Puneet Bhatia

Defining the Digital Marketing Mix

In this section, we shall look at how marketers need to map changes which the digital landscape has brought to the
4Ps of Product, Price, Place, and Promotion along with the introduction of four other Ps—People, Process, Programs,
and Performance.

Product
In this section, we shall deal with the first P of the marketing mix known as Product. Typically, when we talk about a
product, the coinage also relates to a service or a brand. The case of digital is more complex, since the regular
traditional distinctions between each of these terms (product, service, brand) begin to diffuse not only because of the
elements which the digital medium lends to it but also how marketers are actively mixing components of one into the
other to make it a wholesome value enhancing unit which we can call as the ‘Offering mix.’

A key feature of a product or service in the offline world is that they can be a commodity, or as we say non-branded
enough, but still sell on the basis of local availability and the ‘reach factor,’ where they are available in nearby stores
and do not have to bear the costs of being on a digital channel, marketing themselves, and delivering to a location.
This brings us to the fact that any product or service which is being sold online and across digital channels needs to be
reasonably differentiated and have so-called ‘brand attributes’ or elements attached to them, to differentiate from
competition and be seen in the first place.
A product can be classified as consisting two key components—tangible and intangible. Tangible components are
described as the ones which can be physically seen while the intangible parts might not be directly visible but their
impact is felt and perceived by the customer. A service is also considered to be a product category which is intangible
in nature.
An offering on the digital platform differs from its traditional form primarily in the way it develops and integrates
the intangible or service aspects to it. These services can either be developed as new digital products (along with the
main product line) or be an extension to the physical product itself to make it easier for the customer to access,
interact, and ultimately, pur- chase the main product. Philip Kotler (Marketing Management, 14th edition) has shared
five states of service mix components that can be built around a product.
Figure 5.7 showcases the five states of an offering mix, which starts with a pure tangible product with no service
element and ends as being a pure service with no product component. The offering mix of any firm can be classified
across any of these five states depending upon the extent of tangible products and intangible service elements which
are a part of it. Let us under- stand them as follows:
(a) State A: Firms in this state have a mix of only tangible products which are primarily physical in form and
mostly commodity in nature. Examples could be sugar, steel, a basic accessory, etc. Most of these products
might have a generic brand name but do not exhibit the characteristics of a brand or its experiential elements.
Although there is a scope to differentiate, but without a service element, consumers are not able to build a
connection to a product. Pure tangible goods are typically not geared enough for the digital platform.
(b) State B: It involves tangible goods which have a decent service element to them. Examples include mobiles,
automobiles, furniture, etc., which in their base state are tangible products, but addition of digital value elements
(aesthetics, customization, convenience, etc.) provides a service experience to the target customer. Most of the
products sold through e-commerce sites would fall in this state, where the product is sold mostly in the physical
form, but with good amount of intangible elements like information, history, positive customer references, demo
videos, etc., built around it.
(c) State C: This is a unique state in which the offering has an equal mix of product and service elements built into
it. Key examples would relate to hospitality services like theme parks (which sell a service and also
merchandise), restaurants (where Food is tangible and service is the intangible part), etc. Even firms like Apple
and Samsung which are built and marketed as products but have strong technology-based service elements
around them can come in this category. There are only a few firms who can deliver an offering mix in this state
as they need to have strong product and service elements in their portfolio which is often hard to achieve and
sustain.
(d) State D: In this state, the intangible part forms the core service, while the tangible part is built as a support
element. This includes typical examples like air travel where additional services or supporting goods like snacks
 and drinks are sold, but increasingly we are seeing service-oriented companies moving to a productized format
wherein each of their key features and processes are being broken down and sold as a product in itself. Point in
case is the software products industry with firms like Google and Microsoft which sell services that are
customized so as to gain maximum advantage of a service-driven model with enhanced revenues accruing
through its product form. The same can be said for banking and insurance industries which are converting pieces
of their services and branding them as products, thus increasing service lines and revenues.

