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The Demise of the 4 Ps Has Been Greatly Exaggerated
by Paul A. Barsch
June 7, 2005
A recent book by a popular CRM expert declared the era of the 4 Ps effectively over.
The author argues that product, promotion, price and place are no longer key to
providing sustainable differentiation.
In addition, he says, the use of this marketing mix merely keeps the enterprise at par
with the competition.
And while the author makes many compelling points, the key question remains: has the
oligarchy been dethroned and is the reign of the 4 Ps over?
Simply stated, No; or, to paraphrase Mark Twain, rumors of their demise have been
greatly exaggerated!
The global economy has changed the game for all players. Competition has emerged
from low-cost-labor Asia/Pacific countries and contract manufacturers. Outsourcing has
spanned the globe-from Ireland to Russia to India. Powerful global brands like
Samsung, Nokia and Lenovo are emerging and taking dominant form.
Consumers, once satisfied to take whatever products and services the market
produced, are now more savvy, information-driven and have more choices than ever.
Many companies and industries under threat from these forces yearn for simpler times.
Yet some companies are not only surviving in global economy, they're thriving. Some
are regional players and others span worldwide empires.
A common denominator for these companies is that they leverage the power of the
marketing mix (4 Ps) to achieve new heights, capture new markets and grow revenues
at astronomical rates.
Some are mastering one aspect of the marketing mix, some are attempting to
be dominant in all of them. But one thing is certain-differentiation can still be
squeezed from the 4 Ps.
Product
While the global economy has made rapid time-to-market an imperative, especially
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since low-cost producers are quick to copy good ideas, there's still competitive
advantages to be found in innovative products. The consumer is looking for products
that capture the imagination, or sometimes just plain work better than alternatives.
One of the last bastions of differentiation might be product design.
Todd Moses, founder of the Paper Pro stapler, would probably agree.
In a recent Business 2.0 story, Moses was looking for a better stapler-one that could
staple through 19 pages without jamming. Seeing nothing on the market that could fit
his needs, Moses designed a stapler with a compact recoil spring that could staple 20
pages with seven pounds of force. (Typical staplers took 30 pounds.)
Now that over one million Paper Pro staplers have been sold, it's clear that the
innovative product wins in the marketplace.
In another example, Apple computer has emerged from a has-been to one of the
hottest product companies in the past 10 years. One need look no further than the iPod
for a dominant product.
According to NPD Group, the iPod has 92.7% market share in the MP3 player market.
Incredibly, the closest competitor struggles with a mere 3% of the market.
With a simple-to-use operating system that is truly intuitive, and small ear-bud
headphones that could be considered the best on the market, the iPod is far and away
not only the market leader but also the market favorite.
Apple doesn't win because it has a product that no one can copy. Indeed, Dell's DJ,
Creative's RIO and other MP3 players are arguably very similar in features. Industry
watchers also see a challenge to the iPod's dominance with cellular phones that play
MP3 files.
While competitive devices swarm into the marketplace, Apple will keep winning in the
marketplace because the iPod captures our imagination. It brings the universality of
music into a compact device that's so easy to use-the owner's manual can be thrown
in the trash. This year alone, according to the Apple Insider, Apple is challenging its
retailers to move over 100,000 iPods a week!
Two simple examples, the Paper Pro Stapler and the red-hot iPod, prove that Product
can still win in the marketplace.
Promotion
Love him or hate him, there's probably no one on the planet better at promotion than
Donald Trump. Whether it's blatant and shameless self-promotion, or promotion for his
hotels, casinos or golf courses, Trump has mastered the art of public relations,
branding and personal selling.
If you ever visit New York City, you can't get away from Trump. As you tour the city
you'll run into Trump Tower, Trump Park Avenue and Trump World Tower, just to name
a few.
Every Trump property has his name prominently displayed-branded, if you will-on the
front of every building. Taxi cabs across NYC show the face of Trump and his NBC
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television show, "The Apprentice."
