8.7. Product, Price, Promotion, Place: The Four p's of Marketing

Were you a cloth baby or a paper baby? Before the 1970s, nearly all babies used cloth diapers. In the 1960s, however, Procter & Gamble decided to try producing and selling paper diapers.

As a first step, the company conducted surveys to determine if parents liked the idea of disposable dia­pers. They did. The next step was to find a way to manufacture a paper diaper that could profitably be sold at a price consumers would be willing to pay.

You can guess the end of this tale. P&G developed a disposable paper diaper. Pampers™ and competing brands were so successful that most parents today prefer them to cloth diapers.

Disposable diapers successfully applied the total marketing concept. This concept involves four steps-the fourP's of marketing: product, price, pro­motion and place.

Product. The place to begin is with the product itself. To successfully differentiate its products, a business must determine exactly what potential customers want. Companies use market research to find out what's on consumers' minds. They might use surveys by phone or mail or conduct personal inter­views. The product warranty card you return after a purchase provides marketing information too.

You might wonder how asking a few people about their preferences indicates what others want as well, but sophisticated statistical analysis, when applied to a sample of consumers, can indeed describe other consumers. If we can find out what a few want, we can assume that the others in the group or population will want similar things. Deciding who should be in the sample is the prob­lem. Researchers have detailed strategies for con­structing market samples.

The questions asked by researchers will depend on their purpose. For example, a company might want to find out what products consumers will want in five or 10 years.

Price. Another major part of marketing is price. Companies have to decide on a product price that will cover all costs and return a profit. Included in costs are such fixed expenses as rent and insurance. Variable expenses must be anticipated too. These costs are used to compute a break-even point-the point at which income from sales equals fixed and variable expenses. On one side of this point, the company will have a loss; on the other side, a profit. Factors other than cost also affect price. When a company has competition, its product must be priced near competing products. If the item is priced at $7 when competing products are priced at $5 or less, will consumers buy the product? Probably not. Companies must be careful not to overprice their products. If competitors' prices are less, either they have special information allowing them to produce and market for less, or they are more efficient.

Promotion. After product and price, companies must consider promotion. Promotion is a key part of marketing and product differentiation. It is the way businesses get their messages to consumers.

Earlier you read that businesses would prefer to have a steady demand for their products. Promotion can ensure steady growth rather than sudden surges in business. Advertising, direct mailings, and per­sonal contact are a few of the ways producers pro­mote their products to consumers. If consumers don't know about a product, they won't buy it.

Some critics of American advertising say that money used to inform and promote sales is wasted. But advertisers say that through market research, busi­nesses discover what American consumers want. Through advertising, businesses tell people what products are available. Advertising even gives them reasons to buy.

Place. The final marketing step, the fourth "P," is place. For a product to be useful, it has to be in place when and where it is needed. That should seem obvious. To sell products, businesses must anticipate "when" and "where" consumers will buy them. A poor loca­tion has caused the failure of many businesses. A hot dog at a baseball game on a sunny afternoon is an example of excellent product placement. A sidewalk lemonade stand in the winter is not.

The success of companies operating in oligopolistic and in monopolistic competitive markets often depends on their marketing skills. But in a market with only one seller-a monopoly-these skills are less important.