The product marketing mix, a set of activities and tools that marketers use to get you to buy a product, is a classic of Marketing. It is made up of Product, Place, Price, and Promotion – the so called 4 Ps.
Why is it important in our innovation story? Well, we want our innovations to sell (be adopted). And the marketing mix is fundamental to that sales process. Additionally, parts of our innovation tools and techniques informs the marketing mix.
However, the 4 Ps mix comes from the 1960’s product (goods) dominated world. So is it still valid for today’s services dominant economies, increasingly informed consumers, and, issues such as minimising waste through the circular economy? Read on to find out!
- The Marketing Mix: the set of activities/tools used to get you to buy the product
- In the classic 1960’s Product Marketing Mix there are: Product, Price, Place and Promotion
- note: the circular economy fits into place
- yet still 80% new products fail
- A useful re-interpretation of the 4 Ps is the 4 Cs. It:
- replaces the 4 Ps with: Customer Wants and Needs, Cost, Convenience, and, Communication
- addresses a criticisms that the 4 Ps is not customer focused
- Despite there being a lot of criticism of the 4Ps, it endures as a key framework
- and each criticiser develops a new set of Ps, or Cs, or Vs, to solve the issues they see
- In the 1980’s the need for a Services Marketing Mix was well established. We find:
- price needs to reflect a change to value-in-use thinking (from good’s value-in-exchange)
- 3 more Ps are added People, Physical Evidence, and Process
- Nowadays, with bots, AI, deep learning, and computer interfaces wide spread, people is no longer just humans. So we consider people as provider competences
- Physical evidence should be thought of as the servicescape
- and it can even be argued that Performance and/or Partners also needs adding
- Finally, the recent development of the 3 Es framework gives a powerful abstract perspective: we should Entice, Enable and Enrich our customers
We’ll start our journey with the classic 4 Ps of the product marketing mix. And then we look at some of the criticisms and proposed solutions. Out of that we explore the 7 (and 8) Ps of the service marketing mix. To finish we consider the new, related and relevant, framework of 3 Es used to build a brand consumers love: entice, enable and enhance.
This is quite a long article. TL;DR version is that we end up with a marketing mix for services as shown below.
Let’s explore how we get to this resulting services marketing mix by starting at the beginning – the 4 Ps of the product marketing mix.
The 4 Ps of the Product Marketing Mix
In the 60’s McCarthy’s wrote Basic Marketing: A Managerial Approach in which he introduced the product marketing mix. This mix is the set of activities and tools that a marketer uses in order to sell you a product. And it is a classic of Marketing, as well as being very useful to know and understand.
I show the mix – the 4 Ps: Product, Price, Place and Promotion – here in Figure 1. Now let’s take a look at each of these.
First in the mix we have what we are selling, i.e. the product. And in a marketers world the term product means both tangible and intangible things. We would commonly think of tangible things as things such as books, cars etc. Marketers call those goods. On the other hand, intangible things are services. Actually we find that any product will sit on a continuum between goods and services.
Products sit on the good-service continuum
Over on the far left of our continuum (see Figure 2) we have completely tangible goods, a house, for example. Whereas on the far right we have pure services, such as financial advice. In-between we find there are blended products/services.
Lets take eBooks as an example. Whilst you cannot physically hold an eBook, we still call it a goods. You are able to own and store them. In this case, it is a special type of goods, a digital goods. Of course, you probably downloaded these digital goods through a service. That service is not a pure service. Rather, it is service dealing with products. Quite where it sits on the continuum is going to depend how prominant the service part is. If the service just sells eBooks then it is likely to be towards the “tangible products with supporting servies”. However, if it is a subscription service allowing you to rent eBooks, then it is more to the “major service with supporting products” position.
Just as important is the fact that products must meet a user’s need.
Products must meet a user’s need
Its not uncommon for us to think of user’s needs as three types of need: existing, latent or incipent.
If the need is known and there is an existing solution then we would call the need existing. However, if we know the need but there is no existing solution, then we call it a latent need.
Our final category of needs is the incipient needs. These are those the customer doesn’t know they have (yet). They are dangerous needs. Since we can convince ourselves an incipient need exists when in reality the customer has no need. Or the value achieved meeting the incipient need is negligible. On the other hand, history is full of heroes who created industries by fulfilling incipient needs – Henry Ford, Steve Jobs etc.