Even if you don't tour NYC, Trump's empire is ubiquitous. There's now Trump Ice
bottled water, Trump tailored suits and five books on how to think like Trump and
become a billionaire. And it's impossible to forget: two words that have been etched
into our collective psyche from "The Apprentice"-"You're fired."
Trump critics keep wondering when the populace will tire of his endless self-promotion.
Perhaps in the near future the Trump brand will reach the point of saturation, but it's
not there yet. Anything with the Trump name sells. In Florida, the Trump Tower Tampa
condominium highrise had 70% of its units sold a month before the sales office even
opened. And Trump golf courses on the East Coast still command $300,000
membership fees and annual dues of $15,000.
Trump succeeds in the art of promotion for a few reasons. The first reason is the sheer
force and personality of Donald Trump. He is absolutely shameless in his self-
promotion. Everything is "the biggest", or "(h)uge"-with a New York emphasis on the
"u."
Is every Trump property the biggest or the best? Certainly not-look no further than his
struggling three casinos.
Yet Trump, during every press conference, every interview and every taping of "The
Apprentice" keeps reminding us that he works with "only the best" and that "quality"
and the name "Trump" are synonymous. Reminded enough times, pretty soon we begin
to believe it.
The second reason that Trump is a master of promotion is that he realizes every
moment and every interaction is an opportunity for promotion. During job interviews,
Trump reminds candidates that they would be working for the best company in the
world. During meetings with vendors he reminds them that to work with Donald Trump
means instant cachet. Customers pay a premium to acquire a Trump condominium or
golf membership. Employees, vendors and customers all want to work with Trump.
Even if it's widely held that Trump is a little bit over the top with his promotional
abilities, it doesn't matter. He's a billionaire. Businesses small and large can learn from
him.
Price
Pricing decisions are rarely easy, and in fact are most often complex. In the airline
industry, for example, dynamic pricing software changes prices based on seat
availability and flight demand. Hotel chains often adjust their pricing in real time based
on levels of occupancy. And in consumer industries, retailers often hope for an across-
the-board margin, say 20% across the store-but competitive forces often adjust
pricing by the aisle and item.
One company, Planalytics, even helps retailers like The Home Depot and J.C. Penney
manage risk and forecast demand for their products based on weather patterns. The
more data (past sales, seasonality, weather patterns, etc.) made available to pricing
decision makers, the more pricing can be adjusted in near real time to maximize
revenues.
Pricing can take on a new dimension when seeking new market opportunities. Let's turn
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again to Apple Computer: Marketing professionals at Apple saw that the price point of
$299 for an iPod, or $249 for the iPod mini, was reasonable for most consumers.
Market research, however, showed that a whole new segment of buyers would jump on
board at $99 for an Apple MP3 player. Hence, the Apple iPod Shuffle was born.
Small, sleek and hip, the Shuffle is a flash player that gives users the ability to hear
music files in order of download or in a random format. Walt Mossberg of the Wall
Street Journal notesthat the Shuffle is "a good product that will enlarge the iPod's
appeal, especially with kids, people on low budgets, or people who work out. I imagine
some existing iPod owners will also buy Shuffles as sort of add-on players. And the iPod
juggernaut will roll on."
In the marketing mix, "price" does not necessarily mean "cheapest." There are plenty
of enterprises across the globe selling products and services at premium prices. One of
the most outrageous examples is Juicy Couture jeans. A recent BusinessWeek article
titled "To Live and Thrive in LA" pointed out that the founders of Juicy Couture are
getting $178 for a ripped pair of jeans and $395 for a hooded sweatshirt lined with
rabbit fur.
In this age of commoditization and cost reduction, companies are feverishly trying to
figure out how to lower their costs and in many instances are turning to the outsourcing
of labor, production and even design. And while those might be good strategies to stay
competitive on cost, pricing strategies should not be overlooked.
Companies should be asking their customers more than just "at what price will you buy
my product/service?" Instead, the better question is "what product/service would you
want to buy from me-and at what price?"
