The “5″ P’s of Marketing

There are many misconceptions as to what is marketing and what it can do for an organization.  Marketing is best described as a process intended to increase the perceived value and to stimulate demand for a product. A product, in our case, will mean both a physical product and a service, which is then translated into revenues through the process of sales. For an organization to be as effective as possible, starting as early as the initial product design phase, it is important to consider how it plans to market its product,

Most students learn about marketing through an explanation of the “Four P’s of Marketing”, as first mentioned by E. Jerome McCarthy.  However, this article expands the discussion of the marketing viewpoint to include a fifth “P.”  These five P’s should be included in any discussion about promoting the organization’s products within a target market.  Our “five Ps” of marketing are:

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

Product- A product comprises a physical item or service which an organization produces for sale to customers within a selected market, whether directly to consumers or through wholesalers/resellers, retailers, original equipment manufacturers (OEMs), value-added resellers (VAR), etc.  Factors that should be considered in marketing the “product” are the following:

• Form

• Functionality

• Quality

• Packaging

• Support

• Warranty/maintenance/repairs

• Branding

Form - The look and feel of a physical item or the description of a service.  How does the product look to the potential consumer?  If the intended consumer cannot visualize how they will benefit from the product at first glance, then the demand for the product must be generated from one of the other attributes of the product.

Functionality- How does the product function? What does it do? How does it do it?  How does the product benefit the intended customer?  How does the product surpass the functionality of that offered by the competition?  Marketing the functionality of the product is a key point in most campaigns.  If the form factor is not distinguishable from the competition’s product or service, but there is a difference in functionality, then a neutral form factor may not be a limiting issue.

Quality- How well does the product function or benefit the customer?  Is it constructed in a way that the customer believes it is worth purchasing?  Does the customer perceive that the service will benefit her?  Does the way it is presented give the prospective customer the feeling of a quality program?  Will the product hold up over time?  Can it be reused repeatedly?  Are the benefits of the service sustainable over time in order to make the expense worthwhile?

Packaging- Is the product packaged in a way that it catches the eye of the prospective customer?  Does the packaging reflect other attributes of the product (functionality, quality, benefits, price, etc.)?  Does the packaging design reflect the mission of the organization as well as the product attributes?  Packaging always should be considered as a piece of advertising for both the product and the organization.

Support- Customer support is a significant product attribute for customers.  The customer wants to know that he will have support if he should have questions or problems with the product.  Is there personal support through a toll free number?  Is there email support? How about the availability of a frequently asked questions (FAQ) listing? Is there a physical location where customers can go for assistance?  Often, customers will pay a higher price if they know they will have good customer support available.

Warranty/maintenance/repairs- In addition to support, how well does the organization stand behind the quality of its product?  How comprehensive is the warranty and what is the warranty coverage period?  How easy is it to return the product to have it maintained, or to return for repair or replacement?  Not mentioning these benefits may cause a customer to shy away from the product.  Assuming all other attributes are comparable, good warranties sell products. Repeat sales come from customers who have been treated well when products have problems.  How the customer is treated when a product fails may determine if that customer makes another purchase.

Branding- How recognizable is the name of the organization or product?  Is the organization or product logo recognizable to most customers?  How powerful is the brand? Can it create a market segment such as Kleenex, Coca-Cola, Google, etc?  When you need a tissue, do you ask for a Kleenex or do you ask for a tissue?  When you are thirsty, do you ask for a cola or a Coke?  If you are searching the Internet, do you say you are searching it or are you “Googling” it?  These are all examples of extensive branding efforts that have survived the test of time.  In order that customers ask for a product by brand name, the goal is to have a brand that reflects the attributes of the products provided by the organization.

Price- Product pricing should always be developed through the collaboration of many disciplines within an organization.  Make sure that the price established will generate adequate profits or returns to the organization after all expenses, including those costs required to produce and sell the product.  Pricing strategies are key issues when developing successful marketing programs and often consume much of the marketing attention in many organizations.  Pricing schemes should include, at a minimum, the following items:

• Base Price

• Discounting

• Discrimination Pricing

Base Price- The price the organization believes is a reasonable starting point for the market they are approaching. This is often called “suggested retail price” (SRP) or “manufacturer’s suggested retail price (MSRP).  The base price is the level on which all further reductions, for whatever reason, are based.  The base price should be at a level being anticipated by the market we are attempting to penetrate.

Discounting- Discounts are price reductions that are extended under defined circumstances.  The primary reasons for providing discounts are to increase the number of units sold or to stay competitive within a price-sensitive market.  A commodity-based market is an example of a price-sensitive market.  This is true because in a commodities market there are very little product function or feature differences between sellers, so the price is the primary differentiator.

There are many ways to provide discounts that are tailored for the purpose of stimulating sales:

- Volume discount-Offering a lower price based on the larger number of product units being purchased or the total dollar volume of the order (can be retail or wholesale).

- Seasonal discount-Offering a lower price for products that will not be demanded due to entering a new season, e.g., summer clothing sales in the fall..

- Bundle discount- Offering a lower price when a customer purchases more than one product at the same time.

- Special Pricing- Offering a special price is a form of discounting that is based on a particular circumstance.  Special pricing may be offered to an organization that partners with the selling organization to cross-sell each other’s products.  Also, special pricing may be offered in a co-branding agreement, which benefits both companies promoting their products or organizations into the future.

Discrimination Pricing- Price discrimination is the process of offering the same product to different customers at different prices.  Price discrimination is done every day, and the only time it becomes visible is when someone calls attention to it.  If an organization sells its product to one organization under the exact same terms as to another organization – but for a different price – it is practicing price discrimination.

