The Digital Marketing Mix

By January 18, 2018Business, Marketing
The Hutch Report

The new economy and our increasing digitised world seems to have outmoded many classical business concepts. What seemed logical from a business standpoint in the traditional sense now seems less logical from the digital point of view. Should businesses be thinking about tossing out all these old concepts that make less sense and start thinking fresh from a digital sense? Then again, has the digital hype become so great that we forget that most of the world’s economy still runs in a traditional sense and that we should merely be thinking about adapting concepts to digital models instead of having them replaced?

A real digital economy is one that is purely digital, such as information that is produced digitally, marketed digitally,  distributed digitally and sold digitally. With this definition we are able to quantify what percentage of the economy is in fact digital, which is in fact still a small portion. We know that the greater economy does not function in pure digital form, although the hype would lead you to believe this is so. If you purchase a bar of soap through a website, it may have been marketed and sold through the website but the bar of soap is still a physical object. This means that it must be produced in a factory, stored in a warehouse, and distributed to the end customer by physical means. So what we have is essentially a hybrid where the digital tools have replaced certain traditional means of doing business but not all (I don’t think you will ever see the day where we wash ourselves with digital soap).

With this in mind, businesses should be thinking about which digital processes occupy their activity chains and determine how traditional concepts can be modified to suit them, instead of rethinking the wheel and replacing them completely. As an example, we looked at effective marketing strategies in the traditional sense to see how they can be modified to accommodate the digital extension of business.

We start by looking at traditional marketing and the obvious place to begin when thinking about effective marketing strategies is the consumer. Every company’s reason for being is based on satisfying the customers wants and needs with the firm’s products and services in order to generate profits (we will not consider non-profit organisations here).

Consumers tastes vary greatly, which makes it extremely difficult for any one company to serve everybody (although Amazon is sure giving it a good try). In order to make sense of all the consumer variablities in the market, the first task at hand is to separate the market in to homogeneous segments. This way companies can better identify and analyze what really makes them tick. They will do this by asking such questions as what problems are the potential customers having that we may be able to solve better than others? Who else is experiencing these kinds of problems?

Once this is done then the company will attempt to align what it is offering with what the consumer wants or needs. Hopefully they do that properly and the segment becomes profitable for them.

In order to do that, they position four classic strategies in a way that will address the consumers wants and needs correctly and convert that into profitable sales. These classic strategies have come to be known as the “Marketing Mix” and they include: Product strategy, Pricing strategy, Distribution strategy and Promotional strategy.

Product strategy: This includes decisions about the product and its uses, packaging, branding, trademarks, as a few examples.

Pricing strategy: This includes the challenge of setting a justified and profitable price point.

Distribution strategy: This includes the selection and management of marketing distribution channels and the physical movement of goods from manufacturing to the end consumer.

Promotional strategy: This includes personal selling, advertising, publicity and sales promotion tools such as brochures.

In order to provide a simple example of this mix we will take a look at Ferrari Cars. Product strategy – they are a luxury item, therefore they are branded as such. Details of the product are all of the highest quality. The name represents luxury and automobile craftsmanship at its finest. Pricing strategy – because the product is represented as high quality and requires expensive quality materials to produce, the price point represents this fact and retails from between $188,000 and $400,000. Distribution strategy – Ferrari cars will only be sold in exclusive dealerships seeing that they cater to a very select market, and such a luxury goods consumer would accept the fact that there is not a Ferrari dealership on every street corner. Promotional strategy – their promotional strategy has to represent their product so you won’t find any flyers in your mailbox advertising “20% off if you purchase a Ferrari before Friday.”

So now, in the hybrid digital world what has drastically changed for Ferrari? The product is still a luxury car. The pricing strategy hasn’t changed to reflect that. That is to say, you are not going to get 20% off of a Ferrari if you purchase it online. The distribution strategy doesn’t change because the physical object still goes through the distributor channel to the end consumer. Essentially, we can say that the promotional strategy has changed. Instead of a nice glossy brochure (which they still have) you can get all the information you need online. The website looks high end but today you can have a luxurious looking website and sell inexpensive chocolate bars. Communication has not changed much although you get the advantage of more means of communication but so does everybody. In any case if you are going to purchase a car for $200,000 you probably want to speak directly to the seller.

What about the pure digital world? This is where the modifications have to take place because the lines become blurred.

Product strategy – This becomes a content strategy which means we are speaking about a digital good such as a book, piece of software, application etc. Product strategy can now become a bit more difficult, especially if you are thinking of branding yourself as a luxury digital product. Does this category even exist?

Pricing strategy – Because of the digital world businesses have now gained efficiencies and are given additional margin to work with so they can play with price a bit more depending on who they are selling to and what their competitors are doing.

Distribution strategy – In digital form we have the whole world at our doorstep. The strategy becomes which distribution channel to use, YouTube? Website? Instragram? or simply email?

Promotional stategy – The digital promotional strategy can still employ traditional tools such as radio/podcasts, Television, Billboards, Magazines etc. or it can be purely digital using such tools as Twitter, a myriad of websites to advertise on, Facebook, Google adwords, Instagram, YouTube or simply your own website. However, here we see that the lines can become blurred because now your distribution channel also doubles as your promotional channel.

Therefore, businesses have to take special care in thinking about how they position themselves in the new economy and what strategies they use. The most important aspect, which many businesses forget is the customer. If your segment market is 50 – 60 year olds then you have to communicate to them in the proper way and through the proper channels. This segment is not a big user of Snap Chat or Instagram so you have to change accordingly.

So, regardless of whether your product is physical or digital, there are some fundamental questions that businesses should not forget to ask;

Who are my customers? (How old are they? What is their profession? etc.)

Where are they located? (in the digital world, an Italian may be visiting your site, are you selling to them? If you are there are a number of cultural issues to consider).

What need, want or problem are we solving for them? (So many companies are in the “build it and they will come” frame of mind. A nice to have product is very difficult to sell).

Providing something of value that somebody is willing to pay for has not changed for thousands of years. The new economy and digital world does not change that fact. There are numerous articles outlining all kinds of traditional marketing strategies and digital strategies which are valid, however, many often still forget the reason for being in business and that is to satisfy a need. If your business concentrates on the end customer and how his or her needs are being fulfilled by your business, and work backward from there, the chances of success will increase regardless of if your product/service is physical or digital.