Alliterating Ps is a popular way to create a memorable acronym. There are the 5Ps of planning: Proper Preparation Prevents Poor Performance. This saying comes from the British army and is a shortcut of the original, cruder, 7Ps which mean Proper Planning and Preparation Prevent Piss Poor Performance.
A critical component of Marketing is messaging. This entails creating messages that are memorable. This article is about the main Ps of marketing.
Marketing is about delivering the right message about the right product, at the right price, at the right place, at the right time, and to the right person. The 4Ps detail this approach.
The 4 Ps are a way to think about and execute the marketing mix.
It is a great framework to use internally in any marketing department or effort because it provides a clear and concise way of talking about the basic elements of a marketing campaign. This helps coordinate efforts and gets everyone on the same page in planning and executing a successful offering.
The first P is product. This stands for the offering or value proposition. It is what a company is selling. It can be a product or a service or some mix of both like a product and a service contract. We’ll call it product for short here.
A product offering only really makes sense in relation to the needs and wants of customers.
Lets think of Product as the relationship between our Value Proposition, which is the feature set of our product/service, and the needs and desires of our target customers. It is this Product/Market Fit that we are trying to assess and optimize.
The Value Proposition Canvas is a concept that has been developed to help entrepreneurs assess and develop Product/Market Fit.
It can help to evaluate existing products and look to optimize or rethink alignments of features and customers to optimize perceived value. Perceived value is the customer’s perception of the value of your offering. How big of a problem are you solving or how much delight are you generating. This is critical because it is the basis of a sustainable competitive advantage, which translates into higher prices that the offering can command and higher profit margins.
The Value Proposition Canvas (VPC) expands on the relationship between the Value Proposition and Customers. The goal is achieving the optimal fit between what you are offering, the value proposition, and what customers want and need. This fit needs to be evaluated and tweaked for every customer segment. Different customer segments have different needs and wants. We will talk more about this relationship in the STP section.
The VPC helps you move your product towards what your customers want by organizing, mapping, and matching the dimensions of your customer’s needs and your product’s proposed feature set.
The VPC is a clear way to organize and understand your customer’s needs, and design products and services that meet those needs and customers will pay for. It works in conjunction with the Business Model Canvas. It basically refines the right hand side of the BMC. Both were developed by Alexander Oesterwalder to help entrepreneurs organize their ideas and test them against feedback from customers and the market.
Product Life Cycle
The product or service (or mix of the two) is a good that meets a specific customer need or desire. Products tend to follow a life cycle and marketers need to understand the product life cycle sequence and arc. You can then anticipate the various stages and plan to address the unique challenges of each phase.
A product progresses through a sequence of stages from introduction to growth, maturity, and decline. The changes this sequence represents, impacts marketing strategy and the marketing mix.
Marketing management is involved with assessing where in the product life cycle an offering is, and employing a succession of marketing strategies that best address the situation. The markets in which a product is sold evolve over time as do the customer segments. These dynamics must be addressed and managed relative to the offering as it moves through the succession of stages.
Extending the product life cycle
Sales can be improved and optimized by attempting to extend the product life cycle. This can be achieved by:
· Boosting and recalibrating Advertising to reach additional audience and potential customers.
· Exploring and expanding to new markets to acquire more customers in different segments.
· Pricing changes: a reduction or discount in price can motivate potential customers that are on the fence to purchase.
· New features that add value to the product can capture new customers or fans looking to upgrade.
· Design and Packaging: Updated design and attractive packaging can influence purchases positively.
Price is fairly self-explanatory. It is the amount the end user is expected to pay. But at what price to sell in order to maximize sales is tricky. The price of a product directly affects how well and how many sell.
Other things being equal, if the price of something goes down, the more of it will be sold, if the price goes up, the less units will be sold. In Economics this is called the Law of Demand.
Law of Demand
The law of demand is a concept in microeconomics that states, as the price of a good or service decreases, consumer demand for it will increase, and vice versa. If the price of pizza goes down during a sale, more pizza will be sold.
We graph this along dimensions of Price and Quantity. The demand curve is downward sloping which means as price goes down, quantity increases. You know this intuitively and have purchased things in this way your whole life. Don’t get confused by the abstraction into a graph. The graph makes it easier to visualize and talk about.
Here is a simple graph of a demand curve with a supply curve. Where the two meet determines the price and quantity sold.
The quantity that will sell is related to the price along the demand curve. The relationship between how the quantity sold is affected by changes in price is called the Elasticity of Demand.
