What is marketing?

If we use the official definition provided by the Chartered Institute of Marketing, marketing is “the management process responsible for identifying, anticipating, and satisfying customer requirements profitably.” The simple definition of marketing is that it is the action or business of buying, selling, and promoting products, services, or brands, including advertising and conducting market research, as well as delivering products to consumers or end users. So when a company announces its plans to build relationships with its customers through various activities, that is really a way of saying that the company’s marketing efforts are under way.

The essence of marketing is gaining a full understanding of what customers want and need, then using that information to sell the right products. Ultimately, the goal of marketing is to match the company’s products and services with the end users who need them and, in the process, earn profits for the company.

Through marketing, entrepreneurs will be able to put the right product in the right place, at the right time, and at the right price. We will understand this well when we come to the four elements of marketing.

Marketing versus sales

Marketing is often thought to be more or less the same as selling. They may be similar, but they are in fact two different things. According to Theodore C. Levitt of Harvard Business School, selling focuses on the tricks, methods, and tactics used to persuade people to spend their money on buying the product. Marketing goes deeper than that, because it gets into the details of the exchange of cash and product: what drove customers to spend their money? What captures their interest?

Selling is concerned with getting customers to pay for the product; marketing focuses on developing demand for that product, which then drives customers to spend their money on it.
Think of marketing as the big picture: marketing covers product ideas and design, the brand itself, delivering the product to consumers, and even market research and consumer psychology.

To illustrate, let us look at the case of Apple and its products. If you think about it, the world did not really know it needed an iPod. What Apple did through marketing was to spark interest in this product and create demand for it. They created the product and set its prices based on the ability and preferences of the target customers.

The company then brought these products to its Apple stores and to other places where Apple products are sold. Through market research, they identified the areas where demand for their products was high, and set up stores and outlets in those places. As for its promotional strategy, Apple employed as many channels as possible, from unveiling products and their capabilities at technology events to spending heavily on advertising online and in traditional media, such as print and broadcast.

The importance and role of marketing

A company may have an excellent product, sell it in convenient and strategic locations, and still fail to achieve the expected profits, and it would not be surprising if, shortly afterwards, the company went bankrupt or declared bankruptcy. This is not a strange phenomenon: many companies fail even when they have viable offerings, and the problem most often lies in the company’s marketing, or the lack of it.

Why is marketing important for companies? Let us examine each reason.

# 1 Raising awareness of the product, the brand, and the company.

The first step companies must take is promotion, to make your target customers aware of your company and of the products or services it offers.
To create awareness of your product, service, business, or brand, marketing strategies will be useful.

Put yourself in the shoes of a potential customer who is browsing the internet and checking several social media accounts.

What would happen if her eyes fell on an ad at the side of the page about a certain company selling a service she had been looking for?

Obviously, she would be interested in learning more about the service... If the company had not taken the initiative to include online or social media marketing in its marketing strategies, this customer would probably never have known the company existed.

 

# 2 Increasing sales and profit.

Once a potential customer has been made aware of a product, there is a greater chance that they will examine the company’s offerings, and if they like what they see, they will buy.

This leads to more sales for the company and, in turn, more profit.

The reason marketers do what they do is to persuade more people to spend money on a product or brand, and for most companies this is the final stage: making a profit.

But they cannot rely entirely on the merits of the product or service to persuade people to buy; some marketing techniques must be used to give potential buyers reasons to spend their money buying from you.
When marketing strategies are used consistently, word about the product or service will also spread, and so will the chances of increasing sales and profits.

# 3 Improving the company’s or brand’s reputation.

Have you ever wondered why some companies last for decades while others can barely make it past a year or two? The most likely reason is the reputation of the company or brand.

With the help of marketing, a company becomes better able to build its reputation among customers. Marketing does not focus only on building brand awareness and recognition or improving product recall.

Marketing can also put the company in a better and more positive light, inspiring more loyalty from the buying public.

There is a perception that as long as a company makes great products that meet customers’ needs and expectations, it will be able to build a good reputation. This perception is true, but only up to a point; marketing techniques are still needed to ensure that a good reputation is firmly established.

Corporate marketing strategies aimed at improving the company’s reputation include active participation in social responsibility initiatives, a greater presence in the local market, and ongoing media campaigns.

