I remembered when I was sitting in the very first marketing class in my MBA program at The Ohio State University, the professor taught us a marketing framework called “the four P s of marketing”. It’s a fundamental framework and it’s helpful. But….
It was dry and vague. Lots of concepts were taught and by the semester, I was like “urghh” with absolutely no clue about how it would make sense in a real-life business.
So I try to write about the four P s of marketing filled with digestible concepts and practical examples, hope you’ll take home with actionable insights instead of elusive definitions.
What are the four Ps in marketing?
The 4 P s of marketing definition
There are different definitions of the 4 Ps of marketing. Surfing through the internet, you can find:
The four P s of marketing are the key factors that are involved in the marketing of a good or service. They are the product, price, place, and promotion of a good or service. Often referred to as the marketing mix, the four Ps are constrained by internal and external factors in the overall business environment, and they interact significantly with one another.Investopia.
The 4 P s of marketing is a concept that summarizes the four basic pillars of any marketing strategy.Neilpatel.
I liked the definition by Neil Patel so won’t rewrite the similar definition here. Let’s dive into the practical applications of the four Ps of marketing.
The first P: Product
What it addresses
The products or services your company offers.
For example, it could be cars for Tesla, consumer products for P&G.
Or it could be professional services for Bain, education services for The Ohio State University.
In short, it is anything that your company sells.
In every business stage, this P works for you.
You might be starting out a new product development.
You might already build one and now be in the journey of product-market fit.
Or you’ve found your fit and now adding more features to the product.
Either case, you have to deal with product.
The business problem you have to solve is to make product/service which serves the needs and is better than your competitors’.
Product development stage
If you’re in the product development stage, find a need that is under-served or unmet! And then design a product that solve this problem.
The best way to do is to try to scratch your own itch. Look at this example:
From The Ground Up sells hiking socks that, in the first place, the owner tried to scratch his own need. How he came up with the idea is an interesting story.
After coming back from a hike with the wrong socks that absolutely wrecked Rami (the founder)’s feet, he was shopping for better hiking socks, but everything in the merino wool sock market was either itchy, hot, or just plain ugly. It was at that moment, he saw an opportunity to capitalize on the beauty that his home state (WA) had to offer and create his own brand of hiking socks.
Pro fact: FTGU is a side project from his full-time job, yet yielded over $170K in sales.
Product-market fit stage
If you’ve done with your product development, and now turning into the product-market fit stage, look at your customers and your offering to find the gap.
Of course, there are a few proven frameworks for you to start with.
Box grew from $0 to $10M thanks to its Product VP, Alok Ojha. In a webinar in Sep, 2020, he gave insights into how Box turned its SaaS Content Cloud into $10M business. Here are the frameworks:
The Sean Ellis Test
Create a 30-second survey to get inside the customer minds. The survey could be very simple, including only one basic yet insightful question: How would you feel if you could no longer use our product? Would you be: a) very disappointed, b) somewhat disappointed, or c) not disappointed.
The industry benchmark is 40% and over of the answer “very disappointed” for a product-market fit.
PMF Engine (The Product-Market Fit Engine)
Expand the Sean Ellis Test to a up to 2-minute survey with about 4 questions. The questions design yourself but the engine should consist of these steps:
- Set up your survey to ask your users “How would you feel if you could no longer use the product?”
- Segment your audience to find supporters and paint a picture of high-expectation customers
- Analyze feedback to convert on-the-fence users into fanatics
- Roadmap your improvements by doubling down on what users love and addressing what holds others back
- Track product/market fit over time as your most important metric
The next stage when you’ve found your product-market fit is growth stage. At this point, you’d want to focus on product enhancement. Now, conduct trials and errors to explore the unknowns.
In other words, run experiments with different features (trials & errors) to find what features the customers want to see (the unknowns).
In my post about KPIs, I mentioned exploratory KPIs that help a business find its unfair advantages over its competitors. This is one of the most common applications of the exploratory core metrics.
The second P: Place
What it addresses
Place is, in another words, location. Which locations will you serve?
Location, together with the businesses, people, and legal system there, form a market. Given limited resources, you have to strategize which markets to focus at any particular time.
For example, Root Insurance, the unicorn topping the insurtech market (by Crunchbase, 2020), grows strategically.
Founded in 2015, yet in 2019, Root covers only a few states. It targeted states with low barrier to entry contributed by the sate’s legislation, people, and the competition landscape. Then in 2020, it expanded to more than 30 states. Could Root be that successful if it hadn’t targeted locations selectively? Probably not.
The third P: Price
What it addresses
The second P in the marketing mix is Price. How much will you charge your customer?
Pricing is a complicated topic and thus requires research and experiments to find the right price point for you product/service.
If you over-charge, you’ll loose customers. Your income will also reduce.
On the other spectrum, if you under-charge, you’ll loose profit margin. Your income will also reduce.