There is no objective costing criteria. The price is related to the perceived value of the product in the customer’s mind.. Marketing and Branding are critical in creating an aura of prestige and desire around the product and enhancing perceived value. Educating potential customers about the utility of an offering through content marketing communicates the functional value. These techniques support premium pricing, which translates into superior profit margins and a sustainable business model.
You need to understand how a customer values what you are selling. Feedback through customer engagement and social media listening provides vital information about how your products are being used and perceived by customers. Customers can be made aware of different use cases through content marketing.
Price may also be affected by how competitors price rival products. Differentiating you product offering from competitors helps you sustain your profit margins. Don’t compete on price alone. Price wars are destructive. It’s a race to the bottom where nobody wins; unless it serves a strategic goal.
It can work in the short term if it is part of a strategy that looks at the losses as an investment in driving out competitors and capturing market share and dominance. Think Amazon for its first ten years.
Pricing is one of the most critical decisions in the marketing mix. It influences consumers image of the brand and what the firm has to offer. There are a variety of pricing strategies depending on what you are trying to achieve or avoid. The price can be set to maximize profitability or to draw in customers. Pricing can be used as a defensive strategy to protect an existing market from new entrants. It can be used to increase market share or rapidly enter a new market.
Consumers are very selective regarding the purchases they make. Decisions on pricing strategy impact potential customer’s decision on whether or not to purchase.
Another important factor is the competition within the market. Be attentive to the competition’s actions and responses to price changes in order to gain or maintain a comparative advantage in the market. With Internet connected mobile devices customers can perform price comparisons quickly and with little effort.
Pricing Strategies and Models
Here are some examples of Pricing Strategies and Models:
· Two fer
· Loss Leader
· Service Contract
Consumer Perceptions and Price Sensitivity
In the book, The Strategy and Tactics of Pricing, the authors discuss customer perceptions relative to price and price sensitivity. These factors are related to different purchasing decisions and how available information is about alternatives and the ability to comparison shop.
Reference Price Effect –sensitivity to price increases for products depending on how high the price is relative to substitutes.
Difficult Comparison Effect — purchasers are less sensitive to the price of a known brand when it is difficult to comparison shop.
Switching Costs Effect — if there are costs associated with switching, like a new learning curve, there is less price sensitivity. Buyers are committed.
Price-Quality Effect — There is less price sensitivity for brands that are perceived higher quality.
Expenditure Effect — The larger the purchase relative to the available budget, the more sensitive buyers are to price.
Shared-cost Effect — buyers are less sensitive to price the smaller the portion of the purchase price the must pay for out of pocket. Think health insurance and prescription prices.
Fairness Effect — buyers have an idea in mind of what is a reasonable cost for a given item; the farther the price is outside this range, the more price sensitive the buyer.
The Framing Effect — buyers are less price sensitive for bundled goods. In this case it is difficult to separate out the cost for each good.
A couple of other great books that dive deep into pricing and value are:
· Priceless by William Poundstone
· The Price of Everything by Eduardo Porter
Promotion covers the methods of communication and creating awareness that marketers use. It can include content delivered via audio like podcasts, video via YouTube, photos on Instagram and Pinterest, textual via blogs, social media posts, email, text, and others. There are new channels being constantly launched and adopted.
Promotion includes advertising, sales promotions, special offers and public relations.
Promotion channels can be broken into three categories:
· Owned: websites and email lists
· Earned: social media shares and likes
· Paid: advertising
Promotion is the communication aspect of marketing. Channels for communication and promotion have proliferated with the advent of the Internet, web, and mobile.
Whatever the channel used, it should suit the product, the price and the end user.
A promotion plan details the amount resources allocated to each of the elements in the promotional mix. These elements of the mix include personal selling, advertising, sales promotion, direct marketing, publicity as well as event marketing, exhibitions, trade shows and presentations.
Place has to do with how the product is delivered to customers. Supply Chain Management and Distribution are key elements of Place or placement.
The strategic elements of placement are which mix of distribution channels are best suited to delivering a product or service. Purchasing, access and use patterns by end users are placement concerns that need to compliment and integrate with the rest of the product strategy.
We are looking for the ideal locations to convert potential clients into actual clients. Today the initial place potential clients are engaged and converted is most likely online. Engagement and the customer journey usually begin with permission and content marketing.
SaaS Software as a Service models have become very popular. This is where software is no longer purchased and loaded onto a personal computer, but accessed online and paid for with a monthly subscription. This is a revolutionary placement strategy and reduces some barriers to purchase in the customer’s mind by reducing front end costs and commitments.
Place decisions detail where products are sold and how they are delivered to the market.
Fifth P: Positioning
Positioning could be considered a fifth P. Positioning refers to the place that a brand occupies in the minds of customers and how it is differentiated from competitor’s offerings and messaging.
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