Marketing Consulting Marketing Mix
The management consulting industry is a mature industry with expected growth from the year 2012 through 2017. Marketing consulting is a small subset of that industry but still expected to see growth over the next several years. Small businesses, like any business, need marketing and advertising services but typically have little or no budget for it. New digital media and social networking sites, such as Facebook and Twitter, provide the capability for small businesses to build a marketing campaign for low – or zero – cost, yet many do not understand the usefulness of the new technologies. A new marketing consulting firm geared specifically to small business to provide the knowledge and expertise to create online marketing campaigns can carve a niche market for itself and grow as technology and small business environments improve.
Marketing Consulting Marketing Mix
Management Consulting as an industry is in the Mature portion of the Product Life Cycle and is comprised of a number of segmented services, including consulting for corporate strategy, IT strategy, human resources, organizational design, marketing and sales (Ibisworld, http://clients.ibisworld.com/industryus/ataglance.aspx?indid=1421). Some of the key features of the Management Consulting industry as a whole include the following:
- High levels of competition;
- Low levels of regulation;
- Continuing levels of growth;
- Low barriers to entry;
- Low barriers to exit (Ibisworld, http://clients.ibisworld.com/industryus/ataglance.aspx?indid=1421).
In short, despite high levels of competition, a growing number of businesses and an improving GDP require a greater need for management consulting, including marketing and sales. The marketing and sales sub-segment, despite sharing only 2% of the total management consultation industry revenue (Ibisworld, http://clients.ibisworld.com/industryus/ataglance.aspx?indid=1421) has the potential to increase its scope from traditional marketing competencies to new world “Web” and “digital” marketing competencies. Small businesses, in particular, are expected to continually increase their expenditures in social media and online advertising by 29% (Reilly, 2011) yet, conversely, 64% of small businesses do not believe that social media is relevant to their business (Wasserman, 2011).
Despite the misgivings of these small businesses in regard to social media, a distinction should be made between social media and other digital marketing mechanisms that have more of a direct relationship to ‘traditional’ marketing methodologies. A new venture marketing consulting firm can tap into these small businesses to assist them with traditional and new-technology marketing and, in addition, instruct them on the benefits of the low-cost alternative to traditional marketing that social media provides. This paper will discuss the standard “4 P’s” of marketing (Product, Price, Promotion, and Place) throughout the Product Life Cycle.
The product for any particular service offering can, in many cases, be considered the products mission statement and although each successive engagement would entail a different final end product than the previous, each would begin with the same premise: to provide marketing consultation services designed to meet the requirements of the client in the timeframe and within the costs agreed upon. That said, the smallest of small businesses – such as sole proprietorships and individual family enterprises – probably do not have the same need for a long term marketing consultation as small businesses of a larger size or medium sized businesses. Multiple offerings must be provided to meet the need and size of the prospective client; further, the offerings will be of a different nature as the consulting agency progresses through its own Product Life Cycle.
Product in the Introductory Stage
The product for a new-venture marketing consulting firm needs to be both a standard offering available to all potential clients and be flexible enough to meet each client’s unique requirements. Further, the product will undergo changes throughout the Product Life Cycle to meet the differing needs for the consulting firm itself.
In the Introductory stage the firm will need to compete against other well established firms. As a small, or boutique, style consulting firm, the target market should be a specific industry or technology (Gould, 2008). This will allow the consulting firm to target a niche market overlooked by the fore-runners in the space and build a clientele. The target industry for this consulting firm will be sole proprietorships and single-family businesses that have a need for additional marketing but lack the knowledge or expertise to do so. To meet this end there will be two base service offerings to the target market, with the first being a basic training session on how to use digital and social media as a marketing mechanism. This offering would be training only and would leave all implementation to the client.
The second offering is an extension of the first with an additional implementation of the digital media strategy, including Facebook, Twitter and other digital media as necessary. This will require additional resources as well as an initial meeting with the client to identify their needs and a planned strategy; the strategy might include configuring Facebook fan pages, email distribution lists for use with emailed special deals and coupons, QR codes (also for special deals and coupons), Pinterest pages and so forth, depending on the business of the client and their goals.