These user needs can be met by features of the product.
Products are a set of features
Often we break a product down into a set of features. And those features come in the five categories you can see in Figure 3. The concept is from Kotler’s Principles of Marketing.
Kotler’s five categories of features are: core, generic, expected, augmented and potential. But you may have seen only 3 catogories before. Don’t worry. Kotler also created a simplified 3 level model – core, expected and augmented – by merging some of the five categories together. Let’s take a quick look at each of these original 5 categories.
Firstly there are the core features. These features define the basics of the product. For example, we say a core feature of a car is that it gets us from A to B.
Secondly, there are the minimum set of features you would find in the product, across all providers. Continuing with our car example, we would have features such as an engine, wheels, seats, steering wheel, etc. These are the generic features.
Next we come to the expected features. Features we would expect the car to have but are not generic across all products. Let’s take air conditioning in our car as an example. It doesn’t come with every car (yet) so it is not generic. But for certain models, or in certain markets you would expect it. You are unlikely to find a car without air conditioning in the US (it is nearly generic); compared to Europe (expected).
And time plays a part too. We find features move across categories as time goes by. Nowadays air conditioning is expected, almost becoming a generic feature. Yet years ago, it was a unique selling point. Which leads use to our next category.
Augmented and Potential Features
Augmented features bring out the Unique Selling Points (USPs) for this particular product, the differentiators from our competitors. It also covers the extras, such as subscription based serviceing/repairs.
Finally, potential features are those that we use to constantly enrich the customer going forwards. As an example it is not uncommon for Coca-Cola to have competitions for its consumers to excite them. These are potential features.
Next in the marketing mix is price.
Let’s now look at the second element of the marketing mix: price. It is this element of the mix that signals to the customer the value of the product. But, if we set the price too high we likely loose sales. Or if we set too low, we don’t maximise revenue.
When we look, we can find many different pricing strategies. And we also find many different ways of categorising them. I want to highlight one categorisation approach that I have found useful in the past. Here it is in Figure 4.
I don’t intend to go into Figure 4 in any more detail. Rather I will point you to the paper it came from if you wish to read more. The paper is Noble and Gruca’s “An Empirically-Validated Framework for Industrial Pricing“.
Price and Services
One point I do want to make about pricing is that it is traditionally built using something called product dominant logic (PDL). And by that I mean the whole way of thinking is a specific way. Most importantly, PDL includes the concept of value-in-exchange. That is to say that the whole thinking of products is i) the firm embeds value as it manufactures the good, ii) the customer destroys (or uses up) that value through use, and iii) the value is exchanged at purchase point from firm to customer.
In services, a new type of logic is required. And there are two key differences to PDL. First, services have a value-in-use (or sometimes value-in-context) concept. Your consumer only gains value when they use the service, until then, there is no value. Secondly, we see that value is often co-created in services. You have to work with your consumer to generate the value. The impact of these two points is to alter what the price means.
We’ll come back to this in a short while. But first, let’s look at the third element of the mix: place.
I am the world’s worst salesman, therefore I must make it easy for people to buyFrank Winfield Woolworth
Within the marketing mix, place, refers to where your product is bought, and, how it is gets to where it is bought.
How the product gets distributed to the consumer affects the control you have over the presentation. You get the most control when you sell direct to the consumer. However, as you can see in Figure 5, there are various other distribution models. Some arise just becuase that is how it is done in your chosen market.
The most easy to control approach is direct to consumer selling (of either product or service). After that we can see in product we can sell to a retailer, or to a wholesaler or to an agent. As we go lower, the control over the end experience we have gets less.
It is a similar case for services. Quite often we think these will be provider direct to consumer. And it is the case for a large number of services. However, there are sometimes agents involved, for example ticket agents for conserts.
And increasingly there are platforms – such as Amazon, Pinterest, Etsy, Fivvr etc – through which services can be sold. I distinguish platforms from agents.
You may have noticed the last row under products in Figure 5 is strange. The flow is reversed and consumers are sending things to the producer/provider.
As we seek to save the world’s limited resources there is an increase in the circular economy. The World Economic Forum report “Towards the Circular Economy – accelerating the scale up across global supply chains” is a very interesting read on this topic. And Figure 6 comes from there. Additionally, the WEF report gives examples of Ricoh, Philips, Vodafone, H&M, and Trina Solar user of the circular economy.
