The 4Ps 02 How to design your marketing mix What the model looks like and how it works There is an old saying that marketing is about getting the right product at the right price in the right place with the right promotion. The 4Ps (Figure 2.1) is an extension of this simplistic view. It describes the four essential compo nents of the marketing mix: Figure 2.1 The ¢Ps Product Place (Gverting about your |__| (The channel by which offer=al extures and} —| “your product gets to Benet) thomarkat [Target market Price (The price of your product at every level you use to market in the value chain} ‘your product) X J ene, SOURCE Adapted from MeCarthy (1960) — Prom (The promotional mic Product This is what a company has to sell. It may not be a physical product; it could just as easily be a service or a product accompanied by a service. It is nevertheless what the company offers. Arguably, the product is the most important part of the marketing mix. It defines who will buy it, how much they will pay, what features they will find appealing and where it could be sold,‘The Business Models Handbook Questions that need to be answered to determine that the product is right for its market are: © What benefits does the product provide to the customer? How do these benefits solve the customer's problem? © What type of customers are the most likely targets for the product? What are their demographics, their behaviours, psychographic profiles? How would they be described as a segment? cir attitudes and their How will the customer use the product? How frequently will they use it? When will they replace it? © What would the customer do if the product was not available? Price Price is the component of the 4Ps that collects revenue. The other 3Ps incur costs. The price that someone is prepared to pay for a product is the ‘bargain’. From the customer's point of view it is a figure that is worth paying to obtain the product and, from the supplier’s point of view, it is a figure that covers the costs of production and collects (hopefully) sufficient revenue to make a profit. Questions that need to be answered to determine that the price is right for its market are: + How do customers perceive value in the product? What are the key bene- fits that they value? What monetary value is put on each of these benefits? # To what extent do customers perceive the lifetime value of the product (how long it lasts, the degree of maintenance that is required, any resale value, ete)? + What are competitors’ prices for a similar product? To what extent is the product perceived to be better or worse than competitors’ products? Promotion People need to be aware of the availability of products and they need to be convinced of their value. Promotion is the means by which this communica- tion takes place. The promotion could be any part of a mix that includes adverts in newspapers, magazines, journals, the TV and radio, It could also include direct marketing such as flyers or e-mails. Exhibitions, public rela- tions and point-of-sale material are part of the promotional mix.The 4Ps Questions that need to be answered to determine that the promotion is right for its market are: © What is the reach of the promotion? How many customers/potential customers will sce it? © What is the impact of the promotion? To what extent will t stop people in their tracks and capture their interest? ‘© What isthe relevance of the promotion? Is it something that the customer is interested in? Do the messages resonate? ¢ What is the call to action? What will potential customers do next? Place The product (or service) is made available somewhere for the customer. This could be in a shop, online or direct from the manufacturer. It is the channel (or channels) by which the product is distributed. Questions that need to be answered to determine that the place is right for its market are: © What are the channels that are most used by the customer for this type of product? ¢ What penetration of the channels can be achieved? © What are the opportunities for finding new routes to market ~ ie alterna- tive channels? ‘© What docs each of the organizations in the channel require in terms of margin and service support? © How will the product stand out from competitive products in the channel? It should be clear from the above that the 4Ps are not aimed at just anyone; they are aimed specifically at a target audience. The four essential ingre dients of the marketing mix are often referred to as hygiene factors. If the company fails on any one of them, the marketing strategy will fail. The origins of the model The 4Ps were coined by Edmund Jerome McCarthy, an American marketing professor. McCarthy's aim was to bring science and structure to marketing as befitted his training as a statistician and mathematician. He launched‘The Business Models Handbook the framework in 1960 in a book entitled Basic Marketing: A managerial approach." The book became a bestseller on the subject of marketing and the simple mnemonic of the 4Ps was quickly accepted, Developments of the model Still holding with the mnemonic of the 4Ps, other authors have added three more elements to the mix: © People: itis argued that, in many businesses, people are a critical part of the offer. They make the product. They sell the product and create relationships with customers. They service the product and they deliver it. They deal with, enquiries and problems. People are an essential component in any offer. # Process: the process by which the product is made is part of