# 4 Promoting healthy competition.

No matter how fierce the competition, it is a known fact that competition is still good for business: it encourages companies to do better and improve their offerings, and keeps them on their toes.

However, there is healthy competition and there is unhealthy competition.

Marketing can be used in both cases. Some marketers use deceptive marketing methods to undermine the competition, whereas when marketing is done right, it is a highly effective tool for promoting healthy competition.

Through marketing, small companies have the chance to enter a market that may have been dominated by one, two, or three major players for a long time. Marketing levels the playing field for market share, because it gives these small companies a chance to compete for a place in that market.

On the other hand, large companies will also use marketing to hold on to their position or place in the market, and this healthy competition will also contribute to the growth of the business and of the industry as a whole.

The marketing mix and its elements

It was in 1953 that the term “marketing mix” was first used, and that was thanks to Neil Borden, President of the American Marketing Association.

The marketing mix refers to the business tool marketers use to define a product or service offered by a brand or company.

Now, we cannot talk about the marketing mix without touching on the four elements identified by E. Jerome McCarthy, which have become almost universally known among marketers as the “four elements of marketing” or, more specifically, the “four elements of the marketing mix.” These are the 4 Ps: Product, Price, Place, and Promotion.
 

The four Ps of the marketing mix

Product

Marketing involves defining, selecting, and developing the product. It is not limited to products alone, because it also covers the services companies provide, as well as online businesses that offer online courses or digital products.

This answers the question: what goods or services does the company intend to sell and get paid for? Is the product good and worth spending on? Once the product or service has been defined, you need to look beneath the surface.

Technical aspects of the product:

What are the features or specifications of the product you will be selling? What are the sizes, colors, specifications, or other relevant characteristics?
Which features of the product or service meet the customer’s specific needs?
What is the product’s name?
Are there after-sales services and warranties associated with the product?

Customers:

What value does the customer expect from the product?
Which customer needs does the product or service meet?
How will customers use the product or service?
Where will customers be able to access the product or service?
Is the product or service suitable for the customer?
What are customers’ buying habits?
Where are customers located geographically?

Marketing the product:

Can the product be marketed on its own, or can it be promoted together with another product?
What sets the product apart from the product your competitors sell?
Are there products on the market similar enough to yours to be treated as “substitutes” for your product?
How does the brand support the product?

Price

The price of the product is also one of the elements that must be determined as part of marketing.
 

Value to the customer:

What is the perceived value of the product or service to the buyer?
How price-sensitive is the customer? How much would you have to raise or lower the price of your product or service before the customer’s decision on whether or not to buy changes?
How much are customers willing to pay for the product or service?
What is customers’ financial capacity? Being willing to pay that much is one thing, but can they actually pay that amount?

Pricing factors:

What are the pricing factors for the product or service in the specific target market?
How much of the product will be sold?
What does it cost the company to produce or obtain the product? This will also help determine how much the product should be priced at in order to make a profit.
In pricing considerations, there are several methods applied to determine the selling price to be set for the product, including:
- The cost of purchasing the product, in companies where products are bought and later sold in their unchanged form.
- The cost of manufacturing, including the cost of direct and indirect materials, direct and indirect labor, and overheads.
- Expenses, including general and administrative expenses and selling expenses, as well as distribution expenses and logistics costs.
- Marketing costs that can be linked directly to the product.

Price considerations:

Are there discounts the company can offer to consumers or distributors?
What factors are taken into account when determining discounts?
What impression does the set price leave in consumers’ minds? (This is a very tricky matter and creates a dilemma for both sellers and buyers.)

There are two possible scenarios to keep in mind:
Scenario 1: Setting the price too high may give the impression that the product is of high quality, and if so, there are customers who will not mind paying for it.

The problem, however, is that not all customers may be financially able to pay the high price that has been set.
Scenario 2: Setting the price too low may give the impression that the product is of very low or poor quality.

As a result, customers may choose not to buy, because they are looking for the best value for their money.

Competitors’ prices:

At what price do your competitors sell their products?
How does your price point compare with your competitors’?

Place

Place refers to the location of the product’s end user. Marketing also involves delivering the product to the customer, and identifying and selecting the best distribution channel to deliver the product or bring it to the customer’s location is another element of marketing.

The most common options include physical stores, online stores, and third-party distributors.

There are a number of considerations to note, namely:
 

• Budget constraints
  
  - How much can the company spend on its marketing efforts?
  