The strength of social media as a marketing tool lies in the cost: short of the technology costs to purchase computers, other devices (such as a cell phone) and time, the cost for a basic social media campaign without advertising is $0.00. Assuming that most family run businesses do not have a large marketing budget the majority of the business engagements can be expected to be in the lower-costing training offering.
Table 1 – Introductory Stage Product Offerings
|Social and Digital Media Training||
|Social and Digital Media Implementation||
Product in the Growth Stage
In the Growth state of the PLC it is assumed that the consulting firm has built a clientele and a series of references and portfolios with which it will be able to attract larger clients and longer term consulting engagements. The base product offering established in the Introductory stage will still be obtained; however, in this stage the target market will expand to small businesses with a larger footprint and greater marketing requirements, in that social media will no longer be sufficient in and of itself. Instead, new technologies and aggressive methods of marketing and advertising will need to be utilized, such as SEO design and analytics, click through rates, paid advertising on search engines and industry-specific blogs, and QR Code analysis. Additionally, this target market will arguably have a need for a mobile presence as well, for an ecommerce storefront, mobile shopping, or merely to have a mobile presence for additional information sharing via sms pushes or active pushes of information through custom applications.
Table 2 – Growth Stage Product Offerings
Product in the Mature Stage
The Mature stage of the firm’s Product Life Cycle will see a tapering of new business engagements; however, with the strong and successful brand image grown through the Introductory and Growth stages the consulting firm will be well trusted to be engaged in longer term marketing contracts. To attract new business in this stage the firm will offer its services as a long-term outsourcer of marketing requirements. The service would include weekly or monthly meetings with the client to identify branding requirements, marketing needs, and the attraction of new business for the client. The consulting firm would be responsible for the majority of the client’s marketing requirements, such as assistance with channel distribution, re-branding of products in an aging economy, and the utilization of new technologies. Essentially, the firm would act as a marketing department on a retainer basis, to be called upon when the need arises, with a pre-arranged number of hours available every month.
To meet the product offering in this stage the consulting firm will be required to engage in market analysis, to keep abreast of new technologies, and to have a finger on the pulse of the industry. It is also highly likely that the firm will need to focus more specifically on a particular industry as the assumption that “small business” is now too broad a terminology.
Table 3 – Mature Stage Product Offerings
|Long term Marketing Outsourcing||
Product in the Decline Stage
The marketing consulting firm in the decline stage will have three choices to make:
- Re-position itself with new technologies of the time;
- Re-focus on a core set of competencies;
- Exit the market.
The market for management and marketing consulting, though in the Mature stage, is not likely to see a massive decline in demand. It is highly likely, however, that as technology changes the type of demand will shift with new marketing technologies in the future. The recommendation would be to identify the new technologies and shift the consulting firm to be in line with them.
The price of a service must be finely tuned to meet the market’s demands. Pricing, as a function of billing, is the only method a firm has of generating income. The price a firm charges also plays a part in providing an image of value and attracting customers: a price set too high will miss customers unwilling or unable to pay it despite the image of being “very valuable,” yet a price set too low will have negative effects on income.
There are many methods of setting price for consulting: price per hour or per day, price per project, fixed price, price for success, price as a retainer, and other similar methods (Independent Consulting Bootcamp, pulled from http://www.independent-consulting-bootcamp.com/consultant-rates.html). However, not only must the price meet the requirements of the consulting firm, it must also meet the needs of the client itself. All pricing, regardless of final price type (hourly, fixed, etc) must account for both profit and expenses. Instead of finalizing a price for each stage of the PLC, it would be more prudent to instead finalize a formula or function for obtaining the final price.
Variables that must be accounted for in final price include some or all of the following depending on the chosen format of billing:
- Desired annual profit;
- Expected annual labor and profit margin;
- Expected annual overhead;
- Expected hours in project;
- Expected days in project;
- Number of work days in year;
- Number of billable work days in year;
- Number of work hours in day (Crane, 2011).