the offer ‘Companies have other processes that are relevant to customers such as the way it deals with enquiries, carries out eredit checks, handles complaints, etc. These are all part of the offer. © Physical evidence: in some situations the physical environment is an important part of the offer. This would especially be the case for a super- market where the width of the aisles, the layout of the store, the colours, the smells and the ambience of the place can all have a big influence on the marketing. In 2013, Richard Extenson, Eduardo Conrado and Jonathan Knowles wrote an article in Harvard Business Review entitled ‘Rethinking the 4Ps’2 They argued that the original 4P model is not suited to the business to business (B2B) world. They claimed that the old 4P framework stresses product technology and quality, and these they said are hygiene factors and do not differentiate, In an attempt to shift the focus from products to solutions, they suggested the SAVE framework. SAVE is an acronym for solution, access, value and education: # Solution (rather than product). This places the emphasis on solving the problem rather than selling the product. # Access (rather than place), It is important to have access to customers wherever they are and whate and-mortar distribution outlets are far less relevant today than, for example, the internet. x they are doing. This means that bricks- © Value (rather than price). People care far less about the price than what they get for their money ~ itis value that mattersThe 4Ps Education (rather than promotion). Promotion can be seen as manipula- tive and, in many B2B markets, rust and reputation are more important. ‘Trust is built up over time in an educative way. The model in action The 4P model (or one of its derivatives) can be used whenever a marketing plan or business case is being considered. It is particularly usefal in two business scenarios: launching a new product and entering a new market. Launching a new product New products are the lifeblood ofall companies. Successful companies contina- ously modify oF introduce new products to meet the changing needs of their customers, and it is said that a successful company has over one-third of its products that are less than three years old. This proportion could vary consid erably, and companies that make confectionery — for example ~ are more likely to have a greater proportion of new products in their portfolio than those that make steel components. Whether the product in question is a new doughnut or a new alloy, the discipline of checking out the 4P is still worthwhile: # Does the new product better meet the needs of customers than existing products? How much are the features and benefits of the new product valued over and above those of existing products? © Will the new product fit into the distribution chain alongside existing products? © What promotion will be required to launch the new product? Entering a new market Growth can often be achieved by taking a product into a new geography or launching it to a new group of customers. The questions to be answered must be: © Where does the product sit against competing products that are already available? In the new geography or the new segment, what will people pay for the product?‘The Business Models Handbook © What channel to market will be successful within the new geography? © What are the messages that will work in the new geography? ‘Western companies selling into China have had to modify their product portfolios. KFC offers Peking duck, Starbucks has added green and aromatic teas and Coca-Cola sells carbonated fruit drinks (as well as Coke) to the Chinese. Manufacturers of workplace gloves sell smaller sizes to fit the smaller hands of the Chinese workforce, The price that is charged in a country has to be appropriate for the income in that country. This is often referred to as purchasing power parity. Its why a Big Mac may cost three or four times as much in Norway or Switzerland than it does in India. The channel to market varies enormously across different countries. In China and in many Asian countries the open market is still a major outlet for all types of products ~ both consumer and industrial. Small and special- ist shops abound in the East while megastores are dominant in the West. ‘The promotion of products differs considerably across the world. In the East, great significance is placed on the name of the product, the design of the logo and possibly the colour of the pack ‘When IKEA opened stores in China, it could not afford to support them with the big catalogues that were a standard promotion in the West. They used smaller brochures that could be sent out several times during the year. They also communicated with a softer message. Instead of positioning the company asa proud rebellious brand —as it does in the West - they commu- nicated how small changes would make life better, a more humble approach aimed at young Chinese women of 25-35 years of age. Some things to think about © Consider using a 4P structure when developing a marketing plan. It is particularly useful when entering a new market, launching new product or developing a new customer segment. # When analysing your 4Ps, keep in mind the target customers, Build perso- nas for the customers (see Chapter 32) and build the 4Ps around them.thears LD Notes '] (1960) Basie Marketing: A managerial approach, Richard D Irwin, Homewood 2 Ettenson, R, Conrado, E and Knowles, J (2013) Rethinking the 4Ps, Harvard Business Review, January-February