Only at the optimal price, you can maximize your profitability.
In economics, pricing is calculated by just a simple formula (p=mc*(e/e+1)) in which p is optimal price, mc is marginal cost, and e is elasticity. But how you can know the marginal cost and the elasticity of your product? Who knows!
So, this is how pricing is usually done in real-life business:
Using reference prices is the most common method. Reference prices, of course, are from competitors.
What if you start a brand-new product, what can be your reference price? Look at the already incurred costs your customers have to pay for to solve the problem your product addresses. This is also the way we identify our starting price for Weave (3Locks)‘s enterprise package.
By the way, Weave provides groups savings app for friends and family to reach their financial goals, for employers to build a strong foundation together with their employees, and for community to stay connected through ups and downs.
Customer’s willingness to pay
Last but not least, find your customer’s willingness to pay for your product/service, by experiments.
A golden rule in pricing is: it’s extremely hard to increase price! So don’t expect to set the price low at early stage only to attract early adopters then increase the price overtime. (You can only succeed if you gain monopoly, otherwise customers will switch to your competitors).
Then how you can experiment with price? Use promotions to test the willingness to pay.
For example, you find the reference price should be $100. Then set your product price at $120 and run different discounts, for eg, 5%, 10%, etc. and measure the sales and profitability each promotion period.
The fourth P: Promotion
What it addresses
Promotion is all about getting customers aware of then try out your product/service.
After you develop a good product/service, find the sound pricing point, and pick a few locations to target, what you’re going to do next is promoting your offering.
There are a few frameworks you can apply at this P, like “learn, try, buy” or “reach, frequency, yield“, etc. For whatever framework, the first thing you need to do is to identify the target channels, then budget your advertising expenses.
I like to use the 19 marketing tactics. Experiment with your business to find what is the right channel for you. Read more about the tactics here.
Here’s the full list of the 19 channels:
- 1.Viral marketing
- 2. Public Relations
- 3. Unconventional PR
- 4. Search Engine Marketing (SEM)
- 5. Social & Display Ads
- 6. Offline Ads
- 7. Search Engine Optimization (SEO)
- 8. Content Marketing
- 9. Email Marketing
- 10. Engineering as Marketing
- 11. Target Market Blogs
- 12. Business Development
- 13. Existing Platforms
- 14. Sales
- 15. Affiliate Marketing
- 16. Speaking Engagements
- 17. Trade Shows
- 18. Offline Events
- 19. Community Building
Promotion is also what failed me when I started my lighting shop. I didn’t do homework carefully about this P in terms of budgeting. Lighting products, in general, takes around $110 for each conversion, a huge number! And as a result, I burned my thin budget so quickly that I could continue the shop.
How to use 4 Ps
The four Ps of marketing can be used as a framework: by following the 4 Ps, you know what you are missing of when forming a marketing strategy. Without addressing the all Ps, your strategy is not gonna be complete.
However, every strategy needs justification. So, once you form a strategy, apply, then keep tracking and measure its soundness. Here’s the recommended steps to apply the 4 Ps framework:
- Start with the first P – Product, then to Place, Price, and Promotion.
- Identify the business problems that each P deals with, and solve them.
- Keep on testing your marketing strategy until you find the right one for your business.
Can the four Ps of marketing work in digital era?
Yes, all the 4 Ps.
In deed, Marek Rucinski, the Managing Director of Accenture Interactive, said the core of marketing (the 4 Ps) remains as relevant as ever even as digital disruption changes the entire model itself. He indicated the digital version of the four Ps of marketing:
Product = Presentation
Technology advances allow businesses to present product faster, more in-depth, and more efficiently. Take advantages of technology to improve the capability of delivering product/service information to your customers.
Place = Presence
Mobile allows people to access the internet anywhere and anytime. Thus, when looking at the Place P, you need to think about the presence as well – make sure the customers can access the info/service they need anywhere and anytime.
Price = Premise
Digital applications allows businesses to reach to customers more frequently and stay close to them, for eg, social media posts that communicate with customers on a daily basis. In digital world, customer demand more than just reasonable prices, such as social responsibility, sustainability, emotional connection, etc. And your job is to provide the better and better experience to them, of course, besides good prices.
Promotion = Personalization
Personalization means catering differently to different customer. Martech is booming! After the first year of my MBA program, I interned with Pique, the 1:1 personalization software with patent-pending technology. When I deep dived into the personalization software market, I realized this is and will stay one of the key differentiators for businesses. Business that does the best with personalization will grow far better than competitors.
In a nutshell, the marketing mix (the 4 Ps) is still the core of any marketing strategy even in the digital era. But, given the changes in technology, you need to take into account the capabilities that technologies bring to you and the customer behavior changes as a result of tech advances to form a good marketing strategy.
The lesser-known 4 Ps of marketing mix
These is an interesting article about the lesser-known 4 Ps that you can read further. Happy learning!