The Four Ps (Marketing Mix)

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Editor: Thomas Riggs
Date: 2015
Worldmark Global Business and Economy Issues
Publisher: Gale, a Cengage Company
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The Four Ps (Marketing Mix)


Marketing mix is perhaps the best-known and most enduring concept in the field of marketing. In a broad sense, a marketing mix is the set of controllable variables a company can use to satisfy its target market and achieve its business objectives. A marketing mix may include a wide variety of elements, and there are several different approaches to identifying and using the mix.

The most familiar version of a marketing mix, known as the Four Ps, encompasses product, pricing, promotion, and place. Each of the Four Ps can be viewed as a mix in itself, comprising a number of components. In many companies, a manager is in charge of defining the marketing mix for a particular product or product line. The mix will change over time as a product or line goes through the product life cycle (PLC), which includes the stages of introduction, growth, maturity, and decline. The mix may also be varied to address the specific needs of distinct market segments. In addition, the mix will be affected by a range of uncontrollable variables, such as consumer behavior, competitors' behavior, and market conditions.

The Four Ps version of the marketing mix was popularized in the 1960s and has remained a foundational element in the study and practice of marketing. It has been criticized, however, as oversimplified, limited, and inaccurate in its depiction of marketing tools and decision making, especially as the landscape of marketing has become more customer centered and relationship oriented. Many critics also consider the Four Ps to be an inadequate model for marketing services. As a result, an expanded marketing mix known as the Seven Ps has gained an established position. However, some alternative models abandon the Ps altogether, taking a range of different approaches. None of these has yet challenged the dominance of the Four Ps, but as the discipline of marketing confronts rapidly changing economic and social conditions, evolution of the marketing mix is likely to continue.

Historical Background

Marketing's Early History

It seems certain that even the earliest human traders made decisions about how best to profit from their efforts. These traders may have considered the following questions, each of which corresponds to one of the Four Ps: What can I make or grow that other people would want? (product); What kind of value would it have? (pricing); How can I let people know I have something they might want? (promotion); Where am I most likely to find people who want my goods? (place).

These early producers had relatively few choices, but they did have some, and they must have made decisions based on experience, observation, imagination, and intuition. In the sense that marketing is fundamentally a way to facilitate value exchanges, there has always been a mixture of options for carrying out various aspects of the process. Because the tangible signs of marketing, such as advertisements and promotional campaigns, can almost never last long, there are very few examples of early efforts. However, it is known that advertising posters and flyers were produced in many cultures as soon as the printing press was introduced in the 15th century and that medieval merchants used criers to attract customers to their market stalls. Advertisements began appearing in newspapers in the 1700s, and in 1874 journalist Henry Sampson published A History of Advertising from the Earliest Times. The study of marketing as an academic discipline began in about 1900, first in Germany and soon after in the United States.

In a 1960 article titled “The Marketing Revolution,” Robert J. Keith described three stages in the development of modern marketing: the production era (1870–1930), Page 112  |  Top of Articlethe sales era (1930–1950), and the marketing era (1950–). In the first of these periods, according to Keith, demand exceeded supply, so products were expected to sell themselves. Firms concentrated all of their attention on production. In the sales era, which began during the Great Depression (1929–1939), supply exceeded demand, so businesses had to become much more conscious of consumer needs and desires. In order to keep production facilities busy, firms shifted their focus to aggressive sales. After World War II (1939–1945), however, purchasing power returned, and businesses were faced with a new kind of consumer. This meant taking a broader approach to marketing, including distributing marketing concerns and functions throughout the organization.

The four Ps of the marketing mix are product, price, place, and promotion. Each area contains its own “mix” of variables that marketing managers can manipulate to increase awareness and sales. The four Ps of the marketing mix are product, price, place, and promotion. Each area contains its own “mix” of variables that marketing managers can manipulate to increase awareness and sales. Illustration by Lumina Datamatics Ltd. © 2015 Cengage Learning® Illustration by Lumina Datamatics Ltd. © 2015 Cengage Learning®

Defining the Marketing Mix

During the 1950s, as Keith's marketing era began, the importance of organizational structure, particularly the function of management, became a focus of interest not only among business theorists but also in companies of all sizes. As marketing took on increased prominence, it also began to be seen in managerial terms. This development led to a view of marketing that was structured around the marketing manager, an individual tasked with determining how a firm could improve its share of available sales. In keeping with the methodological orientation of the time, the marketing manager needed a defined sphere of activity and a clearly demarcated set of tools. That tool set became the marketing mix.