  - Location or access points
  
  - Where will customers generally look when they need the product or service?
  What kinds of access points or locations are there? If it is a physical store, what type of store will it be? Will it be located in a shopping mall or a supermarket, or will it be in a dedicated store? If it is to be sold online, will the company sell it on its own website, or will it enter into partnerships with online marketplaces or agents? If it is through direct selling, will they use a catalog, or will they hire sales staff for that specific purpose?
  
   
• Distribution channels
  
  What distribution channels are available to the company?
  How can the company reach the right distribution channels? Will they have to attend trade shows and specialized conferences? Will samples need to be sent out?
  
  - Workforce needs
  
  Will a dedicated sales team be needed? If so, how many people are required?
  How will the sales team be managed, and who will manage it?
  How will sales team members be recruited?
  
  - Competitor behavior
  
  What steps do competitors take in choosing the places where they will sell their products or services?

Promotion

Finally, Promotion, the last of the four, concerns the development and subsequent implementation of a promotional strategy to sell the product. Here we are talking about the company’s marketing campaign that will be used to communicate with the target audience about the product: how will you make the target market aware of your product or service, and what does it offer?

The most common promotional activities include the following:

Advertising through traditional and non-traditional media
Personal selling or direct marketing
Sales promotions
Public relations activities
Sponsorships
Guerrilla marketing

When evaluating a promotional strategy for your product, you need to think about the following questions:

- Your marketing message
What marketing message do you want to convey to the target market?

- Delivering your marketing message
Where can you place or set up your marketing messages so that they can easily reach the target market?
What is the best time to deliver your marketing messages to the target market?
Which promotional activities are likely to enable you to reach your target audience?
Which of the promotional activities will give you greater reach into the target market?
What time of year is best for carrying out your promotional activities? Consider whether the market is subject to seasonality, that is, whether there are peak seasons or slow seasons for your product or service.
What potential interventions or issues might affect the timing of your promotional activities?

- Understanding competitors’ marketing strategies
What are your competitors’ promotional strategies?
How do your competitors’ promotional strategies affect yours?

The 4 Ps (Product, Price, Promotion, Place) have been used for so long that they have become almost institutional knowledge. However, there are many arguments against them, and one of the most widespread is how the 4 Ps take only the point of view of the seller or producer.

This argument has led to the emergence of other theories about the elements of the marketing mix, and one of these schools of thought is the four Cs.

The four Cs of the marketing mix

Another approach was coined by Bob Lauterborn, professor of advertising at the University of North Carolina: the 4 Cs (Consumer, Cost, Convenience, Communication), intended to replace the 4 Ps.

Unlike the 4 Ps, the 4 Cs take the point of view of the consumer, who is considered to be at the heart of the whole process: it is their needs and wants that must be met, it is their money that will be paid to producers or sellers, and it is they to whom companies will try to deliver valuable offerings, so it makes sense to see things from where these people stand. This is where the 4 Cs come in.

Consumer

Instead of the product, the focus will be on the consumer, specifically their wants and needs, on the assumption that a company cannot simply design products and sell them on the market.

The “build it and they will come” principle may work, but only in very isolated cases; more often, more planning is needed on how suitable the product is before it is developed for the market.

Companies still need to conduct a study of what consumers want and need, and once these needs are identified they can develop a product around that demand, so that they can offer customers a product or service they will definitely want to pay for.

Cost

Instead of price, the focus is on the cost of meeting consumers’ needs or wants.

The selling price can also be determined by determining the cost.

Some companies operate on the assumption that if they sell their products at the lowest price, they will be able to get ahead of the competition. The scenario then turns into other companies trying to beat them by cutting their prices, without regard to the actual cost they incurred to satisfy consumers, and this is not in the interest of the company or its profitability.
 

Convenience

More than just thinking about the place or location where the product or service will be sold, the 4 Cs focus more on the convenience, from the consumers’ side, of buying the product or service. These days, online shopping and online stores have grown bigger, because they have focused on the point that more and more consumers care about: convenience. It is more convenient for them to shop or buy online, as they do not have to travel or leave their homes to buy the products they need. In addition, the payment options these online stores offer are more convenient, using credit cards and other automated payment methods, because customers no longer have to carry cash to pay for their purchases.

