The marketing mix concept is an essential part of marketing theory. But describing the concept and putting it to effective use are two different things. In this article, the author reviews the elements of the marketing mix and lends insight into how these elements interact. Applying such ideas as consistency, integration, and leverage, he demonstrates how a marketing program must fit the needs of the marketplace, the skills of the company, and the vagaries of the competition. To meet such disparate demands, the elements of the marketing mix must (among other attributes) make the most effective use of company strengths, take aim at precisely defined segments, and protect the company from competitive threats.
The marketing mix concept is one of the most powerful ever developed for executives. Since just after World War I, it has been the essential organizing theme of many MBA marketing courses. It is now the main organizing concept for countless corporate marketing plans as well as for most marketing textbooks and many courses and executive education programs. It has endured because it is both effective and simple.
Now there are several ways to add even more strength to the concept while maintaining its simplicity. This article examines the marketing mix as an integrated whole, presents criteria for explaining why some programs prosper and others fail, and can help improve your ability to predict which programs will succeed and which will not. It then restates some of the more important themes behind the marketing mix concept and suggests several ways to add more power to it.
First, though, a review of the basic marketing mix concept is in order. The marketing mix is the “tool kit” that marketers use to do their job. It consists of four elements:
1. Product (or product policy)
3. Communication (the most visible element of the mix, which includes advertising and personal selling)
The marketing mix gives executives a way to ensure that all elements of their program are considered in a simple yet disciplined fashion. One can describe the essence of almost any marketing strategy by presenting the target market segment and the elements of the mix in brief form. IBM’s personal computer strategy might, for example, be described as follows:
Target market segment. Managers and professionals (not hobbyists or technical specialists).
Product. Parity technology, fairly easy to use.
Price. Reasonable (not high enough to provide an umbrella for competition but high enough to yield healthy profits for IBM).
Communication. Personal sales to large customers through IBM’s powerful sales force; heavy advertising stressing friendliness and broad applicability of the product.
Distribution. Directly through the sales force to major customers; mainly through independent full-service dealers to smaller customers.
Most companies would benefit from the discipline of a similar description of their marketing strategy’s core. It helps ensure that the plan is clear and that the details do not obscure the strategy.
A few examples will quickly make apparent the wide variety of marketing approaches available. A big difference exists between the marketing approaches of companies that sell toothpaste and those that sell huge coal-fed boilers for electric generation. Such a difference is, of course, natural and to be expected. Toothpaste costs little, and companies can sell it in small quantities to many consumers for whom it is more than a trivial but less than a major purchase decision. Coal-fed boilers cost tens of millions of dollars and few people buy them; producers sell them to companies where many people labor over the choice of a unit for a long time.
More surprising are the variations among marketers of the same product categories. Cosmetics, for example, are sold in many different ways. Avon has a sales force of several hundred thousand who call directly on individual consumers. Charles of the Ritz and Estee Lauder use selective distribution through department stores. Cover Girl and Del Laboratories emphasize chain drugstores and other mass merchandisers. Cover Girl does a great deal of advertising, while Del emphasizes personal selling and promotions. Redken sells through beauticians. Revlon’s strategy encompasses a wide variety of brands and selling approaches.
These variations are more than anomalies. They represent fundamental strategies in the war for a distinctive, comparative advantage and competitive success.
The marketing mix concept emphasizes the fit of the various pieces and the quality and size of their interaction. There are three degrees of interaction. The least demanding is “consistency”—a logical and useful fit between two or more elements. It would seem generally inconsistent, for example, to sell a high-quality product through a low-quality retailer. It can be done, but the consumer must understand the reason for the inconsistency and respond favorably to it. Even more difficult is maintaining such an apparent inconsistency for a long time.
