Going to Market: Seven Ps to Success and Some Cs

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A few months ago I had the opportunity, after three enriching years as a Planning and Forecasting Analyst, to change my job description and start a new adventure. This new adventure is called becoming a really good “Pricing Analyst”.

And while this new path has kept me quite close to my old job — the businesses I have to analyze are the same and most of the people I deal with are as well — it also required a massive shift in perspective.

Indeed, if before the company products and services were an input in my analyses, whose outputs were estimated sales, performance reviews and KPIs, now those same products and services are partly the result of my work.

So my analyses are not mainly focused on estimating how well the product or service is and will be doing, but what factors (mostly price, but also composition and customer target) will make them be the best.

And that, right there, is the question I’ve been trying to solve. What makes a product or service the best?

A quick search online will produce pages and pages of results, with key ingredients such as problem solving, value adding, purpose.

I believe these are all correct, a good product should have a purpose, solve a problem and create value. It’s logical, isn’t it?

And yet, as I’m a very pragmatic person, if I had to give an answer to that question it would be a (very dear to economists everywhere) “it depends”.

It depends because purpose, problem and value are all very generic terms.

Which kind of purpose are we talking about here? Is the problem a simple one or a layered one? And again, are we talking value for the customer or for the company? Economic value or emotional?

Generic ideas and answers can only get us so far in business, and at a certain point high level statements, even the logical and the commonplace ones, need to be grounded in reality.

And as this is now my job and my challenge, I’ve decided to study this fundamental “grounding step” and create a monthly series exploring one of the Business World most famous and shared concepts for success: the Marketing Mix.

In the series, for which this latest article wants to be an introduction, I will explore each component of the extended Marketing Mix (plus one!), working on understanding and evaluating which are the best practices, steps and tools out there that a company and its people should follow and use to concretely create and market that “best” product or service.

As my job encompasses both products and services I will try to give insights on both with, however, a particular eye on the latter as it is a main focus in my day to day activities.

The Infamous Marketing Mix: four or seven ingredients to success

Before launching in the exploration of each one of its components, what needs to be done is reviewing the definition of Marketing Mix.

Philip Kotler, one of Marketing’s most prominent experts, defines it as the “set of marketing tools that the firm uses to pursue its marketing objectives in the target market”.(1)

As it is, it seems such a broad and abstract definition, and yet this concept, that is the idea that a multitude of tools is necessary to successfully bring a product or service to the market, is not difficult to grasp.

In our mind we can all agree that coming up with a product or service is not enough to guarantee its success, and effort should go into a series of complementary activities.

So while it was first put on paper in the late 40’s, with J. Culliton defining marketers as “mixers of ingredients”(2) it is clear when looking back at the history of trading and commerce that it has always been there in practice.

Advertising, for example, has been recognized as a tool to push sales for millennia now, with forms of advertising, be it written or oral, identified in most pre-modern historical civilizations, from China to Pompei, Egypt and India.

It was however only in 1960 that E. Jerome McCarthy defined the 4Ps Marketing Mix that has become so popular among academics and practitioners both.

In his book Basic Marketing: A Managerial Approach (1960), McCarthy approached marketing as a management and practical science that takes variables and combines them to solve a maximization problem.

At first the Mix included only four of these variables, that is the most commonplace and universally recognized as deciding factors for business success.

Product
The first variable cannot be of course anything else than the product itself.
As foregone as it may be, this is a variable that needs to be thoroughly analyzed and defined.
The Oxford Dictionary, simply enough, defines it as “a thing that is grown, produced or created, usually for sale”.
And yet, the reality of creating a product goes through questions like “what would a customer want from the product?”, “which features should it include?”, “should it be made of material x or y?”, “what’s the life cycle of the product”, and hundreds more tailored to each specific business that should be addressed and that require more than a simple definition.

Price
The second fundamental tassel of the trading game is of course the price.
Setting the right price is a goal in itself that has a determinant impact not only on how the product but also the company itself will fare.
Price can stimulate or stiffen demand, positively or negatively impact margins, and even shift customers’ perception of the product and its value.
But price is not just a number. Choices like payment terms (how and when to pay), discounts and promotions, bundles, commissions and allowances for retailers and similar should be made.