Communication

Instead of promotion, marketers pay more attention to communication. Pure promotion is seen as overdone, because it comes only from the seller or product developer; communication, on the other hand, refers to a two-way relationship, where information flows in a give-and-take manner between seller and buyer. To achieve this, companies make themselves accessible to their customers.

The importance of the marketing mix

If you look at the four elements of the marketing mix, you cannot pick just one or two as the most important, since all the elements affect one another. We can say that a business has succeeded thanks to its marketing strategy, but the business should not be complacent at the first sign of success; it must work even harder to maintain that success and achieve growth. Sustaining business success is extremely important, and this is where the marketing mix comes in.

The marketing mix increases the continued success of business operations. In general, companies want their operations to continue smoothly and without any major obstacles, the product life cycle to continue uninterrupted, and the entire marketing process to achieve what it was meant to achieve. The information provided by the marketing mix allows the company to make the necessary adjustments to the 4 Ps when it realizes that something is not working.

For example, a company may have been selling a product at a certain price at first, but thanks to the use of the marketing mix, it will be able to make the necessary adjustments once it realizes that the price is too high or too low, to help increase income.

The marketing mix increases the returns the company achieves in the market, as the right combination and implementation of the 4 Ps will help ensure that the company earns profits and that profits are kept at the maximum, given the circumstances.
The marketing mix pushes the company to take responsibility for the claims it makes about its products or services.

In its advertising and marketing campaigns, a company makes claims about the benefits customers can get from its products or services.

For a business to succeed, there must be a way to make sure these claims are not just empty words: the company must be able to back up these claims, and the marketing mix will help them do so.

Types of marketing channels

There are several ways in which producers or manufacturers can deliver their products and services to end users or consumers. Rather than simply naming distribution channels or the physical locations where products or services are made available to customers, we need to talk about marketing channels, or the routes these goods can take to reach customers.

By definition, a marketing channel is a set of activities or procedures carried out to transfer ownership of products from production to consumption, which means it covers all the parties and activities involved from the time the product enters production until the time it is brought to the end user for consumption or use.

The four types of marketing channels are discussed below:

1. Direct selling
   
   This happens when the product or service is marketed and sold directly to the consumer, away from stores or any retail location of the company. The traditional form of direct selling is peddling, where the seller goes in person to the buyer to offer their goods.
   Today, sellers give individual or group demonstrations to consumers, often through sales agents and representatives. They even go as far as contacting potential customers personally to arrange a time and place to meet, in order to market and sell products.
   Online selling is another modern form of direct selling. Online stores send emails to potential customers, display their ads, and advertise their products; in the process, the customer learns more about the product and decides whether or not to buy.

Advantages of direct selling:

It offers convenience to customers. Customers benefit from getting personal demonstrations from sellers, and they can check with sellers about product features. Products are brought to them instead of them going to the seller’s store to buy the goods. It does not require much capital.

On the sellers’ side: they do not have to keep inventory or make cash commitments in order to start. A sole proprietorship can start a direct selling business, which means it can save on paying salaries and wages to others, especially when it has only just started.

2. Indirect selling

This is what we call the process in which selling is done through intermediaries. An intermediary is essentially a third party that acts as a channel between two parties in trade. The best-known intermediaries in business today are wholesalers and retailers. The traditional setup may involve buying products in bulk from producers or manufacturers and selling these goods, also in large quantities, to retailers, who then sell these goods to consumers on a per-unit basis.

Advantages of indirect selling:

Better coordination in the case of bulk or large orders. In some cases, an agent works on behalf of wholesalers, obtaining goods from producers and delivering them to the wholesalers.

An agent is often required when a product is in high demand, with more than a few retailers or stores asking for it.
It removes the company’s need to maintain a sales department made up mainly of sales representatives.
It expands the company’s network, enabling it to build productive relationships with distributors and other intermediaries.

3. Dual distribution

In this marketing channel, the supplier or seller uses more than one type of marketing channel at the same time. A company may have sales representatives who do direct selling, but also have its own groups of intermediaries who help distribute the products. Franchising is the classic example of dual distribution.
Example: a fast-food chain franchisor operating its own units is direct selling, but the franchisor also licenses the operation of other units to franchisees, who are considered intermediaries.
The problem most companies face with dual distribution is the possibility of channel conflict and overlap, where the company’s direct selling efforts hinder the actions of the intermediaries, and vice versa.
In a fast-food franchise, for example, the franchisor’s units may compete with the franchisees for market share and customers.
 