The idea of the marketing mix has its roots in The Management of Marketing Costs, a 1948 research bulletin written by Harvard Business School professor James W. Culliton. Culliton suggested that, with respect to marketing costs, a business executive could act as a “mixer of ingredients.” Like a chef, this executive could follow a recipe prepared by others, adapt that recipe, or create a unique recipe by experimenting with ingredients no one else had tried. Culliton's colorful description caught the attention of Harvard colleague Neil H. Borden, who began using the term marketing mix in his teaching and writing. In the 1964 article “The Concept of the Marketing Mix,” Borden gave an extended account of his ideas on the topic. The article outlined what Borden considered the 12 components of a marketing mix: product planning, pricing, branding, channels of distribution, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact-finding and analysis.

By the time Borden's article was published, however, E. Jerome McCarthy had introduced a streamlined version of Borden's mix in his popular 1960 textbook Basic Marketing. McCarthy consolidated Borden's 12 components into the mnemonic Four Ps. It is likely that neither man expected this set of general observations to be taken up so enthusiastically, but the result of their efforts quickly became a central tenet of marketing theory.

The Four Ps at the End of the 20th Century

As the 20th century progressed, many industrialized nations saw a decline in manufacturing employment as developing economies in Southeast Asia and Latin America gained the capacity to perform complex manufacturing tasks. The comparatively high labor costs and growing number of environmental restrictions in traditional manufacturing economies led businesses to seek less costly locations of production in developing economies, where wages and restrictions remained low. Thus, in the Page 113  |  Top of Article1980s and 1990s, offshoring (the process of opening a production facility in a foreign country) and outsourcing (the process of hiring a foreign or domestic third-party business to perform all or part of a production process) became increasingly common. When coupled with increases in productivity brought about by the rise of computers and automation technology, this trend led to sharp declines in manufacturing's share of overall employment figures in the United States and Western Europe. According to the U.S. Bureau of Labor Statistics, between 1973 and 2010 the United States saw its manufacturing sector decline from nearly 25 percent of the labor force to approximately 10 percent. During that same period in the United Kingdom, manufacturing fell from nearly 33 percent of all employment to just 10 percent. Canada, Australia, France, Germany, the Netherlands, and other Western nations saw similar declines.

This decrease in manufacturing employment coincided with a broad increase in the service sector, loosely defined as the segment of businesses that produce intangible goods. This may include the transportation and sale of finished goods, the provision of services in industries such as hospitality or banking, and so-called knowledge work in industries such as teaching or software development. As the nature of work continued to evolve, some theorists began to question whether the Four Ps, which were developed during the peak of the manufacturing era, remained relevant.

Some proposed doing away with the Four Ps model entirely, including Robert F. Lauterborn. In 1990 Lauterborn suggested an alternate model based on the Four Cs: consumer wants and needs, cost to satisfy, convenience to buy, and communication. Others, however, argued that the differences between the manufacturing and service sectors were minimal and that the Four Ps model remained useful. In 1981 Bernard Booms and Mary Jo Bitner addressed the peculiarities of marketing intangible goods by adding three new elements to the Four Ps model: participants (or people), physical evidence, and process. Nonetheless, the foundational concepts of the marketing mix—product, pricing, promotion, and place—remained influential among businesses and marketers into the 21st century.

Impacts and Issues

The Marketing Mix in Action

Product is, of course, the key element of the marketing mix, since there is no point in marketing without something to sell. Although Borden, McCarthy, and their contemporaries thought of products as goods—that is, objects that are tangible, manufactured, or processed—the Four Ps model is now often extended to encompass services as well as goods. Therefore, it is common to use the term product to refer to a good or a service. From another perspective, the product can be viewed as a collection of features and benefits that provide customer satisfaction. This definition can be applied to almost anything that can be exchanged for value. A product can even be a concept or a social movement in the case of a nonprofit or social enterprise.

