The four Ps are a simple and memorable set of factors used for decision making in marketing for business enterprise large and small. The four Ps are Product, Price, Place, and Promotion and are illustrated in the model framework diagram below:
Product
A product or service is the primary solution that provides revenue in exchange for a unique benefit to your customer. The more important the client benefit in the mind’s eye of the client, the greater the profit potential. The manufacture of an automobile is highly profitable and worth the risk because of a fundamental need for transportation by most people. Therefore, it is worthy of research, client feedback, testing and resource investment to continuously develop and improve a business unit product offering to gain additional and repeat customers. The product or service is the foundation of revenue creation.
Price
Pricing of the product or service reflects how it fits in a target customer hierarchy of needs at any given time and what they are willing to pay. An example of pricing strategy can be seen in the fashion industry. A company may produce a product line of high-end dresses that they sell for $1,000. They then make umbrellas that they sell for $100. The umbrellas may cost more than the dresses to make. However, the dresses are set at a higher price point because customers feel as though they are receiving much more value for the product. Would you pay $1,000 for an umbrella? Probably not. Thus, external factors like customer perceptions guide the pricing strategy. Pricing strategy, premiums, discounts, payment plans, loyalty memberships and the like are all part of a pricing plan.
Most businesses have multiple products and services and need to put considerable thought into pricing strategy. Pricing cannot be higher than the market is willing to pay. Otherwise, few consumers will become clients if alternatives are readily available in the marketplace. A good rule of thumb to remember when pricing products is that your customer base won’t purchase your product if it’s set too high, but your business won’t be able to cover expenses if you price it too low.
Place
Place includes both the location of the client, where the product is found for purchase, as well as the logistics of how the product is delivered to the customer. If a customer comes into a retail location, makes the purchase, and carries the product away, getting the product to the retail store needs to be considered. On the other hand, if a service is brought to the client’s home, great thought and planning needs to be done to schedule and dispatch service vehicles with qualified service providers to visit that home on time and within a planned cost. Every business whether an online retailer to a brick-and-mortar establishment need to consider location of the client and the location of the product and determine the optimum method of getting the product to the client at a profitable cost level. Sometimes this is the most difficult element to plan for.
Promotion
Promotion is broadly how the prospective customer finds out about the product or service at the moment that he or she is ready to buy. This includes articles and reviews, paid advertising, and all manner of creating awareness during the customer decision journey, from awareness, interest, consideration to the final purchase decision. It may also include after the purchase communication to gage satisfaction and create awareness and desire to make a follow up purchase or tell friends about the purchase.
Conclusion
All businesses need a marketing plan as an element of their business plan. While the theory of the four Ps is now 62 years old, it is still an extremely useful framework for business owners. Often, thoughtful, disciplined strategies addressing each of these elements is the difference between a business that thrives and one that does not.