These variables can be used to calculate a price by hour or any other time frame. If pricing by a fixed rate is desired the same numbers can be used to calculate a price if the estimated total number of hours required is known. If many of these variables are unknown one possible solution is to price by what the “industry” prices as average. This number can be obtained at the United States Department of Labor Bureau of Labor Statistics website. The expected hourly rate for management consulting in March 2012 is $110.40/hour (Bureau of Labor Statistics Data, pulled from http://data.bls.gov/timeseries/PCU541610541610).
Price in the Introductory Stage
The target market in the Introductory stage is sole proprietorships and single family businesses. These businesses have a necessity and desire for their expenses to be as simple as possible, or as low as possible for the largest value. Providing a service for a fixed price is the most straightforward method of pricing available; considering the first service product offered in this stage is a training class on utilizing social media for marketing, a flat rate approach for each class makes sense.
The simplest method of calculating the flat rate approach is to identify the desired hourly rate, estimate the number of hours to provide the training, and then multiply the two together, bearing in mind that the target small businesses will likely have a finite budget for such expenses. A good starting point is to use the average hourly rate for management consulting (rounded to the nearest tens for ease of use) found on the Bureau of Labor Statistics web site and multiply by the expected number of hours. Though the industry average rate is suggested, it is suggested as a starting point only; other methods for determining a base hourly rate would be desired income, competition, desired perception of value, and the covering of expenses.
Pricing for the second service – implementation of the social media campaign in addition or instead of training – should follow a similar calculation: identify the number of hours required to perform the implementation and multiply by the chosen hourly rate. This hourly rate, however, can have a premium added above the ‘training’ rate due to the extra value offered: the actual implementation.
Table 4 – Pricing in Introductory Stage
|Social Media Training Pricing||
|Social Media Implementation Pricing||
Pricing in the Growth Stage
The Products in the growth stage are much more value-add services than the basic products in the Introductory stage; this stage sees the addition of analytics and the creation of advertising and eCommerce solutions. Unlike the previous products which are primarily “out of the box” or “black box” type solutions, these products require the use of a good deal of creativity and custom problem solving. The formula used previously of “hourly rate multiplied by estimated hours to completion” can still be used, though due to the increased workload the hourly rate should be increased to a premium. In some cases where a specific goal is desired (for example, the creation of a mobile application as a storefront) an hourly rate might not be sufficient.
In the case of identifiable and measurable outcome (e.g., a new mobile application) one approach to pricing is to calculate the value of the project with the client (Mills, pulled from http://managementconsultingnews.com/interview-harry-mills/). In this formula both the firm and the client agree upon the value of the project as a ratio of total expected income which becomes the cost of the project.
The key goal with the products in this stage, with end-results being agreed upon by both firm and client, is that the goal is itself a moving target. Harry Mills discusses the issues of charging an hourly rate for services that they do not directly control: “the downside of hourly rates for clients is lack of control over the end cost.” (Mills, pulled from http://managementconsultingnews.com/interview-harry-mills/). To provide value, a daily fee or project fee is recommended. A daily rate can be obtained by taking a Premium Hourly Fee multiplied by 8 hours.
|Analytics, Problem Solving, and Idea Creation||Daily Rate or Project Fee
Pricing in the Mature Stage
Mature stage pricing should follow a continued level of growth without being too complex. The primary difference in Product between the Growth and Mature stage is the addition of “marketing on retainer,” in which the consulting firm is hired for either long term project or as retainer for continued, but infrequent, marketing requirements.
Long term projects can easily be priced the same as those projects in the Growth stage, either by the day or by the project. However, “retainer marketing” requires a longer term pricing strategy, such as an annual cost billed monthly.
Calculating the retainer fee can be simple: baseline the number of hours expected to support the client monthly and apply the standard hourly price to it. Discounts can be provided for those clients expecting to use a lot of hours per month. Or, more simply, agree with the client the maximum number of hours per month and set a price based on a per hourly rate accordingly.
Promotion in the Introductory Stage
Promotion of the new firm in the Introductory stage is key to building a clientele and growing. Ironically, the same marketing tools that the firm will sell to clients will be largely the same used to find and obtain clients: social media and traditional marketing methodologies.