A promotional advertisement for the 1957 science-fiction film Invasion of the Saucer-Men. Promotion is an important component of the marketing mix, allowing producers to convey information about the product that may influence a A promotional advertisement for the 1957 science-fiction film Invasion of the Saucer-Men. Promotion is an important component of the marketing mix, allowing producers to convey information about the product that may influence a customer's decision to buy. © Found Image Press/Corbis © Found Image Press/Corbis

Implementation of the marketing mix differs widely according to the type of product, the type of firm, and the requirements of specific markets. In large companies, there may be a single marketing manager, or decision making may be performed more broadly through the marketing department or through several different departments. In addition, or instead, there may be product managers who coordinate all aspects of development, production, and marketing for a particular product or product line. Firms may also employ consultants who specialize in particular aspects of marketing. Some companies may outsource the marketing function altogether.

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At least in part, the Four Ps version of marketing mix theory became dominant because it is easy to remember. Moreover, a four-quadrant model is familiar and has the appeal of symmetry. The BCG matrix, so called because it was created by Bruce Henderson of the Boston Consulting Group (BCG), enjoys these same advantages. First popularized in 1970, this tool is properly called the growth share matrix, and it was originally intended to assist very large corporations in assessing the bottom-line contributions of their various business units. The matrix's colorful presentation, however, caught on with a wider variety of companies.

The BCG matrix depicts a relationship between the growth of a market (vertical axis) and market share (horizontal axis). The matrix consists of the following four categories (quadrants), into which business units, product lines, or products may be divided:

  • Question marks, sometimes called problem children, are newly developed entities whose future contributions to the company are still unknown. These entities are located in a quadrant that enjoys high growth, but they have low market share.
  • Stars are those entities that occupy a high-growth quadrant and have high market share. The catch is that stars may still need significant investment to support their market position, and they may not be providing much return on that investment.
  • Cash cows are entities that have survived stardom and obtained a high market share in a low-growth quadrant (one that is less competitive). Cash cows provide significant returns, and they require little ongoing investment because they have a privileged place in their market sector. At some point, however, the market dominated by a cash cow will cease to be important, and the cash cow will no longer produce.
  • Dogs, also known as pets, are low shareholders in low-growth sectors. Unsuccessful question marks, aging cash cows, and even fallen stars may end up as dogs. This group contributes little to a company's overall revenue picture.

In some respects, the BCG matrix is a different kind of life cycle, one that focuses not on the product itself but on a broader view of market spaces. From a marketing perspective, the matrix can help determine how much money should be spent on marketing a particular product. A company may, for example, put significant resources into a question mark, hoping it will become a star, and withdraw funding from a dog that seems to have outlived (or never achieved) its usefulness.

When it was first introduced, BCG's growth share matrix was intended to help companies maximize their investments in particular products and, more importantly, achieve a balanced product portfolio. Since then, however, the business landscape has changed significantly. In 2014 BCG revisited the matrix and considered whether it was still relevant. After a robust analysis, the company offered several recommendations to adapt the matrix to the “increasingly unpredictable business environment” of the 21st century. These recommendations include faster implementation, new measures of competitiveness, and a structure that is more deeply embedded into organizational behavior.

Marketing strategy can begin at conception of the product, taking an active role in designing the product itself. Using market research and a comprehensive understanding of the firm's strategic goals, competencies, and competitive challenges, the marketing manager can provide invaluable input during the initial stages of product development. In many companies, however, product-related functions are more compartmentalized, and marketing comes into play only when a product is complete and ready to launch. Small businesses and start-ups often prioritize marketing and may use an opportunity-based or budget-driven approach rather than a formal marketing mix. Regardless of size, all firms are concerned with the cost-benefit ratio of marketing efforts. Because it is easy to overspend on marketing, especially if there is a great deal of advertising and paid media involved, the marketing manager or marketing group usually needs to justify its strategy through a return on investment analysis.