1. Reverse channels
   
   This describes a scenario in which the process starts with the consumer or end user, then moves to the intermediary, and finally to the beneficiary; instead of a producer, we have a beneficiary or user.
   In this type of marketing channel, technology plays a very important role, as it allows the usual flow of transactions to be reversed. For example, a consumer may resell or recycle a product, selling the recycled product to the intermediary, who in turn sells it to the beneficiary or user.

We can also classify marketing channels as follows:

Manufacturer to agent, then wholesaler to retailer to consumer. This may seem more complex, since more parties are involved.

In this setup there is an intermediary, the agent, who coordinates the sale and assists the whole process in return for a commission from the manufacturer. The agent actively looks for potential wholesalers and connects them with the manufacturer, then brings the products to the wholesaler, who in turn sells them to retailers, the final link to consumers or end users.

Another classification of marketing channels shows the relationship between the company and its customers. There are two types:
Business-to-business (B2B) distribution: this channel describes a relationship in which a company sells to another company. It is seen mostly in the manufacturing industry, where one company manufactures parts that another company will use to manufacture another product; for example, an auto parts manufacturer sells to a car manufacturer.
Business-to-consumer (B2C) distribution: this describes the relationship between the company and the end user of the product. In the previous example, the car manufacturer sells the finished cars to end customers.

Best practices in marketing

In marketing, marketers apply “different means” and formulate strategies based on various factors, such as the type of product, the market in which the business operates, the core vision of the business, and the constraints the business is subject to.

Let us take a look at the marketing best practices that marketers agree are essential to making sure their marketing efforts succeed.

# 1 Develop a strong marketing strategy.

A marketing strategy is not something that can be prepared in a few minutes, created and presented to management, and ready to be approved and implemented. Developing a marketing strategy, both long-term and short-term, takes a lot of work.
 

Conduct market research:

Some may think that conducting market research is too tedious and takes too much time. The problem with not conducting market research is the risk of missing some crucial factors when creating your marketing plan.
Understanding the market or the audience is vital for any marketing strategy to be able to get off the ground and work.

When conducting market research, get close to your subjects: information obtained directly from customers is more credible and reliable than information obtained from databases or third-party sources.

Understanding the audience will also enable you to see things from their perspective. It is not always easy for manufacturers and marketers to put themselves in the shoes of customers or end users, but that is essentially what needs to be done.
Take, for example, a company that sells products to different countries: all the data or information from these countries needs to be analyzed in order to come up with a marketing plan suitable for multicultural and multinational application.

Sometimes, after the analysis, different approaches need to be devised for different regions.
All of this is based on the assumption that the customer must always come first in formulating the marketing plan: they are the people who must be served and whose needs must be met, and to whom the company hopes to deliver value.
 

Prepare a comprehensive marketing plan:

There is a reason the marketing plan is considered one of the vital components of a business plan. It is not something you should ignore and decide not to prepare (because it requires a lot of work). Be clear about your goals for creating a marketing plan.

You should also know the exact type of marketing plan you will develop. The most common types of marketing plans are:

- Tactical marketing plans: usually prepared on an annual basis, focusing on the marketing activities for that year.

• Project or functional marketing plans: these relate to specific marketing activities or programs; examples include advertising plans, trade show plans, publicity plans, and media plans.
  - Strategic marketing plans: these are usually longer, more detailed, and more comprehensive, and often cover a period of 3 to 5 years on average.

Use the 4 Ps.

There is a reason many marketers consider the four elements important: they are very useful.

If you use the 4 Ps as your guide, you will have a stronger foundation for formulating your marketing strategy.

In every marketing tactic or step, you should always ask: will this product or brand help meet the customer’s needs? Is the price within the customer’s financial means? Will the customer be willing to pay this price? Has the product been made available to the customer? Is your promotion doing what it should?
 

Design marketing programs around real-life events:

Reality resonates with consumers more strongly than make-believe; even if there is an element of fantasy, there should always be a touch of reality.

The fact of the matter is that consumers respond better to stimuli they can recognize. If they have had previous experience of something touched on by a company’s marketing campaign or strategy, they are more likely to pay more attention, take notice, and hopefully take the action expected of them.

