Sep 23, 2022 | Branding, Communication, Management, Marketing, Small business
In 1960, E. Jerome McCarthy published his idea of the four foundations of marketing. Price, Promotion, Product, and Place. The world has changed in the intervening 62 years, so you must wonder if this idea is still relevant, let alone a foundation.
To my mind, they are not only relevant, but retain their place as a seminal part of the marketing process, it is just that the context in which we think about marketing has changed radically, so the role the 4 P’s plays has also evolved.
This used to be simple, there was a product, and there was a price. Whether it was a consumer product, or one sold to another business, it was simple, and uncongested with notions of service.
Life, and the environment in which we compete has completely changed. Let’s see.
Product.
The idea of ‘product’ has changed along with everything else. We used to buy a car, increasingly, we are now buying the means to get from point A to point B, and discovering new ways to pay for it beyond the options of cash, or some sort of loan from a bank.
Product rather than being a singular physical product or service delivered has become a system that delivers value. The scope of ‘produc’t has also changed from the immediate geography to global, and the channels by which this is achieved look nothing like those available 62 years ago.
Price.
The exchange of money is how the economy goes round; money is the fuel. However, the articulation of the ‘Price’ of a product/service bundle has changed as much as everything else. Along with the product and delivery options now available are the pricing options. There are now many ways to be paid, only a few of which were available 62 years ago.
In all developed economies to differing degrees, the taxi industry has been regulated over time. Nothing changed from 1962 when the ‘Four P’s were articulated until along came Uber and disrupted the cosy taxi environment. Uber eliminated the uncertainty of how long you had to wait for a ride, creating great psychological value, and introduced surge pricing that would entice more supply into the system at times of high demand.
Surge and subscription pricing have changed the face of commerce globally. Amazon uses both in their operations, adding the willingness of a buyer to pay higher prices based on their browsing and purchase history.
Place.
We used to buy products at a defined place, in a defined manner. No longer. The notion of ‘Place’ has been replaced by one of ‘How’ you buy rather than ‘where you buy’.
The old model of a set of mechanically driven distribution channels has been replaced by a melange of ‘omni channels’ that deliver value in a wide variety of ways.
Control of the channels, formerly in the hands of the sellers has moved into the hands of the buyers, who demand and are given in increasing amounts of transparency backwards into the supply chain. All this is enabled by the explosive growth of digital technology.
Promotion.
If the other factors have changed radically, there are no words to describe the magnitude of the change to the ways promotional activity has evolved.
It used to mean the way we gained attention of potential customers via a limited number of options, engaged them, then sold product through whichever stable distribution channel was available. While the core process is unchanged, how we promote out products has exploded.
This brings us back to the question posed: are the for ‘P’s’ of marketing still relevant.
My answer is ‘Yes’, but the clothes they wear have changed radically and therefore the way we think about then must change.
My response to the change necessary is to look at the marketing process more from the perspective of the customer. This brings me to the view that both customer and supplier can look at the process from within the framework of Objectives, Value proposition, Ideal customer, and the Current state. Each party to a transaction sees these four parameters differently, but they are all relevant to the way the transection and relationship proceeds.
Sep 19, 2022 | Analytics, Communication
Social media platforms all compete for your attention, not just with other platforms, but with the rest of your life. Then, once you have given it, the real test begins.
What do you do with it.
The nature of social media is almost instantaneous. When something comes through your feed, an increasingly rare event for unadvertised material, it has a second, occasionally a couple, to grab and hold your attention, and encourage you to take the next step, whatever that might be.
It is not the long slow romancing of that great looking person in a bar, or at dinner party with friends, it is more like Tinder.
Swipe left, or swipe right. In or out. More information please or no thanks.
Your marketing task on social media, if you are to use it effectively, is to pass the initial tinder test, and have the other party look for more, and then pass on the post to their networks.
So how do you achieve that end, the referral of your material to others?
