The 4 P's are important to understand the importance of pricing as one of the marketing P's.
Marketing cycles have accelerated. Distribution occurs at
(literally) the speed of light. Opportunities are everywhere. And with all this
speed and opportunity comes... heavy, intense competition.
And your customers have access to tons more information. So
you better offer the best value because they’re going to know it, if you don’t!
That all brings an increase in price risk. Misjudging your
price points costs dramatically more than it used to. You just don’t have the
time for a second try. There’s an amazing amount of information on the Web
about all forms of both online and offline marketing. The same goes for
business books. Just about every aspect of Net marketing is covered ad nausea…
everything except the single most important marketing decision that you’ll ever
make... pricing.
Resources are limited. Offline consultants seem to have
jealously guarded this lucrative area, charging large companies thousands of
dollars to get the price right. Remember... pricing is probably the most
important marketing decision that you’ll ever make. After all, it’s one of the
4 P’s, right?..
Any introduction level marketing course covers the Four P’s
of Marketing. Yes, this old mnemonic still holds true -- marketing basically
boils down to a mix of Product, Place, Promotion, and Price...
• Product -- the “what” that is actually being offered to
the market... ex., a safe and secure Volvo, a high-powered macho-feeling
Porsche, or simply a low-priced, “just get me there”... bus ticket.
What is the customer really buying?... Just the equipment of
a computer system, or a computer with all the software built in and a phone
number to call if the user gets in trouble?
What are you truly selling?... A software package which the
user has to install and figure out, or an automatically updated and improved
software system, which the user rents access to, with live online help, on a
month-to-month basis?
• Place -- the “where and how” that your product is being
distributed. In other words, the “distribution channel” (OK, OK... so the
“Place” one was a bit of push, to make it a “P”).
“Place” is the difference between buying a can of cola at...
• a discount store
• a fancy grocery store
• a stand at a train station ... or
• a counter on the actual train.
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Pricing Isn't All Logic. Discover The Hidden Pricing Tactics You Can Use To Increase Profits!
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In each case, it’s the same can of cola, only the place
changes. And, we all know that that makes a lot of difference to the price.
Have you bought a popcorn and soft drink in a movie theater lately?
As a Web marketer, you have chosen the most dynamic and
fastest growing distribution channel in the history of the world – the
Internet! If you are using the fixed pricing model, your price has to be right
the first time, or you may simply not get a second crack at it.
• Promotion -- the means that you are using to “get the word
out” about your product and its benefits for the customer... even if the
situation is as simple as “cola vs. thirst.”
Your pitch can include online or offline advertising,
personal selling, publicity, search engines and so on. The Internet is the
great communicator. It is just as much a promotional vehicle as it is a
distribution channel.
• Price -- the cost of the product being charged to the
customer. The Perfect Price is the price that meets both the buyer’s and the
seller’s needs. The buyer decides if the price is acceptable by determining
benefits and by considering the competition.
The seller prices to maximize profit, while considering the
bigger picture business model (i.e., high price/low volume or low price/high
volume). The price must pay for the cost of production, marketing and overhead
costs, and still make a profit (unless you’re a dot-com Internet stock!).
Ask yourself a few quick questions about the first three
P’s...
• Product -- how can I make it better?
• Place -- how do I ship it from place A to place B to
customer?
• Promotion -- how do I promote it?
What is the common thread for these three P’s? They all cost
you money – they turn up on the expense side of the ledger. Now ask yourself
the same question for the last P...
• Price -- how much should I charge?
“Price” is the only P which brings money into your company!
It’s building up the income side of your ledger. So...
Make pricing your top priority. It makes cents, er-r-r
sense, to know what Price you should charge for your Product so that you can
Promote it effectively and Place it into the hands of your customer.
Here’s an important “foundation-building” type of exercise
for you to do before we continue with the rest of the course. Examine your
business (or your business plan, if you are not up and running yet) using a “4
P” marketing magnifying glass.
Bring into sharper focus your…
1) Product… What do you sell? What does your customer buy?
What are its major benefits? How important and unique are they?
2) Promotion… How do you promote your product or service?
3) Place… How do you ship from place A to place B?
4) Price… How do you decide on which price to charge?
Take your time with this exercise. You need a strategy for
every part of your business operation to guarantee success. There are so many
inside and outside factors that can affect your business, some of which you
have more control over than others!
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