# 2 Outsource marketing services or functions

Marketing responsibilities tend to become too heavy for management to take on, so it chooses to outsource marketing functions, leaving the job in the hands of experts.

Some companies are able to form, and maintain, their own marketing team; however, there are also those who find it more effective and cost-efficient to outsource these functions.

Why should companies consider outsourcing marketing functions and services?

Outsourcing allows a business to focus on its core competencies and concentrate on what it is good at.

There will be no problems arising from dividing attention between their core competencies and marketing the products; the danger in trying to do everything at once is that some business operations may suffer.
Outsourcing makes for a proper division of labor: experts should focus only on their expertise, and one cannot expect a product developer to also worry about how the product will be marketed later.
Outsourcing allows a business to establish its leadership in its field, as a company can have an easier time attracting the best talent in the industry if it becomes known for its ability to draw clear lines between its core and non-core competencies.
Outsourcing allows a business to make savings. Aside from savings on overheads and the compensation paid to full-time employees and staff, outsourcing also saves the company from spending time and other resources on recruiting and training marketing staff.
Outsourcing allows a business to get the benefits of a top marketing team while sticking to its marketing budget. External marketers also have a great deal of experience that the business can draw on.

# 3 Involve all stakeholders.

Marketing should be a company-wide effort, not limited to the marketing or sales team alone, since the success of a company’s marketing efforts is also affected to a large extent by the amount of support provided by management and the other members of the organization.

The CEO, for example, should give their full support, because a strong show of executive support will certainly help boost the marketing team’s confidence.

It is not only management and the members of the business organization whose support should be sought; all stakeholders should be ready to lend their support to the company’s marketing efforts when necessary.

# 4 Keep all lines of communication open.

Planning will certainly be more effective and efficient with many people involved, and the best ideas often come from brainstorming activities within groups.

You never know: the next great marketing idea may come from someone who is not on the marketing team.
 

# 5 Benchmarking.

You have to start somewhere, and if you are a new company, one good way of benchmarking may involve looking at competitors’ marketing plans and activities.

One mistake companies often make is using random companies as benchmarks.

Benchmarking results will be more relevant and reliable if the companies used belong to the same industry and are direct competitors, because you will essentially be moving in the same business circles.

# 6 Stay ready, keep developing, and keep up with the market.

Marketers are always on their toes, keeping their eyes and ears open for new developments that might affect their marketing strategies, because marketing as a whole is a highly dynamic field. Moreover, if you consider the rapid pace of technology, marketers find they have their hands full all the time trying to stay up to date.

A company’s marketing strategies must be up to date, so it helps to have forward-looking marketers.

The importance of staying up to date is often seen in the case of online marketing, where content marketing, search engine optimization, and search terms are heavily affected over time, meaning that what is new today may not be seen that way next week. It is therefore up to marketers to find ways to make sure their marketing will still hold up years into the future.

# 7 Embrace technology and make it work for you.

If there is one great marketing tool that can be used, it is technology. Technological advances these days have made what were once unimaginable marketing feats possible.

Social media, for example, has proven to be one of the most powerful marketing tools today; even large companies know this, judging by how much they invest in building an online presence on social media sites.

Marketers are always looking for collaborative opportunities that enable them to enter into partnerships with various media and entertainment platforms.

This also includes building a solid relationship with the media, which is a very useful partner in marketing; a good relationship with them will be useful for product placements and future advertising campaigns.

# 8 Stick to the budget.

If there is a pre-set marketing budget, stick to it.

Companies often face major problems that began with their inability to stay within the limits of the marketing budget granted to them.
Your ability to stick to the budget is a clear indicator of your ability to execute the marketing plan.

# 9 Turn customers into partners.

It is often said that word of mouth is the best form of advertising, so it makes sense that customers make the best brand ambassadors.

What many companies do these days is draw on their customer base, selecting those who have the potential to become trusted influencers and strong ambassadors for their brand.

They usually enlist the help of potential brand ambassadors by providing them with promotional gifts, often free samples of their products or even samples of products that have not yet been released, in exchange for product reviews or testimonials.

It has long been the practice of many marketers to build relationships with celebrities and influential figures to promote products, in the hope that their influence will carry over to the product they promote and increase sales. This method still works, and we see no reason for it to stop any time soon; marketers have also become more careful in choosing the personality who promotes the product.

