The Four P’s

Almost every business on the planet sets out with the primary objective of making money. This is usually done by manufacturing some form of product, or offering a service, and then charging customers money for it.

First of all, it is a very rare case that a company can offer a product or service that is genuinely unique and cannot be provided by anybody else. This means that your enterprise will be contesting with other businesses that sell a similar item and you will both be trying to make money from the same shoppers, who only want to spend their cash once. So how can you increase the chances of them spending money with you?

Marketing is the primary tool used by modern businesses to draw potential customers to do business with them and not with their rivals. It is a very broad topic that is affected by a great number of internal and external factors, but when done well it can be the one business practice that can make or break a corporation. Any time spent on marketing will reap benefits, although spending this time efficiently can yield incredible results.

So where should you begin when constructing a marketing strategy for your own company? Well, every situation is different, and each business will have its own set of strengths and flaws that must be taken into consideration, but there is a marketing rule that can be applied to almost any corporation to be used as a marketing platform. It is called the “Marketing Mix”.

The Marketing Mix

The marketing mix was a term that was first coined in the 1950’s and is a phrase that is used to express the fundamental building blocks of any marketing system. It demonstrates the fact that marketing is not a simple, blunt-edged business tool, but rather a delicate balance of different elements of business functions.

The term was later built upon to include the concept of “four P’s” that described the critical elements of the marketing mix. The formalisation of these P’s made it very clear for company managers and marketers to quickly relate the elements of marketing to the strengths of their own organisations, and by doing so could very quickly form a personalised and efficient marketing system. The four P’s are Product, Price, Place and Promotion.

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Product

Although every aspect of the marketing mix is a necessity, the “product” element mentioned as one of the four P’s is perhaps the most critical of all. It identifies the physical product or intangible service that your company will be offering, and at the end of the day it is the reason that buyers are going to spend money with you.

Many people don’t think that marketing has any place to play when it comes to the physical product that your company is selling. In fact, the typical train of thought very often bears the exact opposite sentiment. Surely it should be the other way around – your manufacturing department creates a product for sale and then it is the job of the marketing department to discover ways to sell it, right?

Consider the computer software market as an example. There are many established brands of both operating system and software application products in the market already, and since the market is fairly well saturated it would be very tough (and expensive) to “take on the big boys”.

Rather than creating an operating system and then trying to craft a marketing strategy to rival the likes of Microsoft or Apple, it would be far more effective to look at what types of product are sought after in the current marketplace, and how viable it would be to manufacture and sell them. By being mindful of the marketing mix early on in your product development cycle you can prevent business dead-ends at a later stage.

Once your goods have been designed and created it is still a vital skill to be able to objectively review your own products to recognise the reasons that a customer would buy your product rather than a competitors’.

A different form of this part of the marketing mix is known as product variation and is typically used to either extend the lifecycle of a product already in the market, or to make your new product attractive to as many customers as possible.

The car industry uses this approach very effectively by offering different engines, trim packages and interior options with the cars that they offer. They use the marketing mix to great effect to sell their own products in an extremely competitive marketplace. Whilst these companies may have huge marketing budgets, the same concepts can be applied to all businesses.

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Price

Another important factor in the marketing mix concerns the price of your products or services. This isn’t a simple case of carrying out market research to figure out the top price that your customers would pay (although that can be a useful tool to use), but rather making use of the price of your products as a strategic tool designed to achieve any particular goals your business has.

Whilst it may seem obvious, it’s still worth noting that price has always been, and likely always will be, one of the key factors that shoppers take into account when they are making a purchase. It is also worth noting that customers don’t always consider the cheapest price to be the best price. In fact a price that is too low can sometimes turn customers away.

There are many questions that you need to ask yourself while devising a good pricing strategy, key amongst which are the price sensitivity of your clients, what your rivals are doing and how can pricing maximise your own profits. From a strategy point of view though, pricing can be covered by two primary principals; price skimming and also penetration pricing. These are outlined below.

Price skimming

The principal idea driving price skimming is to make as much cash as possible from the segment of the market which is price-insensitive and are going to be willing to spend a large amount of money to get a product or service early on. Not only can this approach yield excellent economic benefits, but it can also advertise an exclusive and high quality image of your product.

This pricing strategy is very often used in the consumer electronics market where customers will often eagerly await the launch of a new mobile phone or computer games console. Makers could set nearly any price they wanted to and there would still be a loyal base of customers that would pay it. By using this method as part of a pre-ordering strategy, a firm can help to smooth its own cash flow.

Penetration pricing

Penetration pricing is at the opposite end of the pricing spectrum, and is geared towards gaining a large market share at a short-term cost so that monetary benefits can be earned long into the future. It can be a high risk strategy, but when used correctly it can setup revenue streams for many years to come.

Yet another thing to bear in mind is that “price” is the only part of the marketing mix that will generate income for a business. The other members of the four P’s will all cost money to create or carry out.

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Place

Place is the portion of the marketing mix that’s often overlooked by companies, but it’s still an important part of selling your product effectively. In short, it describes the way in which you provide your product to your consumer, and consequently how you collect money from them. It can be a great marketing technique when applied correctly.

The most common ramifications of place-based marketing are the physical venues in which your products are sold. For the majority of consumer products, this involves the distribution network between your production plants and retailers or other outlets around the world. Since distribution of a physical product costs money it is crucial to identify your own priorities and adjust your distribution network accordingly.

With the growing use of the Internet by your prospective customers, marketing techniques have had to consider how they use the Internet to help deliver their products. By using the Internet as a place of contact (or even as a complete distribution route in download-based markets such as MP3s) companies are now able to reach out to a huge pool of potential customers. Effective placing of your product or service can therefore deliver impressive financial results.

Promotion

When you say the word “marketing”, many people immediately think of the promotional side of the marketing mix, although as we have seen, this is only one branch of a more complete system. Promotion can be employed on a very individual basis or as a mass communication tool, and whilst it can be an expensive undertaking it is often an important one.

Advertising is one of the most common forms of promotion. Typically it would be done by posting on billboards, producing short clips for TV and radio or by physically handing out flyers or leaflets to potential customers. With the coming of the information age we have witnessed a great increase in promotion via e-mail and the Internet, or simply as targeted advertising material posted through your front door. The potential for individualised advertising has never been so good.

Another significant part of promotion involves branding, which will not necessarily yield more product sales directly, but relates back to one of the preliminary purposes of marketing; getting customers to choose your product over those of your rivals. When all other pieces of the marketing mix are equal it can be branding that sways a customer’s decision.

Putting it into Practice

As previously mentioned each company is different and will have different marketing requirements. By using a mixture of the four P’s reviewed above you can take a good view of your own marketing plan.