Place
Place, or better yet distribution, plays a fundamental role in marketing a product.
Understanding where, but also when, a customer will search for a specific product is key to optimize reach on demand.

Promotion
As explained before, advertising has been around for millennia, clearly showing us what an important step in the going to market process this is.
But promotion cannot be so easily reduced to advertising.
Promotion needs to be an all encompassing series of activities, ranging from advertising, sponsorship and public relation management, to events, social media management, brand management, and many others, all together having the single objective of elevating the product image in the eye of the customers.

As we know, this decision making framework has become in time one of the most widely accepted and widespread out there.
By the time the 80s came around, however, many experts and practitioners in the field believed the model needed to be expanded to include three more fundamental variables that could not be left unconsidered, even more so when the scope of the analysis was focused on services and not products.

People
If deciding where and when the product will be sold is key, so is deciding, and then adequately preparing, who is going to sell it.
Indeed, even with the advent and growth of digital technologies and e-commerce, human interaction in sales still has a predominant share today (84% of retail sales in the US in 2019 where made at a brick-and-mortar store, while the remaining 16% was made on a digital store)(3), and cannot be left to chance.

Processes
Processes refer to all those mechanisms, activities, and procedures through which a product or service is delivered to the customer and their monitoring.
Managing processes to ensure a seamless delivery means deciding which and how activities should be mapped and coded, who is in charge of them, which KPIs should be monitored to ensure their correct functioning, and which should be the response in case they were not.

Physical evidence
Physical evidence encompasses all those tangible, and non-human, elements that interact with the customers during the (extended) sale process.
The layout of the store or the graphic of the website, the brand visual identity, the gadgets, and so on, all contribute to paint a picture (positive or negative) in the mind of the customer that influences their perception of the product.

Both the original Marketing Mix with 4Ps and the extended 7Ps models are more organizational centric, looking at all these variables as problems to solve for the organization.

Commerce however is a two way street, with a demand and an offer.
This is why parallel to the original Marketing Mix, with its Ps, similar models have been designed to look at the same maximization problem with more focus on the Cs, for customers.

The 7Cs Compass Model, expanded from the 4Cs model proposed by Koichi Shimizu in 1973 (4), shifts the paradigm towards a more systemic view of the problem.

  1. Corporation
    In this model the corporation is just one of the elements that need to be considered, and not as a lone entity but in respect with both its competitors and stakeholders.
  2. Commodity
    In this model the right product to be sold should only be the one that customers need.
  3. Cost
    Price should be thought of as the cost the customer will have to sustain to enjoy the product benefits. This means considering not only the simple price but as the sum of all acquisition and ownership costs.
  4. Channel
    The choice of place should reflect the “convenience to buy” perceived by the customers. This is even more true with the advent of the internet, that has made evaluating alternatives so much faster and transparent than it has ever been before.
  5. Communication
    Communication should be thought of as a collaboration between the company and the customer as to avoid sending a message that could be interpreted as manipulative.
  6. Customer
    Customers should not be seen only as their needs but also for their more personal characteristics, allowing for a more focused and detailed division into clusters.
  7. Circumstances
    Commerce doesn’t happen in a vacuum, and the environment in which it works (national, international, political, legislative, social, cultural, etc.) should be a main concern and benchmark on which to measure the Mix coherence and adequacy.

As commerce is a layered and multi sided business, I will, in my review and study of the Marketing Mix, follow the original 7Ps model but with an eye out for the corresponding Cs and how they impact the Mix.

Now that we have had a brief return to the basics, reviewing the components that make up the Marketing Mix, we will launch into a deep analysis of each of them, exploring best practices and tools that concretely help marketers everywhere shape their offer.

The next article in the series will be out in a month, and it will be all about The Product.

References

(1) Kotler, P., Marketing Management, (Millennium Edition), Prentice Hall, 2000
(2) Culliton, J. The Management of Marketing Costs, [Research Bulletin] Harvard University, 1948
(3)Digital Commerce 360, U.S. Commerce Dept.
(4) Shimizu, Koichi, “Advertising Theory and Strategies”

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Pricing Analyst

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Valentina Falcini

Valentina Falcini

Pricing Analyst

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