In most college courses that begin to address the principles of marketing, students are exposed to the concept of the five P’s that are utilized in constructing strategies. The idea of the P’s was created by a marketing professor by the name of Jerome McCarthy (no relation) and the concept originally had the following four elements:
- Product or production – is the product distinctive and in demand by the marketplace, and are the production processes capable of meeting demand or creating a competitive advantage
- Price – based on the product attributes, what are the pricing strategies that will allow the product to achieve its maximum profitability while remaining competitive
- Promotion – otherwise known as sales and marketing communications strategies
- Place – defining the distribution channels that will bring the product to market in the most cost-effective and efficient manner.
In latter iterations, a fifth P was added that represents People. This final P focuses on the manifestation of the brand through interactions with internal resources such as sales, customer service, technical support, etc.
Changes in the landscape
Much of the marketing activity that I observe seems to have overlooked these marketing fundamentals and has instead been significantly impacted by two relatively recent phenomena:
- The Great Recession
- The emergence of social media
The next several blog posts will address my perceptions of how these two distinctive elements have impacted marketing strategy.
It all starts with Product
When Dr. McCarthy (I must admit that I love writing that phrase) created his 4 P’s concept it was in response to a shift in the business environment from a production-oriented approach to one that was market-focused. In the former environment, a company would basically identify a product that it wanted to manufacture, make it, and then sell it to clients without much input from their audiences on whether or not they actually wanted the product. A purely market-focused approach seeks input from audiences to determine their needs and interests, which then results in products that are designed to meet those parameters. The reality of today’s business environment is that most companies find a middle ground that leverages their core production or service capabilities and seeks input from their clients to determine which variations of those products or services will be most appealing.
Hybrids are here
A recent example of the impact of the economy on product demand is the ebb and flow of the sales of hybrid vehicles. The most visible hybrid vehicle that was available several years ago was the Toyota Prius. Sales volumes were steady if not significant for the first few years, but when gas prices exceeded $4 per gallon, sales skyrocketed. The short-term response from the competition was to immediately tout the fuel efficiency of several of their traditional gas-fueled vehicles, which paled in comparison to the mileage achieved by the Prius. Ford quickly began promoting their emerging fleet of hybrid vehicles, but not all of those models were yet available. Meanwhile, Prius buyers waited months for the delivery of their vehicles because production couldn’t meet demand.
Then the global recession hit. Gas prices plummeted and it no longer was as costly to drive less fuel efficient vehicles. The sales of hybrids slowed, along with the overall sales of the auto industry, and have not yet rebounded.
Yet, Toyota (despite the recent problems) and Ford had the right products available at the right time. This didn’t happen by coincidence. At some point in time, Toyota and Ford identified the likelihood that gas prices were going to reach a threshold that would mandate a change in consumer behavior. They designed and manufactured products that met the anticipated change and brought them to the marketplace. The timing may have been a little early, but the share of market that was captured enabled those two companies to withstand the recession in better shape than most of the competition.
It’s also worth noting that Prius has over 50,000 fans on their Facebook page and Ford is considered the leader in the use of social media among domestic automakers. So, in addition to exploring new territory in product development, these two companies also embraced the global shift in communications.
And that’s the bottom line when it comes to the importance of the first P, product. It’s vital that companies peer over the horizon and anticipate the needs of their clients before the clients themselves recognize those needs. It’s a rare skill, but I believe that it can be cultivated if company leaders demand it. Instead, most companies talk about innovation, perhaps even devote a small amount of R&D budget to it, but are mostly focused on reacting to the short-term shifts in the marketplace.
If you know of other examples of unique products that have succeeded in relation to the shifts in the economy and social media, I’d love to hear from you.
In the meantime, I’ll be pondering the next P: Price
Mike McCarthy