At the very basic instance we can think of recycling plastic bottles. Here in Sweden we do this all the time, returning plastic bottles and aluminum cans to get deposits returned.The marketing mix still applies for the circular economy. We must make the "place" of return for the consumer to producer flow easy to use. Otherwise the circle will not compete. Click To Tweet
For this to be successful we have to apply the same principles of place to the return experience. We need to turn Woolworth’s quote from the start of this section around. We “must make it easy for people to return”. And the place part of the marketing mix is vital in achieving that. This is exactly what the Swedish Pantamera organisation does by organising collection points at various locations and in various other organisations.
Lastly, we come to the promotion aspect of the marketing mix.
With promotion we are talking about all the activities that are involved in communicating with customers. We need to raise awareness, generate excitement, and differentiate our product. All in order to make a sale.Promotion in the marketing mix can learn a lot from innovation diffusion. The promotion that works for one adopter group does not work for the one to the right. And, we need to change message and channels from exclusivity to social… Click To Tweet
Relevance to innovation
I like to think of promotion as a similar challenge as innovation diffusion. There we segment the market into Rogers’ 5 adopter types. That is to say innovators, early adopters, early and late majority, and laggards. And there we find two key insights.
Firstly, we know that promotion activities used for one adopter type do not work for the adopter type to the right. Our promotion has to change.
Secondly, Maloney’s 16% rule tells us that the message and channels used need to change after 16% adoption is reached. Innovator and early adopters types need to see scarcity and are reached through exclusive PR. After that, we need to change to a message of social proof (look, everyone else is using it) and the use of mass media.
So that’s the 4 Ps. But, they do have some criticism.
An aside? Ditch the Ps, embrace the Cs
One of the most common criticisms of the 4 Ps is that it is internal focussed. That makes it at odds with the current theories of market orientation.
And a second common criticism is that the 4 Ps only looks at one-way interaction with the customer. Whether you want it or not communication today is a two-way street. For example customer reviews on platforms such as Amazon or TripAdvisor. Or customers actively commenting on social media – on your pages or elsewhere.
Perhaps more damming is that despite the 4 Ps, Lauterborn highlights that 80% of new product launches failed. Although he does not expand on if it is the 4 Ps that are failing, or if there is a failure to implement the 4 Ps properly. Either way, Lauterborn wants to counteract the above criticisms by replacing the 4Ps with the 4 Cs (“New marketing litany; four P’s passe; C-words take over“). And I show his mapping in Figure 7.
(Note: don’t confuse this with the 4Cs of marketing communication: clarity, credibility, consistency, and competitiveness (which you can find in Jobber and Fahy’s “Foundations of Marketing”)).
So what are these 4Cs and why not use the 4Ps?
1. Customer Wants & Needs, Not Products
As obvious as it sounds, there are numerous examples of companies generating products that don’t meet users needs.42% of startups failed because of a lack of market need, according to a 2018 CB Insights report. We need to make sure products meet user needs! Click To Tweet
Take, for example, Nokia. Nokia spent the last few years of it’s mobile phone incarnation producing more and more phone versions. But none captured the fact that the customer had moved on to having different expectations. Yet another example is the failed start-up Juicero. They produced a $400 device that squeezed pre-packaged sachets of fruit, provided as a service, to make you fruit juice. A product and service that was almost a parody! In fact, we see in a 2018 CB Insights report the top reason, at 42%, of start-up failure was a lack of market need for the product.
Although we have already seen how to describe a product in terms of features, Lauterborn feels we do not get the right message. Features are great, but what if the customer doesnt want or need them? To address that, Lauterborn proposes to rename product explicitly as customer wants and needs.
For services we should explicitly be thinking in terms of the job-to-be-done to help us focus on the value the customer gets. This also helps us transition from value-in-exchange thinking of goods (known as product dominant logic) to service logic of value-in-use (or sometimes value-in-context).
2. Cost, not Price
Price is not the only consideration that users take into account before making a purchase. It is just one component. For example, if I am already invested in an ecosystem of products, then, I am more likely to buy within that ecosystem. There is an extra cost for me to change. Or perhaps can see this as a reduced cost to remain. How can you as the provider/producer minimise that cost or show me it is worth it?
3. Convenience, not Place
The place of 4Ps relates to getting the product into the consumer’s hands. Convenience of the 4Cs focuses on the quality of that experience. How easy is it for your consumer to buy the product. This concept is in the place of the 4 Ps, but it is hidden.
