Marketing has become a complex topic, being heavily influenced and changed by the “digital revolution”. There are now more channels than ever for both selling and marketing products and services, with the online channels, in particular, undergoing constant change.
However, the fundamentals of Sales and Marketing remain the same. With (as a gross oversimplification) Marketing being “lining up the ducks, within sight” and sales being “shooting the ducks, that marketing lined up for us”. Without a clear understanding of core concepts it is easy to “get lost” in the new and changing terminology and channels.
The Four Ps of Marketing represent one such set of Core Concepts.
What are the Four Ps?
Philip Kotler, author the book Marketing Management, defines the Four Ps as shown below. These are used to successfully market a product or related products into target markets.
The Ps, product, price, place and promotion, are often referred to as a marketing mix, and have become standard lore in marketing.
If a product has been clearly positioned and its target market segment(s) well-established, the job of shaping the product, or determining the features of the product becomes much easier. Typical issues that marketing people face in these areas are as follows:
- Quality – Is the quality commensurate with other aspects of the product and marketing mix?
- Brand name – Will this product trades on its brand name, or be a generic, private-label product?
- Variety – Is a broad product line affordable from a supply and production standpoint?
- Design and packaging – Do the design and packaging appeal to the target market(s)?
- Returns – How are returns handled? Is this via distributors? Direct to factory? Are we recycling end-of-life products ourselves? How are unsold items handled (e.g. do we allow distributors to return them)?
In short, key product considerations include:
Variety, Quality, Design, Features, Branding, Packing, Sizes, Service and Support, Warranties offered, Returns and Recycling policies, production cost and complexity.
A Promotion is really a combination of a sales promotion and advertising. They can be differentiated from each other as follows:
- Sales promotions offer incentives to buy, such as coupons, samples, and discounts;
- Advertising offers a reason, and an inducement, to buy.
There are two types of sales promotions:
- Consumer promotions provide incentives directly to consumers. They are aimed at attracting new customers, inducing customers to switch brands, and increasing the volume and/or frequency of purchases. Most experts believe that consumer promotions increase short-term sales volume but do not build long-term brand loyalty. Advertising is thought to build brand loyalty, but advertising budgets are small relative to promotional budgets.
Most of the consumer promotion practices above are self-evident. Patronage awards would include points or stamps redeemable for gifts and prizes. Cross promotions involve two or more noncompeting brands, such as Pepsi and Frito-Lay. In tie-in promotions, two or more brands will collaborate on coupons, refunds and store displays.
- Trade promotions induce distributors and retailers to buy and move more products. More is typically spent on trade promotions by a ratio of about 60:40 (to consumer promotions). Price-offs or outright payments are used to ensure that a manufacturer’s products will make it onto the shelf. Additionally, volume discounts are used to induce wholesale and retail buyers to buy in large quantities.
Selecting the best pricing strategy is vital for product, brand and company acceptance in the marketplace. Possible pricing strategies include:
- Market skimming – The charging of high introductory prices followed by continued price decreases as competition develops. This is typically performed when an innovative new product is released to the market, in order to recover high R&D or promotion expenditures. It can also be used to restrict demand until production can be geared up and to maximise profits at a time when there is little competition in the market.
- Market penetration – The charging of lower entry prices to support early market-share goals. By grabbing as large a market share as possible, it is possible to set the terms and conditions of market entry for potential competitors – and to make market entry more difficult.
- Leader pricing – Selecting a price based on the prices of the dominant seller in a market. Smaller competitors tend to follow the lead of the dominant seller.
- Loss leader pricing – Promoting one or more products at sharply reduced prices, often near or below cost, to attract customers who will then buy more profitable items as well.
- Perception pricing – Charging what the customer believes to be appropriate. The perceived value may bear little relationship to the actual cost of providing a product or service. A higher price is generally associated with better quality or service.
- Cost-based pricing – Setting prices to cover all costs of production, to pay investment costs over a reasonable time, and to provide an acceptable return on investment. Break-even analysis is frequently used as the starting point for cost-based pricing.
- Value pricing – Value pricing can have different meanings. It is often used to mean or pricing a product at a constant and presumably low price. It is also used to mean the opposite: pricing an item at a premium because it provides unique value or has a strong brand name. In essence, if performance is equal, then the price should be lower than the competing equivalent product.
- Bid pricing – Quoting prices specifically upon prospective purchaser request, usually in competition with other suppliers. The bid price will typical be based upon an assessment of the price most likely to win the bid – using one or more of the approaches outlined above.
Pricing options are, therefore:
- Market skimming;
- Market penetration;
- Leader pricing;
- Loss leader pricing;
- Perception pricing;
- Cost pricing;
- Value pricing;
- Bid pricing.
Place refers to the distribution channels through which products reach consumers. The selection and management of distribution channels is one of the key activities in establishing the product in the market.
Illustrated above are five different channels for a hardware manufacturer: general merchandise retailer, wholesaler, category killer (Amazon in books, Home Depot-U.S., B&Q-UK), local hardware store, and direct industrial.