There are dangers to the selling organization for treating the organization’s customers differently.  An organization that is exposed for using this practice may lose customers due to their dissatisfaction with this inequality of pricing.  There are state and federal laws that protect consumers and organizations from pure discriminating practices, and an organization may be subject to punitive measures if found guilty of willful price discrimination.

Place- “Placing the product” implies focusing on all of the distribution components required to deliver the product to the customer.  When it comes to placing the product, there are two primary issues that may impact an organization:

• Product availability
• The cost of moving product to each market

Customers do not want to wait for a product.   Instead, they want it is stock when they are ready to purchase it.  Furthermore, organizations do not want to pay a high cost to get the product to those customers.  To balance these two issues, there are four factors that come into play. These factors include:

• Transportation

• Warehousing

• Distribution

• Order/Inventory Control

Transportation- How are the products getting to the customer, to distribution centers and to warehouses?  Which form of transportation highway, rail, air or sea is the most cost effective to satisfy the needs of the market?  Shipping by sea can be the least expensive way to move product overseas, but it may take too long to replenish inventories from the customer’s perspective.  In many cases, there can be a combination of transportation methods used, such as sending by rail to a distribution point and then trucking to the customer location.

Warehousing- Storing products as close as possible to the greatest number of prospective customers is the overall objective of warehousing.

In order to satisfy customer orders, where is the best place to store product in the most cost effective manner while meeting customer demands?

Different products have varying warehousing requirements, e.g., heavy duty equipment, electronics, perishable goods, etc.  Organizations shipping product by rail may find warehousing requirements need to include being next to the rail-line or the availability of a rail spurs to allow for more effective material- handling activities.  Long haul trucking methods for moving product cross country may require warehousing near major interstate highways.

Distribution- Developing the best distribution channel for an organization’s product is important to how an organization will market its product and to what degree.  There are four primary distribution channels. They are:

• Direct- Selling direct to customers through company stores, catalog, Internet, door-to-door, etc.

• Agents- Independent individuals or groups may sell product on behalf of the organization to customers, distributors or retailers.  Agents usually do not purchase product from the selling organization. Generally, they take orders and the selling organization fulfills those orders and pays the agent a commission or other form of compensation.

• Distributors- Independent individuals or groups that purchase the product directly from the selling organization mark up the price for their profit margin and resell to the customer. Distributors are also called wholesalers or resellers.

• Retail- Retailers buy product from the selling organization or agents of the selling organization and sell directly to the customers.

Order/Inventory Control- The order/inventory control process is essential to ensure that product orders are properly handled through delivery to the customer and that adequate quantities of product are available to fulfill orders.  Use of real-time computer systems or Internet systems can provide instantaneous communication between customers and suppliers.  Orders can easily be tracked and customers can feel more confident that their orders are going to be fulfilled properly.  Inventory control systems work through the supply chain to ensure that components and finished product quantities are managed properly so that product is available when the customer places the order.

Promotion- Promotion is the process of communicating information about the organization and its product to target markets with the goal of stimulating demand and, therefore, generating additional sales of product.  Promotion represents several different forms of marketing communication.   Key factors within the marketing communications tactics are as follows:

• Advertising

• Sales Promotion

• Public Relations

Advertising- Advertising is the method used by an organization to publicize and position products to their target market, including product launches, image and brand building.  Organizations control the content, the target audience and timing for their advertising, all with the intention of reaching the greatest number of potential customers.  Forms of advertising include media (TV, Radio, Print, etc); direct mail, brochures, car/bus signage, bill- boards, handouts, web site/web networks and a direct sales force.

Sales Promotions- Sales promotions include several communications activities that attempt to provide added value or incentives to consumers, wholesalers, retailers or other organizational customers in order to stimulate immediate sales. These efforts are an attempt to encourage product interest, product trials, and purchases. Examples of techniques used in sales promotion include event sponsorships, coupons, samples, premiums, point-of-purchase displays, contests, rebates, and give-a ways.

Public Relations- Public relations (PR) consist of a variety of activities that are intended to promote a positive relationship or image with customers and prospective customers.  Image building and maintenance is the role of public relations.  Tools used include press release announcements, trade articles, charity events or contributions, and integration with promotional activities.

Profitability- The fifth “P” of marketing is Profitability, which is calculated as the sales price minus all costs associated with creating and selling the product.  What does marketing have to do with profitability?  Everything!  Marketing people must keep all their activities geared toward the primary goal of creating demand for and the selling of a product at a price that generates the profits planned during the earliest stages of product design.  All too often, marketing people are only concerned about sales, market penetrations and customer response.  However, if all these numbers are excellent and the product is selling below profit targets, the organization will miss its profitability goals.

How does marketing make such a miscalculation?  Occasionally, marketing has full authority for pricing and discounting.  If the product base price is not set correctly or if this base price is discounted improperly, then the end results are reduced profits.  There needs to be a check and balance with leadership to ensure that pricing contributes the correct and anticipated (budgeted) profit margins.

Often, promotion and advertising activities that were planned to generate sales are deemed inadequate; and, therefore, new programs are put in place and executed at a higher price without making a change in selling price.  The effect of this tactic is lower profits.

Whether the organization has a product or a service for sale, in order to be in the most advantageous position to convert prospects into customers, the marketing department must focus its efforts on Product, Price, Place, Promotion and Profitability.

The five Ps are the core disciplines to an effective marketing function within any organization.

Tags: business, change, cultures, Leadership, management, organizational basics, performance improvement, process improvement

This entry was posted on Tuesday, November 3rd, 2009 at 12:13 pm and is filed under Marketing/Sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.