The Four Ps and the Product Life Cycle (PLC)

After the design of the product is complete, marketing strategy focuses on defining the right mix for introduction of the product. The primary goal in this phase of the PLC is to create awareness of the product and encourage consumers to give it a try. Although development and production costs will always figure into the pricing of a product, the marketing manager may influence pricing further to ensure that it fits the expectations of the target market and properly relates to the price points of directly or indirectly competing products. Special introductory pricing may be used to encourage consumer trials. In preparing for product introduction, promotional strategy often focuses on working with the distribution chain to provide education about the new product. The phase prior to introduction may also include preliminary advertising and outreach (through social media or direct mail) to key segments of the target market. Distribution outlets may be limited during the product introduction in order to focus marketing resources and monitor the rollout closely.

Branding is among the most important elements in the marketing mix. If the new product is being added to an established brand, the goal will be to link it to the brand's overall value proposition—that is, emphasize the benefits the new product shares with products that are already known to the consumer. If the new product is Page 115  |  Top of Articlea stand-alone product or the beginning of a new product line, the challenge enlarges to encompass the tasks of identifying and communicating unique brand characteristics, creating brand awareness, and attracting brand loyalty. Branding can involve every aspect of the product personality, including design, packaging, iconography, value creation, and channel promotion.

Lei Jun, CEO of Chinese smartphone manufacturer Xiaomi Technology, at the launch of the MI-TWO smartphone on August 16, 2012. With features similar to the Apple iPhone but at approximately half the price, the MI-TWO is marketed as an iPhone Lei Jun, CEO of Chinese smartphone manufacturer Xiaomi Technology, at the launch of the MI-TWO smartphone on August 16, 2012. With features similar to the Apple iPhone but at approximately half the price, the MI-TWO is marketed as an iPhone alternative to value-minded customers. © Imaginechina/Corbis © Imaginechina/Corbis

Once the product has been introduced, the marketing mix must be adjusted to support the growth phase of the PLC. In this period, the aim is usually to increase market share and to apply any lessons learned during the product introduction. New features may be added to the product, prices may be adjusted to improve market penetration, and the number of distribution outlets may be increased. If warranted, advertising and other promotional efforts may be expanded beyond the original target market. The marketing mix may also need to be adjusted in order to counter any competitors' responses to the new product.

When the product has reached its maturity phase, the marketing mix focuses on maintaining market share and increasing the profitability of the product. Although often viewed as a maintenance phase, maturity offers a number of marketing opportunities, such as adding product versions for specific market segments, testing new audiences for the product, strengthening the brand identity, and expanding visibility through cross marketing, product placement, and other creative strategies. If the product has become closely associated with particular promotional strategies (for example, an emblematic character or a series of interconnected advertisements), it may be time to freshen the presentation elements.

Finally, most products enter a phase of decline, either because they are no longer relevant to the market or because they have been replaced by another product or product type. At this point, the marketing mix focuses on bringing the product to a soft landing. This is accomplished by minimizing marketing expenditures, phasing out distribution channels, lowering prices in order to reduce stock, and determining how to best deal with excess stock. When phasing out a product, it is important not to damage associated products or the overall brand. Marketing managers must also be careful not to alienate loyal customers during this final phase of the PLC.

A Closer Look

Product The product portion of the Four Ps model deals not only with the product itself (how the product is designed and made and how it fits into its intended market) but also with consumers' perception of the product. This is where branding and packaging become very important. Not all products have a unique brand association. Some are just generic items that compete mainly on price, while others are privately labeled by the outlets that carry them. For many products, however, one aim of the marketing strategy is to create and promote a unique value proposition that will inspire brand loyalty in customers. Packaging, which encompasses the total presentation of the product as consumers will see it at Page 116  |  Top of Articlethe point of sale, is one of the most important ways to convey the product message. Shape, color, iconography, labeling, promotional text, and informational text (regarding warranties, service, and so on) all contribute to the overall effect.

