Co.Design

Why Do B-Schools Still Teach The Famed 4P's Of Marketing, When Three Are Dead?

The digital revolution has rewritten the laws of marketing. So why do B-schools insist on teaching outmoded notions of price, place, and promotion?

In 1960, Jerome McCarthy got a bright and amazingly resilient idea. All the components of a marketing strategy could be reduced to just Four P’s (Product, Price, Place, and Promotion), the 32-year-old marketing professor claimed.

And he was right, at least at the time. Those Four P’s have since become a tremendously influential guide in marketing programs. Although the world of marketing has changed significantly since the '60s, all MBA students, marketers, and strategy consultants are still expected to know and apply the Four P’s as if they were laws of nature. Some would argue that the digital revolution has yet to radically change the teachings of the Four P’s.

But a closer look at some of today’s fastest-growing brands shows that time has buried the Four P’s. Companies can no longer use them to gain a competitive advantage and meaningful differentiation. In fact, they more and more look like the roadmap to failure.


The Three Dead P’s

Let’s look at promotion. In recent years, we have seen the explosive growth of companies that don’t do any advertising at all. Zara, one of the largest and fastest-growing fashion brands, never advertises. Facebook didn’t grow to 800 million users through any type of promotion. And although the company thrives off advertising, Google only recently started to advertise.

In the Plex, a new book about the rise of Google, Steven Levy tells the story of how Google’s first VP of marketing Scott Epstein suggested an elaborate marketing plan based on the Four P’s. Google founders Sergey Brin and Larry Page rejected his plan outright, and Epstein left the company shortly thereafter. "It really came down to this," a Google employee told Levy, "do we want to put money into the technology, into the infrastructure, into hiring really great people? Or do we want to blow it on a marketing campaign we can’t measure?"

Google didn’t need marketing; the search engine was so good that it spoke for itself. Few companies are lucky to have such a powerful product, but the essential rationale is the same for everyone: A penny spent on campaigns is a penny less spent on creating user value. In a transparent, digitally empowered world, only the best offerings survive, so companies that spend on promotions have a cost disadvantage.

Importantly, the decline of promotion does not mean that brands don’t matter; it just means that their value hinges less on costly marketing campaigns.

The other P’s are just as dispensable. Place is obviously becoming less and less important as more commerce moves online. And price is also less of a potential strategic marketing advantage. With price, comparison sites like Tripadvisor.com, Pricegrabber.com, and Bizrate.com, many companies are forced to let raw market forces determine the price of their products.

Only Product Matters

So what is today’s marketer left with as a way to build a strategic advantage? The product. The only real way for a company to build a growing brand is to design products and services that are so good that they become marketing vehicles in and of themselves. Or put in broader economic terms: The golden rule for today’s hyper competitive and information-rich markets is this:

The only way you can increase the value of your brand is by increasing the value of your offering.

That value isn’t defined solely by greater usability, though that’s a part of it; value is to a greater and greater degree determined by the emotional connection a user has to a product. Great design creates emotional value. Bold social actions by a company and great, or even free, services do the same. But in the post-advertising world, there is no simple formula for creating emotional value—apart from producing an outstanding product.

This One-P marketing rule will have profound ramifications for how companies organize their marketing, split their marketing budget, and integrate product development, design, and brand building—not to mention for the $450-billion-plus/year marketing industry. But at least one "P" will be easier to learn than four.
***

Written by Jens Martin Skibsted and Rasmus Bech Hansen.


Rasmus Bech Hansen
is London-based strategy director at Venturethree, a global brand consultancy. He writes on how brands can do well by doing good and has helped to re-launch the United Nations Global Compact brand, the world’s most successful CSR initiative.


[Image: Graveyard via Shutterstock]

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153 Comments

  • Dimitri Shukuroglou

    Basically any model is only instrumental if it applies to variables you control in order to create value. Even if only 1 person on this planet uses this model to define his/her strategic variables, a positive effect on sales volume, then its still valid, true and relevant.You can call it the 4Cs or whatever you want but the objective of function is always the same, just the objects and relationships examined change.

  • Dimitri Shukuroglou

    I think the writer uses a very small sample of online businesses and in particular, what I would call information factories in order to base his/her argument. The reality is that the vast majority of business doesn't fit this description.

    The 4Ps was created to market physical products, and as such is still highly relevant. For example, when in the food manufacturing business, place, or direct sales/marketing and your distribution network can probably explain a huge amount of variability in your sales volume. 

    Infact, if you have 0 places, because you don't invest in communicating/promoting (direct marketing to retailers) and delivering value (distribution to retailers), all the promotion and greatest products in the world will have 0 effect on sales volume.

    If you have places, then thats where you can start to play with price, products and promotions to achieve your profit/volume/cost objectives. At least this is my experience.

    In online "information factories" like google you don't have a price, thus this creates no limiting effect on user volume. Place is the device, and if you are just targeting online savvy users, this creates no limiting effect on user volume. Product is your app / ecommerce solution, this effect acts on user volume. The internet is your distribution network and thus has no effect on your user volume. Promotion uses online social networks of people and "influencers" for the communication of value, this can have an effect on user volume.