Pulling out convenience better represents what today’s consumers are after. And goes back to that quote we had from Woolworth at the start of the section on price: “I am the world’s worst salesman, therefore I must make it easy for people to buy”.
4. Communication, not Promotion
The original 4P promotion leads us down the path of what can we do to tell the consumer our message. But our modern world is awash with better informed consumers, market orientation theories, and social media. One-way communication does not work.
Lauterborn changes the focus from promotion to communication. As a way of reinforcing you need a two-way communication with consumers. Through communicating we get feedback. And feedback can be used to alter our message.
So that’s the 4 Cs, and I prefer to use those than the original 4 Ps.
It actually turns out that there are many criticisms of the 4 Ps as we will now see.
Going further aside…
In “The Marketing Mix Revisited: Towards the 21st Century Marketing” Constantinides collects criticisms (and the proposed extensions) of the 4 Ps from a variety of perspectives.
He highlights, from a consumer marketing perspective, that the modern day consumer is different than back in the 1960s. They are more poweful and aware. He references several studies that show the 4P mix has a lack of customer orientation, has no customer activity or strategic elements. Various authors suggest adding more Ps, or several Cs (including Customer). One critique suggests 5 Vs instead.
Constantinides goes on to give similar reviews from the perspectives of Relationship-, Services-, Retail-, and Industrial-Marketing perspectives. Even the “emerging” field of Electronic Marketing (e-commerce as we would call it today) is covered. Always in the style you can see in Figure 8.
Despite these criticisms, we find the 4 Ps remains a cornerstone of marketing and business school teaching. I find this is quite reasonable given it is a simple framework that drives a lot of value despite not addressing everything in every perspective.
However, one enduring upgrade has been the addition of 3 more Ps to get a services marketing mix. And it is these 3 Ps we will look at next.
The 7 Ps of the Services Marketing Mix
In the 80’s Booms & Bitner (“Marketing Strategies and Organizational Structures for Service Firms“) proposed 3 more P’s were needed for a services marketing mix. These are: Process, People, and Physical Evidence. Leading us to update our marketing mix to that in Figure 9.
Whilst several authors have alternative solutions, as we can infer from Figure 8, it is Booms & Bitner’s extension that is the common referenced one. Lets dig into these three extra Ps.
Services are interactions between a provider and consumer (end customer) through which the job the consumer hires the service for is fulfilled. As such, consumers will be interacting with your (the provider) people. And I’m sure we all have personal experience of how bad and good customer service affects our experience and willingness to be a repeat customer. Therefore we already know how important people are to a service.People are vital in the services marketing mix, most visibly in the consumer interactions. However, in today's world, consumers might be interacting with a computer interface (including bots and artificial intelligence) and never… Click To Tweet
However, this people element was added in the 80s. Back then, people were people. Nowadays, however, you might never interact with a human during the service delivery (or parts of). Instead it could be a bot, or some artificial intelligence agent, or simply just a computer interface.
When you ordering an Uber, for example, you do not interact with any human. And, looking further ahead in time, even the second part of the Uber experience – the transportation – is likely to be free of humans.
So it is better that we consider people as the set of competences the provider brings to the service. In this particular case the customer facing competences. But don’t forget people refers to all the people involved in theservice. And that fits nicely into our model of what a service is.
With that said, let’s move on to the next extended P – the process.
Closely related to people is process. And we define process as the series of activities, and the order they are carried out, in order to fulfill the job of the service.Process, in the services marketing mix, aims to minimise inconsistency in service delivery (or put more positively: maximise customers experience). Click To Tweet
The simplest way to think of process is how a fast food restaurant works. It has a highly defined process for cooking and serving a burger. That process can be replicated anywhere. And can be used by people with a wide range of skills. The aim is to minimise differences in the characteristics of service. Services, by definition, are inconsistent. Having individuals in an organisation always follow a determined process minimises this inconsistency.
Technically we distinguish between skills/competences owned by individuals and processes. Actually, processes come from repeated use, socialising, and subsequently capturing (codifying, to use the literature’s term) skills beneficial to the survival of the service.
In addition to our simple burger example we can add many more. The tools that a top tier management consultancy bring to an assignment. IT consultancies ways of developing software. And so on.