The second level of positive relationship among elements of the mix is “integration.” While consistency is a coherent fit, integration is an active, harmonious interaction among the elements of the mix. For example, heavy advertising is sometimes harmonious with a high selling price because the added margin from the premium price pays for the advertising and the heavy advertising creates the brand differentiation that justifies the high price. National brands of consumer package goods such as Tide laundry detergent, Campbell soup, and Colgate toothpaste use this approach. This does not mean, however, that heavy advertising and high product pricing are always harmonious.
The third—and most sophisticated—form of relationship is “leverage,” whereby each element is used to the best advantage in support of the total mix. The sales response curve helps answer this question (see Exhibit I). In its simplest form, the curve shows the relationship between sales, usually measured in units but sometimes in dollars, and a marketing input measured in either physical or financial terms.
Exhibit I The Sales Response Curve
The relationship between advertising expenditures and sales is shown in Exhibit I. This relationship can often be represented by a mathematical formula or by a chart listing unit sales and advertising expenditures. But the graphical representation of the sales response curve is more meaningful to most people.
Sales response curves enable a marketer to study the relationship between a given level of expenditure of one or more marketing variables and the likely level of sales. More powerful, however, is the ability to look at the changes in sales related to changes in expenditure level. Exhibit I, for example, implies that as advertising expenditures increase, they have little impact initially, then a great deal of impact, and, finally, little impact again from additional expenditures. In the same way, the marketer can understand the dynamics of the relationships and interactions of two elements in a three-dimensional graph.
It would not be sensible to invest additional advertising dollars in the flat part of the curve (upper end) to generate sales, but rather to invest dollars in other elements of the mix. Products with heavy advertising would then benefit more from improved distribution than from an overkill of advertising.
I now go beyond the relationships of the elements of the mix with one another to consider the relationship of the total program with the market, the company, and the competition.
Product policy discussions both in business schools and in real life invariably put great emphasis on the product-market fit. An important question in new product development, for example, is whether the product concept fits market needs. Some years ago, when J.M. Smucker considered the introduction of a thick catsup in a wide-mouthed jar, the company’s executives agonized over whether consumers would respond positively to the new concept. When Loctite Corporation introduced the Bond-A-Matic 2000, a dispenser for its industrial adhesive line, a serious concern was how the dispenser would fit into the prospective customer’s manufacturing operation. Managers can expand the concept of product-market fit to encompass the relationship between the total program and the market. The idea is to develop a program that fits well the needs of the target market segments the company is exploiting.
Such a program builds logically on consistency, integration, and leverage. To leverage you use the most efficient tools for the market segment being emphasized. (Efficiency, in this sense, relates to the engineering concept of output per unit of input. Thus we might look at unit sales generated per dollar of advertising or personal selling to determine which was more efficient, or what combination of the two was most efficient.) It is probably best to approach the price-sensitive, brand-insensitive consumer, for example, with price promotions instead of expensive advertising programs or elaborate packaging.
One of the first steps in marketing-program development is to completely, carefully, and explicitly delineate the market. One of the last steps before launching a program is to review the impact of each element and of the total mix on the target consumers. The review should include tests for consistency, integration, and leverage.
A good program-market fit and a consistent, integrated, and leveraged program are not enough for success. The program must fit the company. Just as each individual has certain strengths and weaknesses, so do organizations.
A marketing program must be symbiotic with the company or operating unit implementing the program. A marketing organization with extensive mass advertising experience and expertise, for instance, is more likely to be able to carry out a program that depends heavily on advertising than an organization with less strength in that area.
Over time, these behaviorial or cultural attributes can change. But the rate of change is limited. It usually takes quite a long time for a company to develop a strength in advertising if it has little understanding of the field. For example, it is not easy for novices to identify and hire advertising experts from other companies. Such an approach takes time and, often, several trial-and-error cycles. Sometimes the beginners hire the wrong people; even when they hire the right people, the newcomers they select are often so alien to the culture of the company that the “transplant” is “rejected.” One executive usually cannot change a whole culture, particularly in a large organization. Over time, strong leaders can change the culture, but not with ease and great speed. Thus the behavioral fit between the program and the company must be carefully considered.