    Rapid innovation cycles mean that product developers spend less time gaming each-other over market power, and just focus on building a product that serves its user well. Really the only constraint in google's case is the potential value it can create from user data vs. the cost of developing/capturing this value.

  • Edgardiazemes

    I believe this is a very narrow vision of the 4 p's. However it's not entirely off-base i'd say a better approach would have been to say that te 4 p's have evolved and the focus of some of them has changed with technology.

  • C Mercado

    From
    reading the article and the comments, some believe three of the four P's are
    dead because of the creation of the internet and word of mouth. I know that the
    4 P's are not dead because the chef that I intern for used the 4 P's to get his
    catering company off the ground and explained how the 4 P's work.

     

  • Gerardo

    Clearly, the author didn't take a single marketing course, or even bother to glance at a marketing book (or even its Cliff's notes) prior to writing this article. I'm frankly baffled at how someone can get a "strategy director" position at a seemingly reputable brand consultancy company without any knowledge of strategic marketing.

    I agree with many of the comments posted as to how much of a blunder this is for the companies associated with this article. Hardly strategic. Thinking that this was some sort of provocative ploy is simply giving them way too much credit.The highest form of ignorance is when you reject something you don't know anything about.- Wayne Dyer

  • Jagadeeshraja

    Hi all and thank you for the wonderful comments offered. The letter P stands for a great number of words and one can always use based on context, application, or even personal preference. Being an operations person, I believe 4 P's still matter but my list is: P - Product, P - People, P- Processes, and P- Performance. I am afraid that any one in isolation may not succeed. We do have history of failures of many "good" products.

  • Jeybbu

    I said it once and I'll  say it again.

    WE still need 4 P's but not the ones that are left over from the last century.
    Four that work with all of his examples are:
    Not Product but performance.  What does the offer do for the customer?
    Works for all of his examples.  Manage it.
    Not Price but pain or penalty.  What do you cause the customer to give up?
    Privacy invasion is the pain of Facebook, information overload is the price of Google.
    Not
    Place or even channel.  Today place is only for your  GPS.  Better
    think of process - creation to attainment of the value created.  Google
    delivers value (for money) to its advertisers through its data base of
    information.
    Free to users, but dear to advertisers.
    Finally, not promotion but perception.  Advertising is only one way to
    create
    and change perceptions.   Buss is another, so is tweeting to followers,
    different medium, same purpose-create or enhance a positive perception
    of the value proposition

    Julian Yudelson
    (I'm too oldto tweet, or even follow all these blogs, but I would love your comments at jeybbu at RIT dot edu)

    Look for-
    Adapting
    Mccarthy’s Four P’s for the Twenty-First Century Journal of Marketing
    Education April 1999 21: 60-67, doi:10.1177/0273475399211008

    Julian Yudelson  jeybbu@rit.edu

  • Lowellhussey

    HMMM. I think we may be getting a little restrictive in interpreting the 4 P's. What if you replace Promotion with COMMUNICATION. Granted, viral is the new "channel of choice" but I think it would be unfair to say that it can't be planned for and encouraged. Otherwise there would be no corporate presence on Facebook, twitter etc.

    How about replacing Placement with CONVENIENCE. Placement might have initially connoted shelf space but is it less valid when choosing how to make your product readily accessible in today's age of Amazon, ebay, groupon, and on and on?

    Now Product may actually be the thing that has changed most, in that a far bigger % of what folks buy these days is made of light than ever before. So lets go with CONTENT which might still be soap in a box but is just as likely to be a movie on a tablet or a seminar on a smart phone..

    For from being beneath consideration, Price is actually a far more complicated proposition than ever. A provider must literally undertake to sell the same product at differing prices according to a market that segments, among other considerations, according to how much price-comparison information the purchaser has. So knowledge is not just power, it's a better deal on the latest widget. The ignorant or incurious will simply pay more. Sounds a little cheesy, I grant you, but isnt that what groupon etc. are all about? So in the furthest extension of this trend, Price considerations are replaced by an acute awareness of COST, both literal and opportunity. In an "auction" style pricing environment, a provider must decide what the lowest acceptable price will be.  That will be determined by how much price canibalization  s/he will permit [opportunity cost] and what is the actual physical cost is of providing the next unit. A better term for this would be "a revenue optimization algorithm" but thats hard to remember and doesnt start with a C.

    So call it Product, Placement, Pricing an Promotion or Content, Convenience, Cost and Communication; it still comes down to deciding what, to whom, where,for how much and how the heck do we let them know about it.

    Incidently, though I come to praise the 4 P's, not to bury them, I always wondered where the targeted market was addressed in the P's paradigm.So, in a holistic spirit wherein the P's may lie down with the C's ,lets add a fifth consideration to each list and call it the Prospective Customer". Or perhaps that's too PC.

  • PP

    each industry givw difference weight on each P. Sure the Product is first piority but u cant forget other Ps.