Place
While many enterprises have long looked at product, pricing and promotion as ways to
expand revenues, one of the strongest strategies in the marketing mix is place. There
are many companies that have mastered the art of distribution, although few of them
have achieved competitive advantage.
Dell Computer, with its direct to consumer model and high-powered Internet sales
strategy, is commonly cited as one of the best examples of dominating a channel.
Another company bent on expanding its brand, ubiquity and availability is Starbucks.
A recent Wall Street Journal article titled "Cautiously, Starbucks Puts Lobbying on
Corporate Menu" says that Starbucks "boasts 9,100 stores, up from 676 a decade ago.
and opens an average of four stores and hires 200 employees each day."
There's a Starbucks in just about every city, often two or three. And many grocery
stores are either selling Starbucks coffee by the bag or have a coffee kiosk at the front
entrance.
Not stopping at coffee, Starbucks has entered the music business, offering private-label
CDs in its stores. And aiming to get its product in the hands of as many consumers as
possible, Starbucks also recently struck a deal with Jim Beam to market coffee liqueur.
Starbucks is after nothing short of market and channel dominance. All told, according
the article, Starbucks plans to open a total of 30,000 coffee houses, from the 6,500
today.
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Smaller companies are also learning how to squeeze competitive advantage out of
"place." A Business 2.0 article estimates that Curves, a gym for women only, has
surpassed 8,000 locations through the power of franchising. McDonald's took nearly 25
years to open 6,000 outlets, so 8,000 Curves properties in 10 years is phenomenal.
Curves, like Starbucks, has found that market dominance can be found through
expanding (profitably) faster than the competition.
In the marketing mix, "place" is much broader than simply mastering channel sales. It's
also optimizing the supply chain. An effective supply chain can be the difference
between a barely profitable company and one that dominates. Getting the right product
to the right place at the right time (and at the right price) ultimately increases
customer satisfaction and prevents money from being left on the table.
Placement is still a winning strategy. Going forward, those companies who have
mastered distribution channels and can supply those channels with a high performance
supply chain will enjoy the upper hand in the battle with competitors.
Mastery of the 4 Ps
Some of the enterprises profiled in this article have mastered one of the 4 Ps; others,
such as Apple, are enjoying advantage in two or more aspects of the marketing mix.
Success does not come easily, however. The strategy, while plain and simple, is difficult
to execute. The winning strategy, and mastery of the 4 Ps, requires for an enterprise to
know the customer.
Curves, Starbucks, Apple and even Donald Trump know their customer. Customers
need and want the self-esteem that Curves gives them, the exclusivity of the Trump
brand, the quality of a cup of Starbucks and the innovation that Apple delivers.
Products and services must tug on our heartstrings, cater to our emotions, fulfill our
desires.
Connecting to customers needs to be more than lip service. It needs to be more than
an investment in CRM software. Customer connectedness is a pervasive attitude across
the enterprise that is genuine, real and consistent.
It's not enough to have the lowest price, the most outlets, the fanciest product or the
best promotional strategies. Mastery of the 4 Ps requires deep customer intimacy.
Mastery involves asking which of the 4 Ps is most important to the customer and then
assessing what can be delivered-profitably. For Starbucks customers, low prices are
not the issue. After all, a latte can cost $3 or more.
Customers care about quick service, convenient locations and a quality product.
Recently, when Starbucks raised prices 10 cents across the board, coffee drinkers didn't
blink and sales are stronger than ever.
The 4 Ps aren't dead-not even close. Differentiation can still be squeezed from the
marketing mix. To win in the marketplace, an intense and intimate knowledge of the
customer is required in a way that no competitor can match. That understanding must
then be applied in a relentless focus on the elements identified by the customer as
most important.
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Talk to customers, engage customers, live and breathe them. Then use the marketing
mix to satisfy them. The seldom-used path of competitive advantage beckons. Walk it.


Paul Barsch is a marketing director for EDS, the worlds second-largest IT services
company. He can be reached at paul.barsch@eds.com.

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