Process can be a competitive advantage. And hopefully the combination of process and people gives a bigger return than the two parts on their own. But we also need to allow for process improvement without it being burdensome. And encourage and support process innovation.
Finally in our 7 Ps service marketing mix we have physical evidence.
Booms and Bitner describe the physical evidence aspect of the services marketing mix as “The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service“.
For example, we can see those 3 aspects of physical evidence in Figure 10. First the physical premises the service provider may user. Such as the bank office, the shop, or the hospital buildings. It also could mean the Uber vehicle or standard taxi. And in our modern world we include the website or mobile app used to interact and deliver the service.
Additionally, there are tangible components that facilitate the performance such as the in-flight food/drinks of an airline. Or the clean trucks of a food delivery service.
Finally there are the tangible components that communicate the service. Such as the insurance policy document, the airline ticket or uniforms worn by doctors, surgeons and nurses.
Relationship with innovation
All 3 of these also relate to innovation adoption. Observability is one of the factors affecting speed of adoption. And we know that we need to switch our marketing to one showing social proof after 16% of adopters have adopted. Without physical evidence it is hard to have this observability or social proof.
Bitner worked further on this and identified what she called servicescapes.
I could write a lot on servicescapes, but this article is already getting long! In short, a servicescape covers the aspects involved in physical evidence of the 7 Ps, when relating to customer interaction.
Here, in Figure 11, is the main diagram from her paper “Servicescapes: the impact of physical surroundings on customers and employees“. On the left are 3 dimensions: ambient conditions, space / functions, and signs, symbols & artefacts. These make up the perceived servicescape. Which through response moderators lead to the employee and consumer responses. Those responded are broken down as cognitive, emotional and physiological. On right we can see the behaviour resulting from everything to the left and the interactions between the employees and the consumers. Either the behaviour is to approach or avoid the service.
It’s a very interesting paper to read through. Though, it is, by nature of when it was written, missing the modern computer revolution.
The physical evidence aspect of the services marketing mix needs to be addressed for the e-services world. Harris & Goode looked at this in their paper “Online servicescapes, trust and purchase intentions“.
They found three dimensions are important: aesthetic appeal, layout & functionality as well as financial security. And that aesthetic appeal and layout and functionality of their e-servicescape mapped closely to ambient conditions and layout and functionality in Bitner’s original off-line servicescape.
We should note their study was focussed on e-commerce. But I believe most aspects are equally relevant for other services. Say you are a service dealing in knowledge – lawyers, management consultancies etc – then those first two dimensions are still valid as part of your web presence. And that presence you use to showcase your knowledge and experience. Additionally, you probably give away digital goods – in the form of brochures and case studies – or run a blog. Those are all activities in the promotion/communication part of the mix. But they also form part of this physical evidence attribute. You’d be wise to ensure they have aesthetic appeal and layout/functionality.
We’re mostly done, if not for Kotler who proposes adding an 8th P.
The 8th P of the Service Marketing Mix
In Marketing Management Kotler adds an 8th P – Performance. Bringing our marketing mix to that shown in Figure 13.
His performance refers to how well the company’s service competes in the market place. And how to measure the company’s financial goals and if they are being achieved.
Finally, the three Es
As a final comment I want to draw on the work of Park, MacInnis and Eisingerich. They looked in 2016 at brand admiration. In particular building a brand that people love. Their work contains a deceptively simple message. People admire brands that entice, enable and enrich them.
And whilst this article is about marketing mix rather than building an admired brand, I believe we can take those 3 Es and reuse. In all of our marketing maix activities/tools we want to be enticing, enabling and enriching the customer. Of course I’m hiding a lot of detail in this very short section. The book is a very interesting read, full of examples and tools.
So, we’re almost done with the marketing mix. All we need to do is wrap up.
We’ve seen that the marketing mix started off in the 60’s focussed purely on products. Which was perfectly valid at the time. As we’ve moved to more service based economies the product marketing mix needed to be updated. We saw that people, physical evidence and process were added to produce the 7 Ps service marketing mix. There is even the proposal to add an 8th P, that of performance.
Along the way we saw that the 4 Ps called be renamed as the 4 Cs to focus our minds on the customer and two way communication. Additionally we saw that in all of our marketing mix activities, we should be trying to enable, entice and enrich our customers.
So we can summarise our resulting services marketing mix as in Figure 15.