Understanding customers and the marketing mix

In order to differentiate itself from its many competitors, Telstra repositioned its marketing plan to put into practice a Market Based Management (MBM) approach.

Market Based Management is a business strategy that puts the needs and wants of an organisation's customers at the centre of all business activity.

Five key concepts that underpin the MBM philosophy are:

• Customer focus and profitability - focusing on customers and their needs rather than products and technology
• Create customer value - creating superior value over the competitors' product and providing exceptional value to the customer; this value may be tangible such as providing a physical product or intangible such as service and account management
• Customer retention and advocacy - creating customer loyalty and encouraging customers to promote your brand
• Competitor analysis - understanding the competitor's differentiation, market share strategy and customer segmentation and
• Cross functional teamwork - a collaborative approach to working together, sharing information and building creativity and problem solving capacity in order to bring a greater and more positive customer experience.

MBM uses strong market research to underpin the basis of all marketing activity. Market research is usually conducted using both qualitative and quantitative methods.

Qualitative research is based on anecdotal feedback from clients and provides information on how and why people make the purchasing decisions they do. This can usually be collected through surveys, interviews and focus groups. In Telstra's case, they conducted interviews with more than 400,000 Australians to understand:

• Why their customers want to connect with one another
• What kind of telecommunications services they need
• What people want from a telecommunications provider
• What their needs and wants are
• What Australian people think about.

Quantitative research provides market researchers with more measurable results based on statistical analysis of data. Statistics, tables and graphs can be used to represent results from quantitative research.

Data will often relate to market size, market share, penetration and market growth rates. It is also used to measure customer satisfaction, attitudes, awareness and behaviour.

Based on market research results, marketers would then need to determine the most appropriatemarketing mix.

The marketing mix refers to the 'Four P's' of marketing: product, price, placement and promotion.

Product

The first of the ‘Four P’s’ refers to the product being promoted. It can be an actual product, a service or information.

Price

Price point can be very important for some products. Pricing can have an effect on the way the product is promoted – will it be a high priced item to target a luxury market or a lower priced product to offer value for money to customers?

Placement

Placement refers to where, and how, to place a product to make it visible to the marketplace. For example, will it be via the Internet or in a retail outlet?

Promotion

The final P of the 'Four P's' refers to promotion of the product. There are various methods of promoting a product depending on budget and relevance. Typical methods include advertising,public relations, word of mouth, direct marketing and point of sale.

By offering a company's product with the right combination of the 'Four P's' marketers can improve their results and marketing success.

To understand its customers, Telstra divided its business and consumer customers into unique segments to better comprehend their needs.

Segment needs differed according to:

• Customer demographics including age, income, ethnicity and family status
• Preferred marketing style
• Understanding, acceptance and use of technology
• Buying decisions and motivations.