Most of the advice around is pretty accurate:
- Promise an explicit outcome to a specific cohort of potential customers.
- Photos of people should be front lit, and eyes not looking directly at the camera. This is to avoid the photo looking like a mug shot from the local cop-shop.
- Simplicity and consistency of design
- Make a clear and explicit call to action
- Make it easy for them to contact you
Remember always you only have a second to make the impact that will encourage them to swipe left, then the challenge is to add value, so they stay.
Better make that first second count.
Sep 12, 2022 | Customers, Marketing
What we purchase and what we pay for it can be a deeply psychological process.
The cost is one element, the value or utility delivered is often an entirely different matter.
The vast majority of purchases of a car represent a mix of the rational with the irrational, heavily weighted to the rational. Reliable transport to get to work, meet the specific needs of the individual and family, and take the kids to soccer safely. Some cars absolutely defy this rational logic. Why would you need to pay a million dollars for an Aston Martin, or $23 million for a Rolls Royce boat-tail, with plenty of options between these two if the rational was to prevail?
Economists who work with mathematical models have trouble reconciling the irrationality of behaviour with their rational models. This is why the seminal work by Daniel Kahneman, published for public consumption in ‘Thinking fast and Slow’ is so important. Important enough to win him the Nobel prize in Economics when he is a psychologist.
It is also why your value proposition and the definition of your ideal customer are so intimately entwined.
Your ideal customer will find some mix of objective and subjective utility in your product not available elsewhere, and be prepared to pay for it.
The cost in dollars is the same for everyone, and everyone understands it. The utility derived from ownership is entirely personal.
Peter Drucker said many things, amongst which was ‘The only purpose of a business is to create a customer’
And he was right.
To create a customer, you must offer them value they cannot get anywhere else.
To create value, you must understand ‘Utility’: the physical and psychological benefit customers receive from owning and using your product.
Utility is highly personal and context sensitive, driven by psychology.
Germans are stereotypically rational, process oriented people. It seems unlikely that they would be as susceptible to emotional purchases as say, Italians, who have the opposite stereotype.
Not so. Two classic examples from Frederick the Great of Prussia, and his great great grandson, also Frederick.
The first Fred, king of Prussia from 1740 until 1786, saw the potato’s potential to help feed his nation, and lower the price of bread. In 1774, he had issued an order for his subjects to grow potatoes as protection against famine. The refusal was absolute. Nobody wanted potatoes, nobody liked them, even the dogs would not eat them, so why should they? Faced by this general refusal Fred had to use psychology.
Trying a less direct approach to encourage his subjects to begin planting potatoes, Frederick got creative. He planted a royal field of potato plants and stationed a heavy guard to protect this field from thieves.
Nearby peasants naturally assumed that anything worth guarding was worth stealing, and so snuck into the field and snatched the plants for their home gardens. Of course, this was entirely in line with Frederick’s wishes.
Fred number two needed to fund the war against Napoleon. In 1813 he urged all families to donate their gold and silver jewellery to the cause, and replicas were given to them made from caste iron, by a specific iron foundry in Berlin. The wearing of caste iron items became the symbol of the sacrifices the family had made to the war, and was highly valued.
When you can articulate and reflect the utility your ideal customer will receive from you in terms unmatched by competitors, where else would they go?
Is the price simply a reflection of the exchange of value made up of both rational and non-rational componets?
Sep 2, 2022 | Marketing, Strategy
Some hard lessons will need to be learnt by the new crop of marketing managers who have never faced the evil of a recession, and even worse, one that has inflation as its bed-fellow.
Stagflation.
This is not supposed to happen, but it is, and we are seeing the first hints of it currently. Inflation growing rapidly, full employment, low interest rates lifting rapidly, we are facing an economic jigsaw that is defying conventional thinking.
Gone are the days when marketing could believe that failure was good, it was a learning opportunity for leveraging in the next round of potential failure. Increasingly the built in tolerance to failure will be tested, with an increased focus on pre experiment due diligence to reduce its incidence.