Figure 5.7 Offering Mix (Product-Service) States

(e) State E: This final state involves an offering having complete intangible attributes. Examples include Spa and
other wellness services, online consulting, support helplines, etc. Again, we should state here that these types of
pure service offerings can also be well branded although they might not have any tangible or physical aspect to
them.
With an explanation of the above states, we would also like to take up examples of how firms and marketers are using
base elements of their pure products and services (across states A and E) and combining or skipping stages to develop
new offerings for higher revenues or to pre-empt competition from other product or service firms. Key examples
include:
(a) Products changing their form to digital: There are specific industries like media and broadcasting which
easily lend to a complete change of their form to digital products.Books, music, movies, TV content, etc., all
have the ability to move directly from a physical to a digital product stage with large associated service
elements. Other examples could include a hardboard games manufacturer, for instance, converting the whole
concept of the Monopoly board-game to a digital game format for new revenues.
(b) Products picking up a perceived benefit to convert into a service: Nike which is the top global manufacturer
of footwear, took one of its key elements ‘performance’ to launch iPhone Apps which provide services as a neat
extension of the brand and its core values and in turn, also helps earn additional revenues.
(c) Products converting content into new products: Traditional information product companies are looking at
strong disruptions to their models as a part of which they are creating customized products for key user
segments, utilizing content as a differentiating factor.
(d) Products converting a particular feature into a service: Zappos is a well-known example of how a particular
product element (like in this case, customization of shoes) can be taken up to develop a unique set of service
elements around it, which become so differentiating as to the product itself being seen as a service. A similar
example is Starbucks which built its reputation on strong service elements while delivering a rather commodity
product like coffee.
(e) Services picking up a sub-process to market as a product: Messaging, which was always looked at as a free
service to be provided to consumers (in reference to Google and Facebook for their e-mail and social media
products) was picked up by WhatsApp and tweaked to build a product which helped in individual and group
messaging, with an yearly subscription charge. This goes to show how sub-processes can be picked up and
developed into mass offerings.
(f) Services converting an expected service to a unique product: The classic example here is of Geek-Squad (the
post-purchase service arm of Best Buy) which was so well developed and branded into a desirable product for
 which customers pay yearly charges for support and maintenance services which they might not even need. A
similar example on the e-commerce side, is how companies have started introducing paid services like ‘Online
Delivery in a Day’ for extra charge which customers are delighted to pay for as an extra.
(g) Service firms creating content-based service lines: An example of this kind would include management
institutes conducting soft skills trainings for corporates apart from their academic programs, thus utilizing the
content they produce in-house through one service to create other sets of services.
(h) Service firms using intangible elements like social networks to provide new services: One of the best
examples in this category include LinkedIn which has started providing paid services to customers to connect
and send messages to other members in the social network. This is a good example to showcase how intangible
digital elements, if identified and crafted well, can be used to generate incremental revenues on newer platforms
with the same customer set.
With multiple examples shared, as above, on how marketers are disrupting and combining various tangible and
intangible elements to create multiple product-service offerings, brands
should also take care that it is not just in the creation of new products and services that business survives but how well
the offering mix is differentiated and sustainable. As shared in Chapter 3 in the section titled ‘Brand Building on the
Web,’ firms should look at developing the six brand elements (Memorable, Meaningful, Likeable, Transferrable,
Adaptable, and Protectable) to their mix to achieve their digital objectives and keep differentiating.
Next we would look at the second “P” of the marketing mix which is Pricing. Pricing has a crucial impact on how
offerings which have been created fare in the market and how successful companies execute their business strategies
and revenue objectives.