Being that the new firm would also likely have a small budget for marketing the same techniques that it would sell to clients would be used to promote itself: a strong Facebook, LinkedIn, Twitter, and Pinterest presence would be essential for free and low cost advertising. Online advertising geared specifically for online marketing would also be used. An online promotion strategy would take the following tactics:
- Facebook for ‘fan’ interaction;
- LinkedIn for a professional gateway;
- Twitter for online ‘word of mouth;’
- A mobile application for ‘push’ notifications;
- A blog for presenting professional references, gallery of successes, professional and academic articles, and a professional web presence.
Prendergast, Ko, and Yuen (2010) have shown that ‘word of mouth’ shared in an online environment is just as useful in obtaining new business as traditional word of mouth; an effective, interactive, and up to date online presence is a requirement, particular to obtain clients in remote locations.
Traditional word of mouth will be just as critical; to that end the new consulting firm will engage in marketing activities for local non-profit organizations and charities on a pro-bono basis. This will allow the consulting firm to obtain needed referrals, experience and positive word of mouth from the end client while also providing the end client needed assistance.
Promotion in the Growth Stage
The Promotion strategy in the Growth stage will not see many changes from the Introductory stage; however, by this stage the consulting firm should have a database of existing and potential clients and their contact information. Targeted email campaigns with special offers will also be utilized to obtain new business and new referrals. Also, blog articles optimized for content showing expertise in marketing will continue to be used and shared on social networks; well written, effective articles will “enhance your corporate brand, position you as an industry thought leader and drive traffic to your site” (Thorne, 2012).
To further drive positive word of mouth and create the possibility for more engagements it will be vital for the firm to engage in as much personal networking as possible: joining trade organizations and attending local conferences are further ways to meet potential new clients and increase word of mouth (Dubois, 2011).
Promotion in the Mature Stage
By the Mature stage the marketing consulting firm will have a breadth of experience and referrals to draw upon; by this stage and with this experience the firm should be considered an ‘expert’ in the field. As such, a wonderful opportunity for Promotion comes with case studies shared via digital media for distribution: this continues to allow the firm to guide and improve on its word of mouth branding and builds its image as an expert in the field. Not only do case studies show expertise and provide support of added value and improvements, they also “tell a story and give advice” (Georgieva, 2010) which appeals to a human nature to share (Georgieva, 2010). These case studies, hosted on the firm’s blog, will also be shared amongst the correct channels for maximum distribution, primarily Facebook, LinkedIn, and Twitter. Videos can also be made and shared on YouTube.
Promotion in the Decline Stage
The firm’s primary product is digital marketing with analysis, analytics, and measurement of success. By the time the current digital marketing channels reach decline new ones will have already, or will have begun to, replace them. Promotion, as well as the Product, in the decline stage will depend primarily on the new technologies at the time. If the firm opts to re-position itself as a leader in the new technologies then Promotion must match, as it has in the three prior stages.
The marketing consulting firm will be a home-based business, with the majority of meetings with clients being performed either via telecommunications or in person at the client site. In the case of face to face meetings in a business environment a local “co-working” location can be used. A co-working location is a shared working location with desks, offices, and meetings rooms for rent for occasional use. A shared location with other startups and small businesses could also be effectively utilized through personal networking and word of mouth to obtain new business.
As the firm grows in size a more permanent location can be chosen in a central business district. Being, however, that the majority of the work is expected to be performed remotely, this would depend on the size of staff.
Marketing Consulting, as a subset of Management Consulting, is a Mature product currently experiencing a shift in demand from ‘traditional’ marketing to the inclusion of ‘new digital marketing.’ Small businesses, as a whole, are moving toward new digital media for low cost marketing, yet many still do not believe or understand the value that the new media has for their business.
The initial goal of a new venture marketing consulting firm is to specifically target small business to assist them in achieving goals through low-cost digital media. As the firm grows the products offered would also grow to include larger small businesses and more of the traditional marketing mix such as analysis of current marketing strategies and implementation of new marketing strategies. Finally, as these currently new technologies give way to newer technologies not yet in wide use, the marketing consulting firm would either adjust to take advantage of the new technologies or prepare to exit the market entirely.
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