  • Sridhar Karnam

    This is a stupid blog post. Promotion is not just advertising its about making your target customers feel they can afford to buy or use it. Price exists. Everything has a price. Even Facebook has a Price. Place is key. Place is where to access. Mobile is a place for Facebook. Good UI or Timeline is a place for Facebook. 4P's will be fundamental pillars behind every marketing decision

  • Al C

    "The only way you can increase the value of your brand is by increasing the value of your offering."
    hahahaha. You know nothing about growing brands. I can guarantee that physical distribution is a VERY significant factor in the success of a brand.

    And obviously nothing about diffusion of innovation, if you think that a valuable product alone is enough.

  • Al C

    And you wonder why designers have little credibility in the world of business. The 4Ps relate to the MIX you choose. Marketing MIX. Don't promote, that's fine - that's your mix.

    Also, "Place is obviously becoming less and less important as more commerce moves online."

    Seriously? Online is part of 'Place'. Also, Place is 'Distribution' - something Zara has a lot to say about....

     "And price is also less of a potential strategic marketing advantage." 

    So in a world where 'free' has become a serious threat to many business models, price is no longer a strategic advantage/disadvantage.

  • Phadke

    A small tip/request. Without being asked & without being told.

    Why not add button for LinkedIn and for Google+? Sharing this type of posting becomes easy & fast.

    Think about this.

    Phadke S. N.

  • Ron Marcus

    I don't think the author is off base here; I just think he's just using extremes to be thought provoking. The 4 P's are still relevant; they've just changed.

    Promotion: has shifted from push-advertising to personalized two-way dialogues with customers via multiple online and offline channels

    Place: Online is still a place; it just isn't a brick and mortar. So we're shifting to more online purchasing (witness Cyber Monday), but last time I took a drive, bricks and mortar were from from dead (did you see the lines of campers outside Best Buy on Black Friday?)

    Price: It is silly to think that 3rd party sites determine the price of a company's products and services. There is a whole distribution chain that leads ultimately to the 3rd party site (pricegrabber, etc.) and the merchant's it lists, and certainly, the initial price to the first reseller in the distribution chain was set by the originator of the product or service.

    Product: same as it ever was.

    What the author does succeed in is getting us to rethink how we view the 4 P's, and in that, he is very successful in my view. We should never take things for granted; always question sacred cows.

  • Joe

    Three of the four P's are not dead... they simply have been redefined in terms that are more relevent.   Time for a re-write? 

  • jjoithe

    The Product is important since the look, feel and use will greatly influence the experience or tangible experience but this is just one touch point with a brand (an important one i agree) but you have to consider the total experience (e.g. all touch points with a brand). Hence, Place is very important and i dont mean just where you or how you purchase a product (offline or online) e.g.where is the store located, how does the interior look, how are the products presented and packaged (packaging is very important ) Price is important - it will influence the percieved quality of a product etc...

    There so many reasons why the 4 Ps (as well as packaging, positioning and People>context>interaction>experience) are a still very much relevant in defining strategy...

    but hey dont worry it takes time to grasp this complexity and eventually you'll will get it at some point (hopefully)

  • Jasper Matter

    Zara might not do much advertising/promotion but they surely invest a lot lot into locations/Place (stores are usually at prime shping locations). Moreover, Zara is paying a lot of attention into their window display. They have a stage at their HQ where they set up the window displays (guideline) - they make a pictue of it and send it out to all Zara stores in the world. The stores change it then it then within days on global scale to ensure "coheerence".

  • JackL

    This is one of the funniest articles I have read in some time. I hope no one takes it serously. 

    Google and Facebook have no promotion?!? You just referenced two of the most powerful promotion tools of our time.

    Price as a marketing tool is dead?!? Tell that to NetFlix and Bank of America.

    Place is becoming less important as companies move online?!? Some of us would consider the Web, and where on the Web, as a placement strategy.

    The specific P tactics have changed significantly, but the 4 P's are every bit as important today as they ever have been. This article is the 21st century equivalent of the Marketing = Advertising misconception.  Thanks for the chuckle.

  • Julian Yudelson

    WE still need 4 P's but not the ones that are left over from the last century.
    Four that work with all of his examples are:
    Not Product but performance.  What does the offer do for the customer?
    Works for all of his examples.  Manage it.
    Not Price but pain or penalty.  What do you cause the customer to give up?
    Privacy invasion is the pain of Facebook, information overload is the price of Google.
    Not Place or even channel.  Today place is only for your  GPS.  Better think of process - creation to attainment of the value created.  Google delivers value (for money) to its advertisers through its data base of information.
    Free to users, but dear to advertisers.
    Finally, not promotion but perception.  Advertising is only one way to
    create and change perceptions.   Buss is another, so is tweeting to followers, different medium, same purpose-create or enhance a positive perception of the value proposition

    Julian Yudelson
    (I'm too oldto tweet, or even follow all these blogs, but I would love your comments at jeybbu at RIT dot edu)

    Look for-
    Adapting Mccarthy’s Four P’s for the Twenty-First Century Journal of Marketing Education April 1999 21: 60-67, doi:10.1177/0273475399211008

  • Matthew J. May

    Sounds like there is a whole bunch of people below worried about two things...1) Changing with the times and 2) losing their jobs. Awesome article. Product (value) dominate all decision making when it comes down to it.