Price
Pricing by definition is the process of determining what a company will receive in exchange for its product or
service. Pricing products and services for digital sales has changed in quite a many ways from how it was done
traditionally. Key trends which have impacted this shift include:
(a) Reduction of intermediaries through digital channels: The two key reasons as to why people buy products
online are convenience and cost. Also marketers are adopting and selling across digital channels as they see a
chance to reduce intermediaries and provide the same product at attractive/competitive prices to more people
than they are being able to do so presently through traditional channels.
(b) Knowledge of customer buying habits and propensity: Helps create cluster/persona- specific and
channel-specific pricing. Also products can be sold at a higher price with more value-added services to support
individualized needs.
(c) Economic pressures and possibility of instant price comparisons online: With economy paying a large role
in price pressures and with internet medium providing the possibility of on-the-spot price comparisons, brands
can no longer be complacent, as customers have a clear idea of both the competitor’s quote and firm’s product
being sold on a discounting site, both of which would demand the marketer to be highly aware.
(d) Ability for consumers to set and negotiate online prices: With sites like Ebay where customers can take part
in online auctions and also with concepts like ‘Buy and sell’ platforms where customers can barter products at
self-set prices, a large part of the pricing control is going into the hands of the customers themselves.
(e) Concept of ‘Free Services’: The most prominent impact of online marketing is the way businesses are built
these days with consumers wanting to test products and services for free before firms can start charging. In the
case of online content and service, they are being run mostly through accompanying ad-models rather than a
rate-card itself.
(f) Customer’s demand for payment elasticity: Most of today’s youth who want to consume products and
services instantly, need easy payment options being offered to them in terms of extended payment installments
which impacts the way products and services should be priced and marketed.
(g) Possibility of content modularity and digitization: With a large category of products like information, books,
music, entertainment, games, etc., easily lending themselves a digital format, which can be customized and sold
as modules, marketers need to develop accurate and predictive pricing models to make most use of it.
(h) Possibility of innovative business models: With new forms of digital models emerging, marketers must utilize
these trends to make revenue in varied and novel ways. Examples include— In-Game payment, App
Subscription, Donation, Pay As you wish, affiliate sales, etc.
With the impact of the above trends, there has been a distinct shift in how companies today are managing their pricing
for key products and services. Let us look at a typical process of developing a pricing model which companies have
been following traditionally (developed by providing a digital context to ‘Setting the Price’ model shared in
Marketing Management, 14th edition, by Philip Kotler).
(a) Selecting the pricing objective: Firms should look at their digital strategy and decide what offering mix
(products and services) they would want to take online and the kind of revenue, market share, and profit
objectives they aim with their presence. This would also depend on the type of channels being chosen, the kind
of customer segments targeted, and how those services can be priced with regards to audience consumption
patterns on those channels and sites.
(b) Determining demand: Generally, there is an inverse relationship between price and demand and companies
need to be careful of how they price different product categories and lines. The economics behind developing
demand curves and their price elasticity (responsiveness of quantity demanded to a change in its price) is not
being covered in detail here as it is an extensive area of study in itself. Firms going digital typically have a lot
more data and more sophisticated ways to test changes in demand based on price and large firms deploy proper
statistical techniques to arrive at varied pricing depending on the kind of site, audience, landing page, and even
the day and time they are selling their multi-portfolio products.
(c) Estimating costs: As it is important to develop pricing techniques, in the same manner, firms need to develop
accurate cost models and apply them to each pricing scenario to be sure that they are profitable enough. With
internet, though it seems that overheads should be lower because of reduction of intermediaries, there are other
technology and infrastructure costs like website maintenance, server set-up, online security, partnership
development costs which have to be borne if companies need to accurately estimate their fixed and overhead
costs.
(d) Analyzing competitor’s costs, prices, and offers: Since digital is a very price-sensitive medium and customers
have access to even historic data points on each product’s price, it becomes crucial to build models which will
not only predict and preempt key competitors’ price moves on their websites, but also make sure that for the
multiple product categories being sold on e-commerce sites, the firms‘ products are competitive enough and are
not losing out to bigger discounts or bundling options.
(e) Selecting a pricing method: This stage involves the actual exercise of choosing different pricing models. We
have shared below traditional pricing techniques and the ones which are being followed more commonly in the
digital space.
(f) Setting the final price: Once all the above factors have been considered, the final price is reached by including
factors like impact of other marketing activities, company-specific pricing policies, impact of pricing on other
parties, etc. The digital world offers marketers much more flexibility in adapting their prices since the medium
itself is amenable to quick changes, which was not the case with physical pricing, where changing and labelling
pricing could take days if not months. Also, a major impact on digital pricing comes in the form of promotions
and deals which are very common to online landscape and whose impact we would see in the ‘fourth P’ on
Promotions.