# 10 Always track your marketing progress.

There must be a process for measurement, monitoring, and reporting, so that the company can make sure whether or not the marketing plan is being followed. This will make it possible to make early corrections if mistakes occur, and to make appropriate adjustments or modifications whenever and wherever needed.

# 11 Accept that marketing is a long-term commitment.

It does not matter whether the marketing plan is dedicated to a specific project or activity only; the fact remains that it is part of the company’s overall marketing strategy.

This means that management and all members of the organization, not just the marketing team, must also show the same level of commitment, which requires ongoing cooperation among everyone and a willingness to take part in every step of the process.

2. Electronic payment gateways

A payment gateway is what keeps the payments system running smoothly, because it enables online payment for consumers and businesses. If you are an online merchant, you do not need to be an expert in payment gateways, but it is worth understanding the basics of how online payments flow from your customer to your bank account.

This article explains what a payment gateway is, how it works, why an online merchant needs one, and how to choose the right payment gateway service for your business.

The key players in online payments

Before we dive into the definition of a payment gateway, we need to identify the key players in online payments.

When a customer clicks the “Pay” button on your website, these are the key players involved in the payment process:

The merchant: this is you, any online business operating in any sector (travel, retail, e-commerce, gaming, and so on) that offers a product or service to customers
The customer: also called the cardholder, who wants to access the products or services the merchant sells, and who initiates the transaction
The issuing bank: the issuing bank is the customer’s bank, which issues the credit or debit card to the cardholder on behalf of the card schemes (Visa, Mastercard)
The acquirer: also known as the acquiring bank, the acquirer is the financial institution that holds the merchant’s bank account (known as the merchant account). The merchant’s bank passes the merchant’s transactions to the issuing bank to receive payment

What is a payment gateway/processor?

A payment gateway is the technology that captures and transfers payment data from the customer to the acquirer, and then transfers the acceptance or decline of the payment back to the customer.

A payment gateway securely validates the customer’s card details, ensures that funds are available, and ultimately enables merchants to get paid. It acts as an interface between the merchant’s website and the acquirer, and encrypts sensitive credit card details, ensuring that the information is passed securely from the customer to the receiving bank via the merchant.

In other words, a payment gateway acts as an intermediary between the customer and the merchant, ensuring that the transaction is carried out securely and quickly. An online payment gateway can also simplify how merchants integrate the necessary software: as an intermediary during payment processing, the gateway manages the customer’s sensitive card details between the acquirer and the merchant.

Why do we need a payment gateway?

You may be wondering why you need a payment gateway if it is just an intermediary. Before we answer this question, let us take a step back and point out that an online payment is processed as a card-not-present transaction. The customer’s card cannot be physically swiped on a point-of-sale device, as you would normally do when processing a payment in a sports store or a grocery store.

You can therefore rely only on the card information the customer enters on the payment page.

How can you be sure that the card the customer is using is their own? In card-not-present transactions, the risk of fraud is much higher, and this is where the payment gateway works its magic.

What would happen if you took the payment gateway out of the online payment flow? Fraudsters would have easier access to the card data you process, exposing your business to fraud and chargebacks.

Moreover, fraudsters would also find additional ways to initiate illegitimate transactions, making you more vulnerable to fraud and to damage to your brand’s reputation.

The payment gateway is the guardian of the customer’s payment data. For online merchants, the payment gateway transfers the information from you, the merchant, to the acquirer and the issuing bank, using data encryption to keep unwanted threats away from sensitive card data.

Apart from fraud management, a payment gateway also protects merchants from expired cards, insufficient funds, closed accounts, or exceeded credit limits.
 

How does a payment gateway work?

Now that you understand why merchants need a payment gateway, let us take a step further and analyze how the gateway works during the payment journey.

The customer selects the product or service they wish to buy and proceeds to the payment page.

Most payment gateways offer you different options for your payment page. They offer the following options for a payment page tailored to your business needs:

Hosted payment page

This is a ready-made payment page to which customers are redirected when they are ready to check out. The payment gateway securely receives the transaction data before passing it on to the acquirer.

A hosted payment page reduces the burden on online merchants if you do not collect and/or store cardholder data on your server.
 

Server-to-server integration

Also known as direct integration, because it enables communication between two servers: the merchant’s server and the payment gateway’s server.