The marketing program must fit the company’s overall capabilities as well. A price-oriented strategy works well in a company that stresses efficient manufacturing and distribution along with administrative austerity. An account-oriented marketing program is much more likely to thrive in a customer-oriented culture that has responsive operating and logistics people than in a manufacturing-oriented culture that stresses efficiency to the detriment of customer service. The large plant geared to long production runs is well suited to a strategy of a narrow product line with intense price orientation. And the company with a strong balance sheet and low cost of capital can much more easily provide generous credit terms than can a financially limited competitor.
Market position can also help to determine the most sensible marketing program. The market share leader, for example, gains when it encourages competition on a fixed-cost basis via elements like national advertising, company-owned distribution, or heavy research and development. Its position enables it to spread the costs over a large volume, reducing its cost per unit sold far below that of smaller competitors. Anheuser-Busch, for example, spends less on advertising per barrel of beer sold than its major competitors because it spreads its huge advertising budget over many more units than do its smaller competitors.
Small unit-share competitors or niche marketers, on the other hand, should emphasize marketing programs that stress variable costs so that their cost-per-unit-sold is equal to that of their largest competitors. Thus small companies often stress intensive price promotions, a commission sales force, and independent distributors.
The consumer’s or distributor’s image of the company can also have a big impact on program-company fit. In the early 1980s, Levi Strauss & Company introduced a line of men’s suits in which the jacket, vest, and pants were displayed and sold separately in department and specialty stores. The product line included matched items meant to look like a tailored suit. Although the concept met success for some competitors, it failed for Levi Strauss because the stores and the target consumers viewed the company not as a credible source of “suits,” but as a jeans and sportswear manufacturer.
Executives cannot develop or review a program in isolation; they can assess it only in relation to the company using it.
How should the program deal with competition? Your company’s program should be such that it builds well on your strengths and avoids stressing your weaknesses, all the while protecting you from the competition. Your company derives strength from a program that evades your competitors’ strengths, capitalizes on their weaknesses, and in total builds a unique market personality and position.
Accomplishing this set of related tasks requires meticulous analysis and honest introspection. Perhaps the most serious danger, other than neglecting the competitor-program fit altogether, is to underestimate the competition’s strengths. Don’t be too proud or too uninformed to see your competition’s good points and your own company’s weaknesses.
Too many companies display their disregard for the competition when they wonder, particularly about market leaders, “Why can’t we emulate them?” The answer is twofold. First, the strengths of the leading competitor are almost certainly so distinctive that any attempt at imitation would fall short of the mark. Second, the current leading competitor in all likelihood took command when the market was quite different—when a leading competitor with similar strengths and capabilities did not exist. Thus, in a sense, the leader expanded into a “vacuum” that no longer exists. Companies that blindly attempt to imitate the leader usually fall, often very painfully.
Companies compete with one another by emphasizing different elements of the marketing mix and by using different mixtures of those elements. The competitive response or reaction matrix is a useful table for visualizing the alternative action-reaction pattern.1 A simple matrix might include two companies and three sub-elements of the marketing mix such as price, product quality, and advertising (see Exhibit II).
Exhibit II Comparative Response Matrix
The vertical columns represent action taken by our company, Company A. We might, for example, cut price (left-hand column), increase quality, or increase advertising. The reactions of Company B, our competitor, are represented by the horizontal rows. The coefficients (numbers indicated by the “Cs” in the matrix) represent the probability of Company B responding to Company A’s move. The subscript “p” is for price, “q” for quality, and “a” for advertising; the first subscript is Company A’s action and the second is Company B’s response. The coefficient Ca,p (upper right-hand corner), then, represents the probability of Company B responding to Company A’s increase in advertising (right-hand column of the matrix) with a price cut (top row of the matrix). The diagonal (Cp,p, Cq,q, Ca,a) represents the likelihood of Company B responding to a move by Company A with the same marketing tool (by, say, meeting a price cut with a price cut). We can estimate the coefficients by studying past behavior and/or by seeking management’s judgment. The coefficients must, of course, add to a total probability of one (or 100%).