Place
Moving to the third P which is known as Place, we will see how channels of purchase are critical to a firm and how
companies can make sure that their products and services are present at the right places where their e-Consumers
would be looking for them.
A key distinction has to be made here to understand the difference between Place and the next P which is
Promotion. By channels of purchase, we mean only those channels through which final ordering and fulfillment
happens while channels which are utilized for promotion (like search engines, e-mail, display ads, social media, etc.)
and are more of a conduit to the final purchase (will be covered in the Promotions section).
With this understanding, we will first look at the basic classification of channel ownership across direct and
indirect sales channels and also across sales effort orientation which could be push-based (more transactional) or
pull-based (more informative/engaging). We should note that the matrix developed here as an example pertains more
to marketing of products than services. Typically, channels of purchase are divided into two types:
(a) Direct sales channels—where a producer and ultimate consumer directly deal with each other. These channels
are typically owned and controlled by firms themselves.
(b) Indirect sales channels—when there are indirect intermediaries between the producer and consumer. Third
party companies typically have more control of these channels.
In Fig. 5.8, we have created a matrix between channel ownership and sales orientation. By sales orientation, we
imply the effort of sales and marketing activities and its direction. As discussed in Chapter 1 in the section titled
‘Emergence of Digital as a Marketing Tool,’ push and pull marketing differ in the way products and services are sold
to the e-consumer. While push marketing has a more sales mindset in which firms set an inventory target to be sold in
a particular period, pull marketing has a more information-oriented focus in which the customers

Pull Based (Curated)

Push Based (Traditional)

Direct Sales Indirect Sales

Figure 5.8 Channel Ownership—Sales Orientation Matrix

are made to engage with the channel through customized and curated content (which can be hosted either on direct or
indirect sales channels). Some of the key examples of each of these matrix quadrants include:
(a) Direct push channels: Involve branded websites and microsites which are developed and controlled by the
firm, through which firms make a direct sale to customers.
(b) Direct pull channels: Include content-based channels like blogs and, the more recent phenomenon of mobile
apps specific to a particular business process, developed in a well guided and curated manner to make it simple
and engaging for customers to buy.
(c) Indirect push channels: This quadrant typically contributes the most to online sales and includes highly
popular e-commerce sites, marketplaces, wholesalers who have set up online presences, web portals which offer
widgets to firms to sell their products, product listing sites which help market the firm and list its products, etc.,
among others.
(d) Indirect pull channels: These are channels which have high engagement rates with cus- tom audiences and
provide value beyond the push-based channels. These include vertical sites (like car sales only sites), price
comparison sites, affiliates (who sell products on behalf of a firm for a commission), value-added resellers (who
provide services wrapped around a firm’s product to deliver a more complete solution to customers), Other
Equipment Manufacturers (OEMs) who resell a firm’s product under their own name and brand- ing (for
example, Salesforce announced its AppExchange OEM Edition in 2006), SaaS Integrators (system integrators
who provide end-to-end solutions by integrating a firm’s product with others and make their revenues through
services rather than product resale, for example, Bluewolf).
With an understanding of the channels of purchase, we now move on to the last of the four main Ps, which is
Promotion. Promotion is what determines the extent and quality of traffic to come to direct and indirect sales
channels.

Promotion
Promotional channels are those which help marketers position and promote their products across customer funnel
stages so that they finally purchase products on the aforementioned channels of purchase. This said, we should
actually look at all of the channels of final purchase shared above as promotional channels since they too contribute to
increasing awareness, generating interest, and managing engagement for a consumer to fulfill marketing objectives
across the funnel.
Promotional channels form the core of digital marketing and the key types of channels and communication
methods would be covered in detail in the next chapter. For the present section, we will make an introduction to some
of the most important online promotion channels through the use of the key marketing funnel stages (as shared in the
REAN Marketing Engagement Framework in Chapter 1). We would be covering here the key stages of Reach,
Engage, and Activate, which include the most important promotional channels.

