For those that have followed my posts, you may have noticed that I sometimes apply concepts of physics to marketing. In many ways, physics can be a good metaphor for marketing.
In this one, I continue that notion with the concept of balance. Newton's 3rd law says for every action, there is an equal and opposite reaction. Alvin Toffler used a similar concept in his book Future Shock. He said for every modern convenience, there is an equal and opposite inconvenience (email and spam are perhaps examples). If you understand balance (harmony, negative and positive, yin and yang), you are more likely to successfully apply this physics concept to marketing. Hopefully the following examples will help.
Customer focus versus patronizing the customer
While the better companies focus on the needs of the customer, some companies confuse this concept with giving the customer whatever they want -- right or wrong. There needs to be a balance. Customers should be given the benefit of the doubt, but in cases where customers are definitely wrong, giving in to their demands can financially damage your company. When your company is in financial difficulty, you sacrifice the good customers and employees for the bad ones. Even worse, patronizing customers can damage your corporate image. Why? If customers demand something they don't deserve and you give it to them, they lose respect for your company and your products. This can cause serious brand damage and related consequences.
It's a balancing act
If you have ever cooked or baked, you know that it does not taste very good if there is too much or too little of an ingredient. The same is true in marketing. An out-of-balance mix does not work. We learned this lesson as kids from Goldilocks and the Three Bears, where Goldilocks encounters situations that are too hot, too cold, or just right. We live on a planet that scientists tell us is in the Goldilocks zone that supports life, as we know it.
Seven fundamental building blocks need to be in balance
Marketing uses a periodic table of elements I call the seven building blocks of marketing. To work most effectively and avoid instability, these elements need to achieve a balance. They are summarized below along with balancing issues.
- Marketing Information System. Marketers need to create this building block to research the market and to continuously collect, analyze, report, and act upon information from the marketplace. An out of balance system provides the wrong answers -- leading to the wrong products and failure.
- Corporate Image. One of the two major branding elements marketers employ to create, protect, and enhance the image of the organization. When this gets out of balance, the market is less likely to trust the organization and buy its products.
- Positioning. The other major branding element comprised of two components -- (1) The lock, or the target audience with an unfilled need and (2) The key, which marketers use to fill that need better than competitors with a unique and compelling image of the product. If the key does not fit the lock, the situation is out of balance -- causing sales of products to suffer.
- Products. These are the goods and services that the target audience wants to buy from your company. They work when they are in balance. When they don't work, customers are annoyed or angered -- causing damage to the brand (corporate image and/or positioning).
- Pricing. Marketers offer products for sale at prices buyers are willing to pay and for which they (the sellers) are willing to sell. If these are not in balance, or buyers think the price is too high or too low (in cases where the quality of the product is in question) the sale is not likely to happen.
- Distribution. This is how organizations make it convenient for their target audience to find, buy and use their products. If inconvenient or out of balance, buyers are far less likely to buy.
- Promotion. This is the building block companies use to communicate the benefits of their products in such a compelling way to prompt a buying action. When out of balance, prospects do not learn enough about the products to buy them or interpret the communications as exaggerations, boasting, or other negatives that will "turn them off "from buying.
Balancing the Marketing Mix
Once you achieve a balance within each element, the interaction between building blocks also has to be in balance. The mix of building blocks used to create marketing strategies is called the Marketing Mix. Too many companies have an unbalanced mix -- either because it was not in balance in the first place or it is put out of balance by changing one of the building blocks without adjusting the others.
Common out of balance mix
Perhaps the most common unbalanced mix occurs when a company changes the price of its products, but does not rebalance the other building blocks. In reaction to a competitor that offers a similar product at a lower price, some marketers lower the price to match or beat the competitor's price. They do not understand that this is usually a big mistake. Why? There are many reasons. Here are just a few.
- The customers that bought the product yesterday at a higher price are likely to get mad. They feel as if you "ripped them off."
- When you lower the price, you lower the image of your product and in some cases the image of your company. This creates a brand problem, and makes it more difficult for you to get the price you need to make money in the future.
- A lower price is often associated with a lower quality product. Customers figure that if your company (which knows the product well) is willing to de-value it, why should they think it is as good as it was before?
- Lowering the price often lowers your gross margins and makes it more difficult for you to make money.
- When you lower the price, the margin distributors and dealers get goes down, and they are less likely to actively promote your product.
Examples how to re-balance or avoid an unbalanced mix
Intel. A really good example of illustrating the proper way to rebalance the mix is what Intel did in response to price competition from a competitor -- AMD (Advanced Micro Devices). AMD offered a similar processor to Intel's popular Pentium chip. However, Intel was the market leader and had a significant corporate image advantage. Rather than lower the price of the Pentium, which would devalue its image, Intel introduced a less expensive chip called the Celeron processor. So as not take sales away from the Pentium, Intel positioned Celeron lower and gave it fewer capabilities. The brand image, price, and product capabilities were all put in balance.
French National Railroad. Another example is the French National Railroad. A long time ago, there was demand for less expensive train service from those that could not afford the price of a 2nd class train ticket. Rather than cannibalize (or take away) the sales of 2nd class train service, the railroad cut the top off of 2nd-class cars to create 3rd class service. They rebalanced the mix by creating a lesser product (passengers would get hot, cold, or wet under certain weather conditions), with a lower image, and a lower price.
Local bakery. So you don't think re-balancing only works for big organizations, I offer the example of your local bakery. Rather than discount the fresh products with top-quality ingredients, local bakeries offer discounts for items that are no longer fresh, such as day-old break or pastries that are unsold at the end of the day. This is an example of a mix re-balance where the image of the product, the product quality and the price are all put into balance so as not to cannibalize fresh baked goods.
Balancing to win
When you put the mix of building blocks (and the building blocks themselves) in balance, you are more likely to create a win-win rather than a lose-lose strategy. To win more often, it would behoove marketers to think about applying Newton's 3rd law in their marketing strategies. I hope you find this idea helpful. Good luck.