The manufacturer of this tin of expensive Russian caviar uses a variety of strategies to signify the value of the product to consumers, including attractive gold packaging (product), premium pricing (price), selective advertising (promotion), and The manufacturer of this tin of expensive Russian caviar uses a variety of strategies to signify the value of the product to consumers, including attractive gold packaging (product), premium pricing (price), selective advertising (promotion), and limited availability (place). © Godong/Robert Harding World Imagery/Corbis © Godong/Robert Harding World Imagery/Corbis

Pricing Pricing is one of the most complex elements of the marketing mix, especially because pricing strategy must take into consideration both the performance of the product in the marketplace and its profitability for the company. From the marketing perspective, pricing strategies can be roughly divided into three categories. One category sets prices relative to the costs associated with producing the product and getting it to market. For example, a price may be set by adding a set markup percentage to the total production and post-production costs associated with the product. Another category sets prices in relation to market circumstances and the stages of the PLC. This would include penetration pricing (a low introductory price designed to gain market share), skimming or creaming (a high introductory price that sacrifices volume in order to cover the company's investment in the product), and loss leaders (pricing below cost of production in order to attract associated sales or future sales). The third category includes persuasive pricing strategies, such as premium pricing (maintaining an above-market price to suggest high quality or exclusivity) and psychological pricing (setting the price at a point just below consumer expectations).

Pricing strategies considered inappropriate by most companies include predatory pricing, which is designed to drive competitors out of the marketplace, and discriminatory pricing, which involves setting different prices for different market segments.

Promotion Promotion can include almost anything that advances awareness of the product. Promotional activities are typically divided into two categories: above the line (ATL) and below the line (BTL). These categories take their names from traditional corporate accounting ledgers, which use a line to differentiate between expenditures (such as television ads) that include a commission for the advertising agency that booked the media buy and expenditures that do not include such a commission. Although the system no longer operates in the same way, expensive mass-media promotions are still characterized as ATL, while relatively inexpensive or free promotional activities are referred to as BTL. The promotional mix determines the proportionality of ATL and BTL activities. The total mix may include paid advertising in television, radio, newspapers, and so on; public relations and publicity; personal selling; sales promotions; direct marketing; sponsorship of events or causes; endorsements by celebrities or organizations; and product placement in movies or television shows. In the early 21st century the promotional mix also includes social-media marketing, personalized marketing, and guerrilla marketing (unconventional strategies for attracting attention to a product).

Place Place is perhaps the most underrated element of the marketing mix. It is usually identified with the choice of distribution channels. For example, a company may need to decide whether to sell a product in specialty stores and boutiques or in retail chains. There are also decisions to be made about where in a store the product should be displayed, whether the product should be sold online and, if so, whether directly or indirectly, through one or more vendors. These are important considerations, since a product will not do well if it is placed in a selling environment that its target consumer does not frequent. Moreover, the right choice or mix of distribution channels can help to first penetrate the target market and then expand the product's market share. Successful choices depend on a thorough understanding of the product, its potential market, the channels used by competitors, and the relative effectiveness of different channels. In addition to the decision of where a product will be available to consumers, the place aspect of the marketing mix may also deal with the selection of wholesalers and other intermediaries in the sales chain, as well as with delivering a purchase to the consumer.

Future Implications

In the early 21st century traditional approaches to the marketing mix—not only the Four Ps but also the more recently developed Seven Ps—have become increasingly inadequate. Gaps continue to open between the original applicability of these models and their usefulness in contemporary business. These gaps include the shifting focus from product to consumer, the growth of Page 117  |  Top of Articlerelationship-based marketing, the rising importance of online shopping, the growing emphasis on social-media marketing, and the use of micro-segmentation and personalized marketing. Underlying all these factors is the accelerating pace of change. Many modern-day products run through their life cycles much more rapidly than did those of the 20th century, and as a result the marketing mix must be adjusted more frequently and cover many more categories of promotion and distribution. While these developments do not invalidate the conventional Four Ps model, they have a significant impact on its use by marketing managers and groups.

Attempts to alter or augment familiar approaches to the marketing mix have concentrated primarily on adding more factors. In the future, however, many companies may find it necessary to abandon the mixing model altogether and search for an approach that arises more organically from the product-consumer relationship. For one thing, marketing managers and their departments will have to become increasingly nimble in order to respond rapidly to newly emerging promotion and distribution channels. Additionally, the importance of first-mover advantage (the benefit gained by the first company to enter a new market segment) in technology and lifestyle markets will continue to increase, and marketers will have to position or reposition their products very quickly in response to new trends. These are just some of the challenges that will drive marketing strategists toward more flexible and self-adjusting approaches.



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Source Citation   

Gale Document Number: GALE|CX3627200027