‘Four Ps’ Apply to Product and Service Businesses

In marketing, we often speak endearingly of the “Four Ps” – Product, Price, Place and Promotion.

But over the decades, strategy has evolved significantly from an industrial manufacturing and production mentality – think Henry Ford’s initial attitude toward building and selling the Model T: You can have any color as long as it’s black.

Companies like Harley-Davidson were initially and surprisingly successful in the manufacturing environment when they took a different approach in adapting to their markets, in the United States and internationally, and tailored their products to customer preferences. This approach resulted in many unique styles and options, particularly among a specific age group and psychographic profile of the motorcycle market.

But over time, the market slowly changed in terms of age demographics, as well as consumer preferences. Before Harley-Davidson could get a clear understanding of the market changes and adjust, it got caught short with an abundance of supply and shrinking demand. This resulted in excess capacity and a need for a more aggressive “push” selling strategy.

E-commerce firms such as Amazon and Zappos have changed the strategic focus from products to services by collecting and analyzing customer-generated data and successfully balancing that analysis against the supply and demand characteristics of the brands and products available to customers. This change of approach has allowed them to create a personalized customer experience, which is also highly profitable. These types of developments and their application to marketing have resulted in higher consumer loyalty and proliferation of a more enjoyable user experience for the companies deploying them.

Often I refer to companies like Walt Disney and Apple in making the connection to marketing organizations and our ability to anticipate the future in both product and service markets. Walt Disney was the first entrepreneur to understand and embrace user experience to great success in 1955 with his Disneyland in California. Steve Jobs was able to elevate user experience to new heights in 1984 with the introduction of the Macintosh computer and again in 2007 with the iPhone.

These examples aren’t really considered traditional product markets anymore. They are becoming more narrowly defined as service markets with a high user experience element that ultimately determines their success or failure.

The Four P’s still apply to these companies and their marketing mix. Recall that the term Four P’s is more commonly known as, and referred to, as the marketing mix.

Products, the first of the Four P’s, are essential building blocks of any company. However, modern organizations are providing a service as the product. So when we talk about our products, even if it’s a service business, we are still well served by defining features and linking them to benefits for our customers.

For product organizations, the features are easier to identify and can be readily defined and communicated, which makes it much easier for the salesperson and the customer to understand and discuss the benefits.

For service firms, the defining and communicating requires a bit more homework, but can still be identified, defined and communicated in terms of benefits to the customer, which most effectively answers the customer’s big question – “What’s in it for me?”

Pricing, the second of the Four P’s, also requires some homework to get right. Pricing methods and strategies must address the customer demand and its various elements, as well as the dynamics of the business enterprise itself. These include providing a desired product (or service) that meets the needs of the market while still providing a high level of customer service and support at a price that can deliver a sustainable profit regardless of whether it is a product or service business.

The important factor here is that salespeople should have some contribution to influencing pricing, particularly when they are being made accountable for sales targets and profitability goals. We know the sales force contributes to a firm’s selling and administrative expenses, but the sales force also contributes to delivering the high level of customer service promised and is most often on the frontline of providing customer support.

Advertising and promotional programs, another P in the marketing mix, are designed to build and maintain awareness and drive customer demand. For service businesses, this is no different. The considerations in this area are growing at a very fast pace, not only because of the advancements in technology, but also because the number of channels that customers and prospects have to get information from.

As consumers, it is reported that we see some 5,000 advertising messages a day. It seems to make sense – when you have more channels, you can create more advertising. The important factor to consider is the expectations being set by the advertising message and how your salespeople are delivering on that message and those expectations.

One of the critical factors is to ensure that the product benefits actually deliver on those expectations.

For a service business, it is no different. The company must ensure that the benefits of customer service and support actually deliver on the expectation set. A well-informed and well-trained sales force is now even more important to framing the original advertising message because they are increasingly providing more of the customer service and support – delivering on the promises, whether it is a product or a service business.

The source of significant frustration for customers and clients is when expectations aren’t met. And the source of significant frustration for salespeople is when there aren’t enough resources to deliver on the expectations and they must constantly deal with the customer’s frustration.

In addressing the last of the traditional Four P’s – Place – a service business now must effectively deliver in the real world and the virtual world. In contrast to addressing place in terms of logistics or transportation, place can also be a perspective. Not unlike transportation and logistics, each route has its own set of perils.

A key factor in this area is to embrace collaboration and coordination among all functional areas in the organization.

The salespeople need to spend time with corporate marketing and marketing communications, as well as product marketing departments, to find out what types of programs are being considered and undertaken, and what results are being achieved. This also helps to address the need for an established feedback loop for understanding and evaluating whether expectations are being met and customer service and support promises are being fulfilled.

There is significant benefit to building a cooperative and collaborative system within your organization, regardless of whether it is a traditional product-type business or a modern service enterprise.

The constant and ongoing reevaluation of the marketing mix and rethinking in terms of expectations met and promises fulfilled is clearly more important today.

These are elements that allow you to evaluate your direct competition and potentially set out a strategy for developing a more effective competitive advantage.

Feel free to contact me at The Business Journal in Youngstown – [email protected].

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