Almost the first exposure anyone gets to marketing (and subsequently, writing for marketing purposes), are the traditional 4 P’s: price, product, place and promotion. You can liken this ‘combo’ to the journalist’s mantra: the 4 W’s and 1 H: who, what, where, when and how. It’s just as fundamental.
Let’s take a look at the 4 P’s to see if their iconic status is as well deserved as we’ve been told:
1. WHAT HAS PRICE GOT TO DO WITH IT?
Traditional marketing looks at product or service pricing in terms of where the product or service fits into the market. This is fine if you have a product / service with a homogenous market. But as soon as you have a product / service that can be sold to a variety of markets to suit a variety of cicumstances, you have a dilemma. The price that will work for one market may be completely off-putting for another.
What do I mean by that? Simply, that there is a certain amount of elasticity in pricing if you are selling to more than one specific market. Let’s look at two different types of sales to illustrate this point:
The Product Sale:
Let’s take a basic, tangible product such as a scarf. Let’s say this scarf is a lightweight, synthetic blend woven fabric incorporating 3 complementary colors and a metallic thread. It’s a cottage industry produced product with a reasonable manufacturer price of $5.00 per unit.
It’s picked up by the distributor at that price and then sold to the retailer for $10 per unit.
Here’s where the dilemma comes in.
One retailer sells it for $20, one for $40. How does that work? How can one get away with selling it at $40 while it’s being sold elsewhere for $20? Is the one who’s selling it for $20 leaving money on the table? Is the one who’s selling it for $40 gouging?
Not necessarily. The retailer selling the item for $20 is situated in a location which services a market which is very price sensitive. Lower to middle income demographic who purchase lower priced fashions, generally at larger box store type outlets.
This independent retailer has made a niche for themselves in this sector by offering the lower end ‘designer’ fashions that are unique to their store in this area. They’ve priced the scarf so that a) they make a reasonable margin, and b) so that they will encounter the least resistance to the sale and can therefore hope to turn over almost all the scarves they bring in for the season before having to go on sale.
The retailer selling the items for $40 is in an altogether different location, servicing a much higher income clientele and subsequently also incur higher overheads. But, besides that: they carry mid to higher end designer fashions and their clientele expect prices to be set at a certain level. If they were to retail the scarves at $20, the clientele would experience a ‘cognitive dissonance’ where the item would immediately appear ‘too cheap’ in relation to the rest of the inventory, and sales of this item would suffer.
The Service Sale:
Similar criteria apply when it comes to services. For instance, a consultant might charge $500 per month retainer to smaller clients and ten times that amount for larger clients. The service offered may essentially be the same, with the higher priced service simply having some ‘extras’ built in that add value for this client.
Why is this? The consultant is doing the same thing for both companies.
Not necessarily. With the smaller company, the consultant will probably be providing the same expertise, but the client will have a lot more responsibility for implementation / execution, monitoring, management and so on. With the larger client, the consultant will shoulder more of that burden, making their responsibility greater.
In addition, the sad truth is that larger companies tend to appreciate, value and respect a higher priced service more than a lower priced service. So by positioning your price at the same level for all your clients could be of serious detriment to your long-term survival as you will be perceived as being less professional and therefore lose business to those who are perceived as being more professional .
2. HAVE PRODUCT, WILL SELL
As both a marketing consultant and a direct response writer, this is an area where I see people making mistakes time and time and time and time again. Often, a product / service will evolve as a result of a particular skill or preference of the founder of the company, rather than as a response to a market demand.
When considering your product, whether it be a tangible product or a service, here’s the million dollar question:
What does the market REALLY want?
Now, this goes for existing products / services as well as new. Just because you’ve been selling your wares for the past decade, it doesn’t mean that you’ll be able to continue business as usual forever. Sooner or later (advisably sooner!) you need to take a look at the market to assess whether they’re still in the market for what you’re selling.
Times change and markets change. What worked ten years ago won’t necessarily work this year or next year. We most often see this happening in technology sectors where new developments are continually making older technology and methodology obsolete.
