Every budding marketer is taught the 4 P’s of marketing: product, place, pricing, and promotion. We are taught that the four aspects must work together in a carefully orchestrated balance or the product will fail. For example, consider the following scenarios for a soap product:
- The product is made upscale with extra emollients and specialty fragrances. In this case, the selling locations will be upscale boutiques or department stores. The pricing will be higher and the promotions will focus on the luxury aspects of the product.
- The product is formulated for simple cleansing for the whole family; fragrances are minimized or kept neutral. In this case, the selling locations will be mass market locations, such as WalMart. The pricing will be competitive, likely with introductory discounting and the promotions will focus on cost effectiveness and core cleansing capabilities.
- The product is sized for single usage. In this case, the product will be sold as a B2B transaction to hotels, hospitals, gyms, etc. The pricing will be based on contract negotiations and quantity amounts; promotions will be replaced by personal selling.
In a perfect world, as these examples show, a slight change in the product results in a completely different set of place, pricing, and promotion components that are specific to that product’s needs. Ideally, these combinations will result in long-term product success.
However, research by Ataman, Van Heerde, and Mela (2010) shows that two of the four Ps have a stronger relationship with long-term success than previously thought. These researchers examined both short- and long-term success ratios for 70 products sold in 560 outlets (21 chains) over the course of five years.
While most marketers focus on promotion and price, essentially advertising and discounting (coupons and other promotions), it turns out that product, particularly the depth of the product line, and the place, or amount of distribution channels, were the key contributors to long-term growth.
Ataman et al. noted that “base sales are positively affected by advertising, but negatively affected by discounting over the long run.” Consumers usually respond to discounting with “deal-to-deal” purchasing patterns, meaning that they only purchase when a discount is available, holding off on future purchases until another discount appears.
While the length of the product line can create some cannibalization effects (one extension taking sales from another extension), a strong product line usually means that more consumer needs are met with the different products, leading to increased sales.
In addition, while increased distribution channels can create some “cherry picking” as consumers are able to compare prices across multiple brands in a single location, usually the wider availability “facilitates consumer’s ability to find the brand” conveniently.
From a marketer’s perspective, it is a sobering reminder that we need to look past short-term bumps in sales towards long-term growth and profitability. According to Ataman et al., it is wiser to focus more on the two Ps of product and place than the two Ps of pricing and promotion.
Ataman, B., Van Heerde, H. and Mela, C. (2010). “The long-term effect of marketing strategy on brand sales.” Journal of Marketing Research. 57 (10), pp. 866-882.