Marketing Strategies Fundamentals – Are you using them right?
Recently I saw an ad of a hair product with a promotional offer of cashback. At first, I got skeptical, why they are promoting a hair care product through cashback. I wouldn’t cost my hairs for a little cash back. But then, I reasoned, what if I am not their Target Audience? I carefully tried to identify their target audience and user behaviour.
While promoting a product or service, it is crucial to use the right marketing strategies as per your TG. Being a top line brand who target high-end women, a cashback might not be the right match for the Brand’s marketing strategies.
If you’ll check any marketing strategies, it will fall in one of the five below given strategies. These 5 crucial marketing strategies are then twisted and tweaked as per the market and brand requirement. To drive the result, it becomes critical to identify the right strategy. The strategy for a product launch would be different from the strategy for customer retention.
Below are the 5 strategies and the best possible scenario to use them:
- Price Game
- Push Promotion
- Peer Influence
1. Price Game:
Pricing is one of the four pillars of marketing, along with product development, positioning, and place of sale. This is the most used marketing strategy worldwide. Whether it is a product or a service, either in retail or in e-commerce, whenever brands feel a tough competition or they are unable to sell, they start leaking the price. Why everyone follows this strategy? Because this strategy works. It helps you acquire new clients, get more customers.
But does your Brand really need this strategy?
A price cut can serve as a boon or a curse. Depending on your competition and target customer, price-cutting can help you increase sales volumes and profits, or damage your brand and make you less competitive.
Let’s deep dive in the benefit and forfeiture of this strategy.
Below is the Price Strategy matrix which should be taken care while fixing the price of a product or service.
We all are familiar with the Economy and Premium pricing. Let’s see More about Penetration and Skimming.
1.A Penetration price:
Pricing for Market penetration. Here the price charged for products and services is set artificially low in order to gain the market share. Prices are increased after achieving the market share. This approach was beautifully used by the Set-top box companies such as Dish TV. These companies need to grab large numbers of consumers. To compete with local cable agencies, they offer free telephones or satellite dishes at discounted rates in order to get people to sign up for their services. Once there is a large number of subscribers prices gradually creep up.
1.B Price Skimming
In Price skimming a company charge higher price because it has a substantial competitive advantage. However, the advantage tends not to be sustainable. The high price attracts new competitors into the market, and the price inevitably falls due to increased supply. The mobile phone and the telecom companies used the skimming approach in the early 90s. But once the other manufacturers and service providers were tempted into the market and the phones were produced at a lower unit cost, other marketing strategies and pricing approaches were implemented. New products were developed and the market for mobile phone gained a reputation for innovation.
Pros: Immediate Results, Easy to execute, Drives attention, Gives the competitive advantage
Cons: Short-lived, Easily out beaten, Hampers long term sales
2. Push Promotion
Along with Price, the next most used strategy is Promotions. To entice the customers for buying the new products, companies often combine the product with various offers, coupons, cash back, and freebies. One of the best examples for making judicial use of cashback is PayTM. PayTM was a new thing in India and in order to make users habitual of it, they promoted cash-backs heavily. In the case of PayTM, the Cashback strategy worked well, but the same didn’t work for other E-commerce sites. Reason: PayTM was a wallet and the cashback could be used to buy anything, right from Grocery item to apparels to electrical appliances to transfer money to someone.
But in the case of Flipkart, Price Drop proved to be the strategy of the year, known as “Big Billion Day”.
For e-commerce portals, marketplaces, both of these strategies works wonder but in the case of Brands, one has to choose the strategy wisely.
In case of Brands, Promotions have a certain edge over Price Game. It assures that the Price of the item remains the same, keeping the appeal of the Brand same.
Pros: As the Brand doesn’t compromise on their price, this strategy helps to keep the appeal of the Brand same.
This strategy could be used for the upsell and cross-sell of products.
Cons: Tough to drive Brand loyalty with promotional activities all around the year.
“Believe in something, even if it means sacrificing everything”, says Colin Kaepernick in the recent Nike ad. This form of marketing comes under the Inspiration Segment. In this form of marketing, Brands try to aspire the audience any goal is achievable and using the company’s product can help them do so. This form of marketing is generally done in the Fitness and Beauty segment. “Want to look 2 tones fairer”, simple use Fair & Lovely. The GYM memberships, the new product line of a Matte Lipstick, the new protein powder in the market are all marketed using this strategy.
Pros: As compared to other strategies, this strategy is more value driven and helps is building a loyal brand.
Cons: This strategy might not drive the sales immediately. A lot of effort is required to build trust. As this strategy portrays the Brand as a Hero which can help/guide the users to achieve their dream, over committing can backfire as well.
Segments: Health and care, Fitness, Beauty
This strategy is the opposite of Aspiration. Like many other marketing tactics, this strategy can either prove to be a foremost strategy or can blow up in our face. Most of us don’t want to admit that we are controlled by fear because it makes us feel vulnerable and weak. Still fear is the strongest human motivator. Fear encourages us to take actions and is definitely one of the biggest manipulators. The biggest example of fear as a motivator comes in the Pharma segment. Patients turn down the generic medicine or medicine from the other brand at a lower price because of the fear of risking their health and life. In the presence of fear, facts take a back seat.
In the Crazyegg’s article: “How fear works in marketing”, they have told that there are two primary considerations that control how threatened we feel:
Perceived Vulnerability: ‘How likely is it to hurt me?‘
Perceived Severity: ‘How bad will it hurt?‘
If people feel that they are likely (high vulnerability) to be hurt badly (high severity) they will feel threatened. But this is not enough for them to take actions. A third element plays an important role to decide whether they would take action or not. It is known as Efficacy.
What is Efficacy?
Efficacy is a person’s perception as to whether or not they can do anything about the threat. If they think they can’t do anything, they won’t take any action.
To use fear as a marketing strategy to drive someone for taking action, you must prove the following to the consumer:
- You are likely to be affected
- When it affects you, it will be painful
- You have the ability to avoid this pain
The medical insurance companies play on this approach.
5. Peer Influence Marketing AKA Social Influence
Peer influence is how the behaviour of the people around us impacts our own behaviour. Though the influence of peers on our behaviour peaks at age fourteen, people around us continue to impact our behaviour our entire lives. When it comes to marketing, purchasing is the behaviour that marketers try to influence, as well as the actual use of the product.
Take a moment to think about how much consumers rely on the advice and social cues of friends and people they admire.
Apart from Social pressure, there is a functional reason behind this behaviour specifically in technical products. For eg., everyone using the same software allows us to share files and collaborate more efficiently.
Let’s take the example of Blackberry. It was the brand for every smartphone user during the late 2000s. Everyone knows the BBM feature which makes the BB users feel that they all belong to the same community
Pros: You can establish your brand as an industry expert. Can reach a large number of audience. Reduced Sale Cycle Time
Cons: It takes time to set up. Difficult to track. Slow results
Next time if you need to choose a strategy, have a quick glance on the below table to match your strategy with its pros and cons. In case we have missed any important strategy, let us know in the comment and we’ll try to cover it in our next blog.
|Price Game||Immediate Results, Easy to execute, Drives attention, Gives the competitive advantage||Short-lived. Easily out beaten. Hampers long term sales|
|Push Promotion||Helps to keep the appeal of the Brand same.||Tough to drive Brand loyalty with promotional activities all around the year.|
|Aspiration||Value-driven. Helps in building brand loyalty.||Does not drive the sales immediately. Overcommitting can backfire|
|Peer Influence||Helps establish your brand as an industry expert, reduced Sale Cycle TIme, can bring a new audience||Takes time to set up, Difficult to track, Slow results|