offer

You might already have a mature and polished product, but at its core, what are you actually selling? Many startups that focus excessively on creating products drift away from the actual underlying need or problem that they are meant to address. It’s often useful to think of the essence of your offering. In other words, what is the outcome of its use or consumption for the customer?

At the most fundamental level, to survive as a business, you need to provide your customers with value. The value is simply the difference between all the benefits derived from your offering minus their price.

Value = Benefits – Price

Take Starbucks, for instance. They are not merely selling hot beverages with certain flavors, they’re providing comfort, convenience and ultimately a positive, relaxing experience in a familiar and recognizable environment. The intended experience is that customers leave refreshed, with a sense of having just relaxed in their living room, and this experience is consistent and dependable. That is ultimately the value delivered and the essence of the service — it’s not just the cup of coffee. (This is also the reason why they can charge twice the price of the new coffee shop next door).

How can you gauge your customers’ perceived value? While you may not be able to tease out a dollar value estimate from your customers, you’ll benefit greatly from understanding what your customers get from you and why.

Ask them outright why they are buying your products and services. What brought them here? How did they find you? How did they like the experience; were they happy with the price paid? Would they recommend you to their friends? 

In more established businesses, you’ll also want to understand how such metrics are trending over time, so you, as a marketer can understand how your marketing function performs on a daily basis, and why. When shopping online or offline, you have at some point probably been asked to provide similar data. For example, you might have been asked ‘how likely are you to recommend us to your friends?’. This is known as the Net Promoter Score. 

Interestingly enough, customer responses may even be enough to change your entire value proposition. Have you heard of the Apple Mac Mini? While initially marketed as an affordable Apple entry point computer for PC users, the Mini was in actuality often used more as a home media center. It was small and neat but had most of the connectivity users needed for just that purpose. Apple subsequently tailored the product accordingly, adding an HDMI port so that it could easily connect to HDTVs and accommodate for its real-world use case, and thus, a star was born. The market knows best, and even Steve Jobs knew to listen to it, when the message was clear.

Data-Driven Marketing

There has been a lot of hype around the concept of data-driven marketing over the past few years. While it is certainly true that modern marketers need to be numbers-oriented, it’s tough to work with data effectively — especially early on when you might only have a trickle of it.

Data-driven marketing simply means: a marketing strategy built on analysis of data collected through consumer engagements, to form predictions about future behaviors. We can make it even simpler than that: you act on what you actually see.

Being data-driven helps you make short-term decisions, and it allows for technology to take over when it comes to media buying and fine tuning campaigns. However, performance data is always backward-looking, and it can not tell you outright and with certainty what the ideal marketing message is, what the optimal price point is, or what the next market to conquer is. For early stage businesses and startups, note that you obviously won’t have much data to analyze. In other words, you’ll have to learn by doing and by making best guesses and using creative ideas.

Variability: Finding Pockets of Efficiency 

The key to being data-driven is to understand how and why your performance varies, and act upon these findings.

For instance, you might find that Mobile and Desktop users on your site behave vastly differently. You might find that different age groups make for completely different types of customers. The key is to identify such trends and leverage them in the appropriate way to optimize your value delivery, revenues and your customer acquisition and retention.

The Matrix Approach

Although there are many reasons why companies use data-driven marketing, more often than not, its intended goal is to enhance and personalize the customer experience.

For instance, you can ‘slice’ up your performance data by many dimensions, such as age, gender, acquisition channel, device and even inferred psychographics and interests. This helps companies convey the right message, to the right audience, at the right time.

Data-driven marketing allows brands to create a customized campaign that converts leads through a deeper understanding of the customer profile. It makes it much easier to separate and group target audiences a business is trying to reach.

For example: you may find that female 25-34 year-olds from Santa Barbara, California may prove extremely receptive to your offering. You may even find a great deal of observations confirming this, as well as statistical analysis to support your hypothesis. However, you still need to ask two questions:

  1. How big is this segment, in absolute terms and relative to the greater target market?
  2. Can I effectively pinpoint and cater to this potential audience and if so, at what cost?

In other words, you are looking for significant variability, but also significant scale to the potential new audiences. In the above example, Santa Barbara is far too narrow a data slice, and not worth optimizing for, so instead, you might settle for focusing on 25-34 year-olds in California.

Setting Objectives

You need to have a clear general objective before you articulate your marketing strategy. Could you have multiple ones? Yes, if you can prioritize them. It’s important that the objective is quantifiable and that it ties into ‘hard’ business performance metrics and the general direction of your business. It’s also important that you assign a time horizon to your objective. (An objective without a deadline is just an aspiration).

That said, the long-term, fundamental objective of every marketing strategy is to generate revenue. This, however may take place using a more elaborate sequence of events and behaviors and therefore objectives are more granular and specific. Consumers do not turn into customers overnight; and they don’t recognize and love your brand instantly. 

Example objectives might be:

  • Generating a certain amount of new leads
  • Improving your customer retention by a certain amount
  • Raising the profitability of a certain product
  • Developing brand awareness for a brand new product

Top-Level Marketing Strategies

With so many moving parts and variables in a business, it’s important to articulate a basic, concise, top-level marketing strategy to guide your efforts. This encapsulates your thinking, keeps your focus on what matters and if needed, helps you pivot on the most meaningful elements.

Why is this important? 

  • A marketing strategy is meant to clarify a complex landscape with a view of how to move forward, helping you stay organized and well-structured.
  • The fundamental strategy needs to be clear: this makes it more actionable, faster to execute, and easier to communicate throughout your team or organization.
  • The strategy needs to be assessed and tailored on a regular basis as new data and insight comes to light. Having a well-articulated top-level strategy helps you validate or invalidate your initial assumptions.

Below are a few examples of top level marketing strategies that encompass the environment, customer acquisition, and value delivery. Winning marketing strategies successfully identify key drivers, conditions and expected behaviors and weave them together into a coherent, succinct narrative.

Example of an overarching marketing strategy for a real estate business: To leverage social media to identify and target prospective house sellers and deliver competitively priced, fixed-fee real estate services; undercutting established agencies using a nimble, digital-first service.

Example of a top tier marketing strategy for a CRM platform: To create a new niche segment for personal coaching businesses needing CRM services; driving value using tailored functionality and introducing a new price point between the flagship services and the bare-bones solutions. In addition, drive new customer acquisition using a referral program and maintain retention using monthly tutorials and webinars.

Example of a top line marketing strategy for an online university: To drive customer acquisition using specific behavioral and audience targeting; identifying 24-30-year-old college leavers and showcase degree completion programs using underutilized video formats.

Author: Lars

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