Idea 22 - The four P's of marketing (50 Management ideas you really need to know)

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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