Case in point: the entire desktop publishing industry put the reprographics / pre-press industry out of business – except for those who evolved and morphed into something quite different. Twenty years ago, you had graphic designers, reprographics or pre-press houses and printers. Each fulfilled a separate function. Nowadays you find printers employ designers and handle the whole project in-house. And you also ind graphic designers that handle everything right up to the actual print stage.
When it comes to services, it’s a matter of continually assessing what and how your market is buying. Are they trying to eliminate costs by adopting a d.i.y. practice? Are they trying to cut costs or increase convenience by outsourcing?
What is your market’s main challenge and how can you package your service to take care of their ‘problems’ by making it so easy and so convenient that they see the value in paying you to deliver – and at such a price as to be profitable for you as well as cost-effective for the client?
The bottom line is that any product, be it tangible or service related, HAS to be something that makes sense to the market. That means it has to continually evolve to meet the changing needs of the market in order to survive.
If you’re struggling to determine what the market is really looking for, there are simple techniques you can employ to identify this, however it’s beyond the scope of this article to address that issue.
3. PLACE: WHERE ON EARTH AND HOW?
Determining the right place to market your products / services used to be fairly clear cut. If you had a tangible product, it usually relied on the logistics of where you could ship it to with a reasonable freight cost. Your distribution network would be planned to address the geographic hot spots for your product. With services it was even simpler. You operated within the geographic area you could physically service.
With the growth of internet usage, these parameters are changing. It’s now possible to sell product directly to the end-user and distributor via the internet. Warehousing and fulfillment now have the possibility to be more cost-effective and convenient for the company. End-users are often happier to save time by ordering over the internet and paying over and above the product price for shipping.
When it comes to services, it’s even easier. If you’re not offering a physically delivered service, your work can be delivered over the internet and phone at little or no cost to you or your client. You can operate globally.
The key in determing distribution channels is, to once again, look at how your market is trending. How are they buying? What is most convenient and desirable to them? How can you supply what the market is looking for in a way that is advantageous for you both?
4. PROMOTION: AVOIDING THE MONEY PIT.
If you’re confused by the ‘whirlpool’ of promotional do’s and don’ts, it’s not surprising. The area of promotions has always been a fierce hot bed of contention amongst professional marketers. It used to be that you had print advertising, TV and radio advertising, and direct mail.
Now, you have all that, plus you have the internet, often touted as a low / no cost promotional medium.
Ha. Right. Most of the clients I’ve worked with have had horror story after horror story of how they lost money promoting on the internet before they worked with me.
Here’s the bottom line:
it’s rare that you can use a single medium to get maximum results. It’s frequent that you can spend a lot of money on promotion and never know if you are getting any results. It’s rare that anyone will advise you to do the grunt work of assessing your promotions on the basis of cost v.s. bottom line profits. It’s frequent that advertising decisions are made on the basis of the persistantance of an ad sales rep or personal ego.
To plan an effective and accountable promotional strategy and budget involves some work upfront as well as the commitment to monitor, test and tweak until every cent invested is paying the highest possible return and all unproductive promotional activities are eliminated.
How do you do this?
It’s kind of like the chicken and egg situation. Do you assign a budget first or do a plan first and then cost it out?
My suggestion is that you carefully examine what you want to achieve and then look for the mediums that will deliver this result the most efficiently and cost-effectively. Then cost it out and if it’s way beyond your budget then re-design your plan to stair-step the promotions so that they become self-funding and can expand to your ‘wish list’ as quickly as possible.
It’s better to do it this way rather than to look for promotional options based solely on budget limitations and end up with ‘cheap’ advertising that turns out to be expensive in the long run because it doesn’t generate returns.
Once again, the ins and outs of this procedure is beyond the scope of one small article.
So having examined the 4 P’s to determine if they are still relevant, I think it’s obvious that they still are, but not necessarily in the traditional sense. Basic laws of marketing don’t change. They’re determined by demand and supply, in that order.
What has changed is how we approach the 4P’s. And how prepared we are to lay down any pre-conceived notions in order to take a closer look from our customer’s perspective iwithin the environment of the lightening speed changes in our world today.
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