A transaction can be initiated directly by requesting the card details on the payment page, and customers can complete the card payment without being redirected to the payment gateway’s payment page, resulting in faster checkout, a more consistent user experience, and greater control over the look and feel of the payment page from the merchant’s perspective.

Server-to-server integration is suitable if you collect and/or store payment data before sending it to the payment gateway for processing.
 

Client-side encryption

Client-side encryption, also known as encryption at source, refers to encrypting sensitive data on the device on the client side before it is sent to the merchant’s server.

This enables the merchant to simplify PCI compliance requirements. In short, it enables you to accept payments on your website while encrypting card data in your browser using the payment gateway’s encryption library.

The customer enters their credit or debit card details on the payment page. These details include the cardholder’s name, the card’s expiry date, and the CVV number (card verification value). This information is then securely passed to your payment gateway, depending on your integration (hosted payment page, server-to-server integration, or client-side encryption).

The payment gateway tokenizes or encrypts the card details and performs fraud checks before sending the card data to the receiving bank.

The acquiring bank securely sends the information to the card schemes (Visa and Mastercard).

The card schemes perform another layer of fraud screening and then send the payment data to the issuing bank.

The issuing bank authorizes the transaction after performing a fraud check, and the approved or declined payment message is then relayed from the card schemes to the acquirer.

The acquiring bank sends the approval or decline message to the payment gateway, which then sends the message on to the merchant. If the payment is approved, the acquirer collects the payment amount from the issuing bank and holds the funds in your merchant account (more on that later).

Depositing the funds in the merchant account is a process known as settlement; when the actual settlement takes place depends on the agreement between the merchant and its payment gateway.

Based on the message, the merchant may display a payment confirmation page or ask the customer to provide another payment method.

What is a merchant account?

A merchant account is a specific bank account required for card payments/online trading, and it should not be confused with a business bank account.

That said, payment gateways, payment service providers (PSPs), acquirers, payment processors, independent sales organizations (ISOs), or major banks can provide you with a merchant account. Once your application is approved, a merchant identification number (MID) will be assigned. The MID is the account number of your merchant account. Card transactions are then processed and funds are transferred from your customers’ issuing banks to your business bank account, once their payments have been authorized and are ready for settlement by the acquirer.

The payment gateway (or the entity that creates the merchant account for you) deposits the funds from your customers’ payments there.

You may ask why the funds cannot be transferred directly from the issuing bank to your business bank account. Merchant accounts are necessary to maintain the chain of approval from the time the customer submits their card details to the time the funds are received.

Because goods can be returned, there is always a chance that some of the funds you receive as an online seller will have to be repaid, due to returns or chargebacks.

Returns account for a certain level of risk in your transactions, depending on the sector you operate in and the nature of your business.

The acquirer deducts the returns from the funds held in the merchant account at that particular time, then transfers the remaining funds to your business bank account.

Your payment gateway may also aggregate deposits from multiple sources.

A merchant account simplifies the way you collect your money: your payment gateway collects the funds in your merchant account and consolidates them into a single deposit to your bank account, making reconciliation easier.

Payment reconciliation is the process of checking your bank statements against your accounts and the records of your payment gateway, PSP, ISO, or acquirer to ensure that the payment amounts match.

Typically, if you are both an online merchant and a physical store, you will need two separate merchant accounts, one for each point of sale.

Payment gateway versus merchant account

To accept card payments and use a payment gateway to transfer payment data online, you must have a merchant account.

A PSP, a payment gateway, or any other financial institution that processes your payments, as mentioned earlier, can issue your merchant account. The bottom line is that you cannot accept online payments without having a merchant account.
 

Can a multi-currency payment gateway help with cross-border sales?

A multi-currency payment gateway enables you to accept payments in different currencies. It also enables you to process international payments and accept online payments from customers around the world.

Multi-currency processing takes place when your company can accept card payments from customers in foreign currencies.

If your business charges customers in more than one currency (for example, in pounds sterling and euros), then you are processing multi-currency payments.

International gateway services can help you offer multiple currency options so that international customers can pay in the currency of their choice.

Many multi-currency payment gateways offer dynamic currency conversion, as well as simplified international payment authorizations and settlement.
 

How do I set up a payment gateway?

To set up a payment gateway for your website, you need to ask your PSP for all the requirements and setup configuration details.