Figure 5.9 Promotional Channels across Key Marketing Funnel Stages

In Fig.5.9, we have divided the key promotional channels across three major marketing funnel stages of Reach,
Engage, and Activate. We will have a quick look at major types of promotions covered across these channels and will
cover key channels in depth later.
(a) Reach—As we have seen before, Reach involves the set of promotional activities to raise prospects’ attention to
marketer’s brand product or service. Key promotional areas include:
• Search engine marketing: Part of intent-based marketing channels, it includes areas like search engine
marketing/pay per click, search engine optimization.
• Display marketing: Classified as a part of brand marketing, it includes banner ads, sponsorships, rich media
ads, video ads, among others.
• E-mail marketing: Forms a part of direct message marketing and includes personal messages shared via
e-mail, sms, newsletters, etc.
• Affiliate marketing: Part of the partner marketing channel, it includes promotions shared as a part of affiliate
sales efforts.
• Social media sites: Part of community-based marketing areas, it includes social media, collaboration,
networking platforms.
(b) Engage: Involves the set of activities needed to engage prospects developed during the Reach stage. Key areas
include:
• Content marketing: Includes all content and information-related areas through which marketers promote
their products and services, as well as, web content development, blog management, native content, webinars,
playbooks, etc.
• Public relations: Oriented typically towards media, key areas include newsletters, online magazines,
link-building on sites, etc.
• Special interest marketing: Involves activities related to developing specialized content and building
networks through vertical and special interest sites.
• Viral marketing: Refers to videos, social messages, articles on buzzing topics created as sharable content for
people to share brand values in an entertaining manner.
• Gamification: Involves techniques in which brand marketing is done by deploying gaming in non-game
contexts where users are given prizes, discounts, and coupons for engagement and product trials.
(c) Activate: Includes activities to convert leads and make prospects take other actions which marketers want them
 to. Key areas include:
• Interest-based marketing: Involves promotion to customers who have interacted with a product on any of
the online sales channel through personal messaging or giving them offers/discounts/coupons for real-time
conversions.
• Social targeting: Includes sharing targeted messages to leads on social platforms; for example, Twitter tying
up with Amazon to support consumers buy a product on Amazon using a Twitter message.
• Retargeting: Involves all sets of promotional activities to re-target ads (images and con- tent) specifically for
products which they left abandoned in website carts.
• Response marketing: Covers all activities which help respond to specific consumer que- ries while prospects
are at the last stage of buying. It includes automated chats, sending response mails/SMSes to queries, social
media responses, etc.
• Custom recommendations: Involves sending direct promotions to consumers on related
products/recommendations associated to what they have already bought.
With an understanding of the classic four Ps, we would now move to understand the set of extended 4Ps
including People, Process, Programs, and Performance in the next section.

Extended Ps
(People, Process, Programs, and Performance)
With the growing proliferation of marketing channels, techniques and technologies being deployed, the 4Ps
suggested by McCarthy have been added with four more Ps which should be considered by marketers while
creating their marketing mix plans and strategies. Below, we would go through them in detail:
People:
Involves developing online teams with a mix of digital marketing expertise, tech- nology know-how,
multi-channel experience, knowledge of automation tools, and most of all, target customer insights. It also
involves how to look at customers with all their human impulses and desires to know what would entice them
most towards marketing efforts both on the content and creative side.
Processes:
Involves developing a rigorous process-driven marketing organization which lays down clear steps to
understand and identify target customer clusters, develop thought- through and tightly integrated
supplier-customer processes and manage campaigns as a series of processes with clearly aligned goals parallel
to consumer funnel activities, with ways and means to refine them as needed.
Programs:
It is defined as the entire set of consumer-driven programs which are run in a holistic manner online and offline
to meet a firm’s marketing objectives. It also includes all the multi-channel initiatives which are taken across
traditional and new platforms to make sure that customers at all stages, be it targets, prospects, or leads are
touched upon and impacted in a 360-degree manner.
Performance:
The final P relates to setting up systems and ways to measure performance and desired output at each stage of
the marketing activity, through well-defined metrics and KPIs (Key Performance Indicators). Performance
evaluation should touch all of the other Ps to continually refine the offering mix, related pricing offered,
performance of var- ious channels of purchase, and the extent of impact brought about by various promotional
set-ups.
With a knowledge of these extended Ps, (specifically developed to cater to the changing demands of today’s
digital marketing activities), we are now in a position to understand how the strategy for a Digital Marketing
Program can be developed, how firms (depending upon the digital and Product Lifecycle stage they are in) can
make use of the ‘6S Strategy Roadmap’ to plan their journey and successfully conduct digital marketing
programs. In the next part, we shall look into all of these in more detail.