The Four P’s

Nearly every company on the planet sets out with the primary objective of earning money. This is usually done by producing some form of product, or offering a service, and then charging people money for it. This fundamental principle is fairly straight-forward, though it contains many specific details.

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 supplied by anyone else. This means that your enterprise will be competing with other businesses that sell a similar product and you will both be trying to earn money from the same customers, who only want to spend their money once.

Marketing is the primary tool used by modern firms to draw potential customers to do business with them and not with their competitors. It is a very extensive topic that is influenced by a great deal of internal and external factors, but when done right it can be the single business practise that can make or break a company.

So where should you start when creating 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 principle that can be applied to almost any corporation to be used as a marketing framework. It is called the “Marketing Mix”.

The Marketing Mix

The marketing mix was a term that was first coined during the 1950’s and is an expression that is used to describe the fundamental building blocks of any marketing system. It reflects the fact that marketing is not a straightforward, blunt-edged business tool, but rather a subtle balance of different aspects of business functions. It got its name since it is similar to the ingredients list for a recipe.

The term was later built upon to include the concept of “four P’s” that described the essential elements of the marketing mix. The formalisation of these P’s made it very easy for business 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 tailored and effective marketing strategy.

The “product” element of the four P’s could pertain to any service, such as resin flooring, or even any kind of non-physical asset being provided for sale by a business.

Product

Although every aspect of the marketing mix is a requirement, the “product” element mentioned as one of the four P’s is perhaps the most crucial 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 customers 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 common train of thought very often bears the precise opposite sentiment. Surely it should be the opposite way around – your manufacturing department creates an item for sale and then it is the job of the marketing department to discover ways to sell it, right? This is not necessarily the case.

Take the computer software market as an example. There are many established brands of both operating system and software application products on the market already, and since the market is fairly well saturated it would be incredibly 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 sorts of product are desired in the current marketplace, and how viable it would be to produce and sell them. By being mindful of the marketing mix early on in your product development period you can avoid business dead-ends at a later stage.

Once your products have been fashioned and created it is still a vital skill to be able to objectively evaluate your own products to recognise the reasons why a customer would buy your product rather than a competitors’. The skill is called product differentiation and forms one of the fundamental skills of the product part of the marketing mix cake.

A different form of this part of the marketing mix is called product variation and is typically used to either lengthen the lifecycle of a product already in the market, or to make your brand new product attractive to as many customers as possible. Again, this technique can be applied at all stages of product development.

The motor industry uses this technique very effectively by offering different engines, trim packages and interior options with the cars that they sell. They use the marketing mix to great effect to sell their own goods in an incredibly competitive marketplace. Whilst these companies may have substantial marketing budgets, the same principles can be applied to all businesses.

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Price

Another key factor in the marketing mix relates to the price of your products or services. This isn’t a simple case of carrying out market research to determine the highest price that your customers would spend (although that can be a useful tool to use), but rather using the price of your products as a strategic weapon designed to achieve any specific objectives your business has.

Although it may seem obvious, it’s still worth noting that price has always been, and likely always will be, one of the crucial factors that shoppers take into account when they are making a purchase. It is also worth noting that customers do not constantly consider the lowest price to be the best price.

There are many questions that you need to ask yourself while devising a good pricing plan, key amongst which are the price sensitivity of your customers, what your competitors 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 money as possible from the sector of the market which is price-insensitive and will be prepared to spend a premium amount of money to receive a product or service early on. Not only can this technique deliver excellent financial advantages, but it can also advertise an exclusive and high quality image of your item.

This pricing technique is very often used in the consumer electronics industry where customers will often eagerly await the release of a new mobile phone or computer games console. Manufacturers 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 financial benefits can be earned long into the future. It can be a risky 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 one 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 produce or undertake. So it is even more vital to get your pricing strategy right.

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Place

Place is the component of the marketing mix that is often overlooked by companies, but it is still an important part of selling your product successfully. In short, it describes the method in which you deliver your product to your customer, and subsequently how you receive money from them. It can be a fantastic marketing technique when applied correctly.

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

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

Promotion

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

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

Another important part of promotion involves branding, which may not necessarily yield more product sales directly, but goes back to one of the preliminary functions of marketing; getting customers to choose your product over those of your rivals.

Putting it into Practise

As previously mentioned every business is unique and will have different marketing needs. By using a mixture of the four P’s discussed above you can take an effective view of your own marketing plan.