Idea 22 - The four P's of marketing
As the arm
of the business responsible for getting the customer's attention, marketing has
generated more than a few tanker loads of snake oil. The four Ps, however, has
the virtue of being a simple and sound management idea, still much-used more
than 40 years after it was first formulated
The idea of the four Ps is rooted in 'the marketing
concept'. While marketing is self-evidently not the same as production, nor is
it the same as sales. Nearly two and a half centuries ago, Adam Smith observed
in The Wealth of Nations that the whole mercantile system had been contrived to
serve the needs of producers rather than those of consumers. He had put his
finger on the basic idea of marketing - or, in his day, the lack of it. From
that time, and before, until the early 20th century, business revolved around
production. The 'production concept' meant that producers concentrated on goods
that they could make most efficiently, at a cost that would create a market for
them. The questions they would ask themselves were: can we make it, and can we
make enough of it?
As the age of mass production got under way after the First
World War, the nature of those questions changed. People had the bare
necessities, by and large, and competition was increasing. Enter the 'sales
concept', in which producers asked: can we sell it, and can we charge a decent
price for it? The question of whether or not the customer needed it did not
arise Marketing, if there was such a thing, came into play only after the goods
had been produced, and was restricted to more inventive forms of 'selling'.
It was only after the Second World War that marketing in
today's sense of the word began to evolve. Customers had more money and were
becoming increasingly selective. The questions that producers were now forced
to ask themselves were: what does the customer want, and can we produce it
before he or she stops wanting it? That was the birth of the marketing concept,
which demands the consideration of customer needs before a product is
developed. It also means aligning all the resources and functions of the company
to focus on those needs, since it is only by satisfying them over the long term
that the company will make profits. The four Ps emerged as a conceptual tool to
assist in this process. It was a refinement of the 'marketing mix', a term
coined by Neil H. Borden in his 1964 article 'The concept of the marketing
mix'. He listed more than a dozen ingredients, to be mixed in varying
quantities - a little more of one, less of the other - depending on
circumstances. The ingredients were later grouped into four categories by Notre
Dame marketing professor E. Jerome McCarthy. These were the four Ps of
marketing.
Product The
first element in the marketing mix is the product - which could be goods,
services, a destination or even an idea, as in 'don't drink and drive'.
Decisions to be made here will include what it looks like, what it is called,
its quality, packaging and the level of after-sales support.
Price The
second element is price - how much are consumers willing to pay? This is the
only element in the marketing mix that generates revenue. All the others
represent costs. What initial pricing strategy will be adopted - skimming (as
much as the market will bear, coming down over time) or penetration (low prices
to stimulate early sales)? What discounts will be offered? Will there be
seasonal adjustments?
All other things being equal, price is the most important
factor influencing potential buyers. It is also one of the most flexible
elements in the mix, since it can be changed at short notice, particularly in the
form of discounts. Pricing is often a difficult issue for marketing executives,
and they don't always get it right, sometimes being too cost-oriented or not
adjusting to changes in the market. Whatever pricing strategy is adopted at the
launch stage, it is likely to change as the product goes through its lifecycle.
Place This
is really about distribution, but that doesn't begin with a 'P'. It encompasses
all the activities required to get the product to the customer, ensuring that
it's in the right place at the right time to be bought. A key 'place' decision
will be the selection of a distribution channel. This could be direct to the
customer, using sales reps, mail order, telephone sales and/or the Internet.
More indirect channels involve a retailer, or a wholesaler and a retailer, and
occasionally even more levels of distributor. Making these choices will require
decisions on market coverage, which could be intensive, selective or exclusive.
Intensive means distributing via any wholesaler and retailer who wants to stock
the product. With selective distribution, the channels are limited to a chosen
few. Exclusive distribution is via only one wholesaler or retailer in a given
area. Place is also concerned with the physical logistics of distribution, such
as order processing, warehousing, use of distribution centres and
transportation
Promotion this
is where marketing spills over into selling. Promotion involves communicating
all the information necessary to persuade the customer to buy the product.
Promotional strategies tend to be categorized as either 'push' or 'pull'.
Advertising pulls - it makes customers aware of the product and prompts them to
ask for it, but it can be expensive. In a push strategy, the sales force
promotes the product to wholesalers and retailers, pushing it through channels
to the end user.
Marketing promotion is often classified as being either
'above the line' or 'below the line'. Traditionally, above the line activity is
advertising on which commission is paid, such as press, television, radio,
cinema and billboards. Below the-line promotion involves no commission - sales
catalogues and catalogues, sponsorship, merchandising and exhibitions. Public
relations, which seeks to build good relations with an organization's various
publics, falls below the line. Sales promotions are short-term incentives to
encourage sales.
Promotional trends today are shifting from mass marketing to
mass customization and the so-called 'market of one', from 'broadcasting' to
'narrowcasting', And the Internet is changing communication and shopping habits
profoundly. Even in an Internet age, however, the four Ps remain a valid and
useful construct
Reference: 50 Management Ideas You Really Need to Know
Book by Edward Russell-Walling
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