The 4Ps and the marketing mix

The 4Ps are the ideas to consider when marketing a product. They form the basis of the marketing mix. Getting this mix right is critical in order to successfully market a product. The 4Ps are:

1. Product
2. Price
3. Promotion
4. Place

If market research is carried out effectively, a company can plan a promotion for the right product, at the right price, and to get it to their chosen market, in the right place.

Now look at the 4Ps in more detail.

Product

A product can be either a good or a service [Goods or services: Goods are usually products that you can see whilst services are those things which are done for the consumer like retailing, hairdressing and cleaning. ] that is sold either to a commercial customer [Commercial customer: A business which is itself a consumer. ] or an end consumer [End consumer: The final consumer of a good or a service. ]. A customer buys a product, and a consumer uses it. Sometimes these are one and the same, as an industrial firm can also be a customer and a consumer. For example, British Airways might buy aeroplanes from British Aerospace, so it is a customer. It won't sell on the planes to another buyer, as BA needs the planes to provide its service, so it is also a consumer. Sometimes a wide product range [Product range: The range of goods that a firm produces. ] covers both (Mercedes produce lorries for haulage companies, and cars for domestic use).

More commonly, there will be a number of sellers forming a chain of distribution [Chain of distribution: The route a product takes from the primary sector through the secondary sector to the tertiary sector and the consumer. ]. For example, a gold mine may sell gold to a jewellery manufacturer, who in turn will sell on rings to wholesalers and retailers, before we get to buy them in the high street. Each is a customer, but only the final user is the end consumer. A marketing manager will identify who his/her target market [target market: the end-user or consumer group to whom the manufacturer aims to sell ] is, what they want, and sell it to them at each stage in the chain.

Price

No matter how good the product is, it is unlikely to succeed unless the price is right. This does not just mean being cheaper than competitors. Most people associate a higher price with quality, so you would expect to pay more for a Rolls Royce than for a Lada. On the other hand, is one cola worth more than another, and if so, how much?

As a rule, a producer of luxury or medical products will use skim pricing or premium pricing [Skim pricing or premium pricing: A high price is set to maximise profit. ] initially, in order to maximize its profits. This is useful, as it helps them to recover expensive research and development costs quickly.

For fast moving consumable goods (fmcg's) like colas, penetration pricing [Penetration pricing: A low price is set to improve its market share. ] is usually used. The firm will want a large share of the market, so will settle for a small profit on each item. In the long term, they hope that the turnover, and therefore their profits, will be high.

The simplest method of all is cost plus pricing [Cost-plus pricing: A method of pricing where each product's unit price has a mark-up added, say 5% of the purchase price or the manufacturing cost and this then becomes the selling price. ], where a firm adds a profit mark-up [Mark-up: The profit added to the cost by resellers. ] to the unit cost.

Promotion

The main aims of promotion are to persuade, inform and make people more aware of a brand, as well as improving sales figures. Advertising is the most widely used form of promotion, and can be through the media of TV, radio, journals, cinema or outdoors (billboards, posters). The specific sections of society (market segments) being targeted will affect the types of media chosen, as will the cost. If you were a toy manufacturer, you might want an advertising spot during children's TV. If you ran a local restaurant, you might choose a local paper or radio.

A small or local business would not usually advertise on TV, because it is very expensive. Sales promotion is designed to encourage new and repeat sales [Repeat sales/business: Customers returning to buy from the same business. ]. Loyalty cards, free gifts, competitions and voucher schemes are the most popular.

Companies use sponsorship and public relations to improve their image, notably through financing sports, the arts and public information services.

Place

Distribution channels are the key to this area. A firm has to find the most cost-effective way to get the product to the consumer. Direct marketing [Direct marketing: Where sellers contact potential buyers directly without having middlemen buying their goods and then selling them on to consumers. ] through catalogues, via a TV shopping channel and through the Internet have become popular, because the consumer can shop from home.

For the firm, they can cut out the middleman in the process, and can therefore make more profit. Going through wholesalers and high-street retailers, however, is the most popular form of distribution, as that is still where most people shop.