Once we have developed the matrix, we can review each of our potential marketing actions, here, for example, with regard to price, quality, and advertising in light of probable competitor response. If we expect that there is a 70% chance that the competitor will meet our price cut but only a 20% chance that it will meet a quality increase, we might reason that a quality increase helps us to develop a more unique marketing approach than the price cut, which is more likely to be imitated. We can also continue our disciplined conjecture by asking how we (Company A) should respond to the competition’s (Company B’s) most likely reaction to each of our actions. If we cut price, and it is 70% likely to meet our new price, what should we plan to do when it does meet our new price?
The competitive response matrix is a flexible analytical approach. One can add more columns representing many marketing tools, add more rows for delayed responses (for example, will the competition cut price immediately, in a month, in a quarter?), and add rows for additional competitors. The discipline of the approach is exceedingly valuable.
The competitive response matrix is useful in helping to develop a distinctive approach to the market. It enables a competitor to understand more easily how it can differentiate itself from the marketing programs of other competitors.
Formal competitive analysis programs are particularly important for making large capital commitments. The essence of these programs is to play the role of the competitor or of a group of major competitors. Some companies even go so far as to have their own executives play competitive games built around their industry, with one or several company executives representing each competitor. The response matrix can be incorporated into these elaborate, formal approaches.
Like most concepts, the marketing mix is an abstraction from reality. And real marketing programs don’t always fit the product, price, communication, and distribution paradigm perfectly. For instance, several aspects of the total mix really involve combinations of the four basic elements. These combinations include:
Strictly defined, “promotion” includes short-term price cuts to the trade and consumer incentives like coupons, contests, and price allowances; it involves price and communication. In many industries and companies, trade and consumer promotion account for a larger share of the budget than advertising or personal selling. There is certainly no need to expend much effort trying to categorize consumer promotion as price or communication. The important thing to note is that it is useful and fits into the mix.
Often viewed as part of the product, “brand” is also part of communication. In fact, it can serve as a useful, integrative force to bring product policy and communication closer together.
“Terms and conditions” relate to a myriad of elements of a contractual nature that are closely related to price (payment terms, credit, leasing, delivery schedules, and so on). But they are so close to personal selling that I think they should be viewed as an interface between price and communication. Elements like service support and logistical arrangements also approach product policy. The important thing is not necessarily to categorize these issues but to consider them as marketing tools.
In conclusion, I suggest you use the marketing mix concept to answer the following questions:
Are the elements consistent with one another?
Beyond being consistent, do they add up to form a harmonious, integrated whole?
Is each element being given its best leverage?
Are the target market segments precisely and explicitly defined?2
Does the total program, as well as each element, meet the needs of the precisely defined target market segment?
Does the marketing mix build on the organization’s cultural and tangible strengths, and does it imply a program to correct weaknesses, if any?
Does the marketing mix create a distinctive personality in the competitive marketplace and protect the company from the most obvious competitive threats?
Use these questions to help focus on the most important aspects of the marketing mix and its fit.
1. Jean Jacques Lambin, in Advertising, Competition and Market Conduct in Oligopoly Over Time (Amsterdam: North Holland Publishing, 1976), describes the approach in great depth. I am indebted to my colleague, Robert J. Dolan, for introducing me to it.
2. See my article with Thomas V. Bonoma, “How to Segment Industrial Markets,” HBR May–June 1984, p. 104, and our book, Segmenting the Industrial Market (Lexington, Mass.: Lexington Books, 1983), which explains that marketing segments can be defined by such attributes beyond customer demographics as urgency of need or personality type.