At last, we will revert to the core of business sustainability: Profit.
The absence of profit means that eventually, depending on the depth of your pockets, you will go broke. Nonetheless, marketing wankers for the last decade have been seduced by the comforting idea of ‘Purpose’. Often this seems to have overridden the old fashioned idea of delivering value to customers that leads to making a profit.
Every brand has a purpose they say. Heavens, I just want my washing soap to be an effective cleaner, my toothpaste to clean my teeth and leave a nice taste, my internet connection to work, and my car to start on cold mornings.
Having an explicit, relevant, and well understood Purpose is great. It provides a focus for the strategic choices that need to be made, and acts as an aligning ‘North Star’ for all stakeholders. However, purpose over profit is stupid, and the price of stupid is extinction.
Header cartoon credit: Thanks again to Scott Adams and Dilbert for clarifying and simplifying a complex question.
Aug 31, 2022 | Innovation, Marketing
Processes are the means by which things get done. From the simplest thing like cleaning the coffee machine in the lunchroom, to launching a major new product, it happens by way of a series of activities culminating in the objective being achieved.
It makes sense to do the same thing the same way every time, assuming you get the desired outcome. Doing so delivers stability, reduced errors, and makes the processes transferrable between people.
Process stability is a fundamental foundation of being able to scale a business.
However, processes do not innovate. They can replicate the past with great productivity benefits, they do not take risks. They squeeze out creativity, as it is variation to the process, and therefore not allowed.
Let’s look more closely at innovation, which can be broken down into a series of repeatable steps, and thus becomes a process.
There are two types.
Incremental. This is where there is continual improvement, the adjustment of processes to deliver benefit. The preconditions of incremental innovation are twofold:
- First, you need stability to be able to execute on CI, and
- Second, you need the culture of experimentation, continuous A/B testing to prevail.
Break-through. This second category is, to me, real innovation. It can create new markets and demand, of the type Apple deployed with iPod, iTunes then the iPhone, and Henry Ford did with the Model T. You need to be able to see where there is new potential, new markets, new demand, and be prepared to throw the baby out.
The culture and processes that support these two types of innovation are very different, effectively mutually exclusive, so you must make a choice. Trying to do both inside the same corporate ‘shell’ rarely works.
The former requires alignment, stability, continuous improvement, and several other popular management cliches.
The latter will die under these constraining circumstances, it requires insulation, a ‘skunk-works’ of some sort to succeed, a culture that enables experimentation and the attendant risk, giving the efforts immunity from corporate ‘sameness’.
Scott Adams reflects this pardox beautifully in this 2012 cartoon used for the header.
Aug 22, 2022 | Marketing
‘Marketing’ means many different things to different people. Therefore, a conversation that seeks to allocate marketing resources in the optimal manner is bound to be flawed.
To a plant manager, ‘marketing’ means the money spent to generate orders to keep his plant running, to an accountant, it is an expense code in the profit and loss, to a scientist it is an occasionally needed extravagance so people can see their brilliance, and to many marketing people it is going to lunch a lot.
It is none of these things, and all of them.
That is the problem.
So called marketers have for so long shovelled so much jargon, hyperbole, misunderstanding, fortune-telling, and flatulent bullshit onto the pile that they have forgotten, if they ever understood, the purpose is to find and serve customers.
We can only find our way back by taking advice from Aristotle, by identifying the foundational proposition and assumptions shape the investment. In other words, to define it from first principles, or, to quote Aristotle: ‘The first basis from which a thing is known’
In this case, the first principle stems from Peter Drucker’s immortal pronouncement ‘The purpose of a business is to create and keep a customer’
Marketing is, or should be, the leader in that task, and everyone has a responsibility for a part of the equation.
Header: Once again, I thank Dilbert and his mentor Scott Adams for the insight
