August 20, 2013 | Written by: Brock Douglas
Categorized: Customer Analytics
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Do you remember the” Marketing Mix?” What about “the 4 Ps?”
The Marketing Mix (or 4 Ps) is a traditional approach to understanding four key factors when taking a product or service to market. The 4 Ps are one of the most well know approaches to marketing, often forming the cornerstone of many marketing decisions.
The 4 Ps are:
1. Price | 2. Place (distribution) | 3. Promotion | 4. Product
All of these play an important role in developing an attractive offer for your customer. Businesses often make changes to one or more of the Ps in order to appeal to new, existing or potential customers. For instance, an organisation may make a slight change in the product, price, promotion or place, which they hope will improve sales of that product (or conversely decrease sales). The challenge involves how we use the 4 Ps to make the best marketing decisions.
The traditional 4 Ps approach:
Traditionally, decisions about the 4 Ps have been made by organisations based on limited customer information, a manager’s intuition (i.e. gut feel) and generic market research. This often time consuming, expensive, and limited process has produced mixed results.
The revolutionised 4 Ps approach:
Smarter Commerce and analytics provide organisations with the ability to significantly improve the process of selecting and adjusting the 4 Ps. Smarter Commerce and Analytics capabilities allow organisations to make informed decisions for individual customers, with greater speed and predictability.
Over the next 4 weeks, I will discuss each of the 4 Ps in detail. Let’s begin with price.
Current pricing methodology is insufficient
Many factors must be considered to determine the “right” price. How price sensitive are your customers? How can you entice customers through pricing? What are the other price points in the market? And, so on.
However, pricing today is typically determined by a method recommended by the Marketing, Finance or Accounting departments; this might be cost-plus, penetration pricing, skimming, value based or one of many others. With any of these methods, price is generally consistent across customers and channels and the method chosen can often be arbitrary, neglecting many other important factors.
Price and Smarter Commerce
The days of one price for all customers, across all channels, are coming to an end. Customers are now more sophisticated in how they search for the prices of comparable products and services, requiring organisations to become equally sophisticated in their pricing approach. In this case, organisations should keep the Pareto Principle in mind, “80% of your revenues come from 20% of your customers.” Smarter Commerce can use analytics to make the process of customising a price for individual customers easier and more effective. Analytics can utilise the vast amounts of customer data available to an organisation to develop an attractive price for each individual customer.
A customer frequently visits your online store, looking at the same 2 products each time. It’s clear the customer is interested in these items, but something is preventing them from completing the transaction. You also have noted that this customer is using price comparison websites. Analytics can assist you in converting this price sensitive customer to a purchaser by assessing large amounts of customer data to develop an attractive price. As a result, the customer may be prompted to purchase with a personalised small discount offer.
Next week I will discuss the second “P” in the Marketing Mix – “Place.”