The 5 P’s of Marketing

What are the 5 P’s of Marketing?

The 5 P’s of marketing has five aspects:

• Product
• Promotion
• Place
• Price
• People

These elements help companies maximize the differentiation and value perception of a company relative to its competitors.

Also known as a marketing mix, the five P’s represent different strategic levers for a business. Each factor is distinct and can be used independently.

A successful marketing mix strategy involves integrating various processes to be sure that the final product released in the market will help:

• Increase brand awareness 
• Maximize sales 
• Capture a proportion of customers from the competition 
• Attract new customers
• Generate long-term value 

It requires collaboration between stakeholders in all stages of this process to deliver the required outcome successfully.

Executing a profitable marketing mix strategy is one of the key priorities for a business, regardless of its size or the sector in which it operates. Employees, managers, and senior business leaders play a part in delivering the 5 P’s strategy. 

The marketing mix depends on internal factors, for example, the country in which the firm carries out its operations, as well as external factors, such as inflation, heavy discounting, and supply chain shortages, to name a few.

The marketing mix's product, price, promotion, place, and people elements are explained in more detail below.

Product

A business's product refers to the physical items or services that will be introduced into the marketplace. For example, a product can be a piece of clothing, a smart technology appliance, or a new financial product.

For example, in 2016, Goldman Sachs entered the retail banking sector with its new Marcus online platform, offering loans and savings accounts to retail customers. Diversification was one of the reasons for the investment banking giant to enter the consumer finance market.

The other reason was that Marcus would offer a financial product that traditional or digital-only banks couldn’t.

The new platform attracted younger and more technology-savvy customers by offering savings accounts with much better rates than conventional retail banks and loans that served to pay off debts at a lower rate.

Diversifying your product range is pivotal for a company to grow. The range of products and services on offer will bring a larger pool of customers, which will increase the sales volume and its profitability.

Products and services have to be carefully conceived, designed, and executed. They must have a specific:

• Texture
• Color
• Shape
• Packaging that triggers a sensory or emotional cue

For instance, gold and black are usually associated with more premium products.

The product, whether an addition to an already existing offering or a brand new launch, has to consider the demographics and culture of its target customers as well as any specific social long-term trends, such as sustainable investing or sustainable fashion.

Marcus by Goldman Sachs is an example of identifying areas for improvement that can be capitalized on to bring more revenue.

Price

The price of a product or a service is the second element of the 5P marketing mix. The price of a product is determined by various factors, including how much consumers are willing to pay and what the company needs to be profitable.

The pricing strategy includes:

• Credit arrangements
• Price-matching activities
• Discounts and sales
• Other payment arrangements.

Other psychological and economic factors also influence the price component of the marketing mix. Some are described below. 

Supply and Demand Theory

The supply and demand theory of economics explains that prices reach equilibrium when there is a balance between the buyers and sellers. This occurs at a price where both are willing to transact their goods or services.

From a seller’s perspective - whether an investment management firm or a retailer - the higher the price they can sell their products, the better.

Sellers usually want to supply more products, but higher prices often discourage consumers from buying them. Prices of premium and luxury items typically don’t play a role in the purchasing decision of consumers.

Unlike the supply side, buyers would prefer purchasing a product at a lower price or a price they are willing to pay. Promotional events, such as Black Friday and seasonal sales, are typically very popular among buyers, and there is an overall increase in demand.

The supply of products is generally reduced or limited as lower prices over a certain period may negatively impact a company’s profitability. 

Psychological Pricing

Psychological factors influence purchasing decisions and play an important role in buyers’ behaviors. Businesses use different techniques to entice individuals to buy a product.

The way people perceive a price is very important in understanding their behavior. Marketing experts use this to help establish the right price for the product. Some of the commonly used psychological pricing strategies are 

1. Charm pricing

This method establishes a price that ends in “5” or “9”. Usually, nine is more common, and a price ending in nine, for example, $4.99, is perceived to be of a better value than $5.

2. Induced sense of urgency 

This tactic creates a sense of urgency to trigger purchase behaviors. This type of pricing is typically accompanied by strong words such as now, limited time only, and exclamation marks.

3. Price Appearance

A price appearance is simply the way a price looks. Longer numbers make prices appear more expensive, while shorter numbers are interpreted to be the opposite. While both are identical.

For example, $20.00 and $20 have the same monetary value; however, $20 will be preferred over $20.00. 

4. Innumeracy

Pricing professionals use Innumeracy to communicate pricing strategies. For example, consumers favor “buy one get one free,” also known as BOGOF, over “50% off two items”.

Although the two propositions are the same, the first resonates better with people.

Promotion

Promotions are the third aspect of the 5P marketing strategy. Promotions aim to publicize the product and bring it into the spotlight.

The goal is to make the product or service known to a wider audience, leading to incremental sales. Promotional activities include sponsorships, advertising, public relations (PR) campaigns, and endorsements. These strategies are detailed below:

1. Sponsorships

Sponsors can team with event organizers and tv program producers; for example, investment banks often sponsor sports events to gain more exposure to their products JP Morgan, one of the leading U.S investment banks, has sponsored the U.S Open Tennis Championships since 1982.

Bank of America has various partnerships with the NFL and baseball teams, including the New York Yankees and Los Angeles Dodgers.

2. Advertising

Another very popular form of promotion is advertising. Advertising is paid promotion and can be supported by traditional media, such as:

• Print
• TV
• Radio

New media:

• Online advertising
• Including social media
• Sponsored content 
• PPC,
• Outdoor.

Advertising is still very effective in reaching broader market segments and providing exposure to a company’s products or services.

3. Public relations (PR)

Public relations are a set of techniques and strategies that monitor and establish how a company’s image is represented to the public, especially in the media.

PR helps connect a business with customers, investors, and the community. PR's main functions are 

• Media representation
• Stakeholder management
• Crisis communication
• Content production

At present, authenticity has become more prominent and important for companies that want to consolidate their values in front of the public.

4. Endorsements

Endorsements are a type of advertising where prominent public figures such as :

• Celebrities
• Social media influencers
• Actors
• Politicians

puts their name next to a product as a sign of approval and support for a specific product.

Celebrities voicing support and endorsing cryptocurrencies recently are an example of endorsement.

Place

A product needs to have a distribution channel or an outlet where it would be made public. The right channel type must be available to the correct one at the right time.

For instance, if a product requires enhanced technology, it should be made available to people with a specific device or in an area that allows such technological support. In addition, users of specific social media who are also part of the target customer audience should see a promotional message designed for the platform.

Aside from a technological presence, a product can be distributed through a network of approved vendors or exclusive partners.

A brand may be in a restricted number of shops and cosmopolitan cities, whereas other brands may go for a bigger and more popular outreach. Conversely, big financial institutions may only have representatives in capital cities. 

The choice of place is critical for the distribution of the product and contributes to the overall success of the product.

The appropriate selling channel - whether online or offline - has to be carefully selected so that the product reaches the target audience correctly.

For example, online banking should be executed so customers can easily open an account without going to a physical branch.

Both online and offline channels have benefits and disadvantages. However, the mix of both can lead to more

• Customer conversion
• Increased sales
• Better bottom line

The choice of distribution medium has to be considered from a cost-benefit perspective, and cost analysis should confirm if the choice is feasible. In addition, the selected distribution channel needs to be within the allocated budget.

People

The people in the marketing mix are essential for the success of a product. The ultimate aim for a company is to provide a product that adds value to its customers with customer service that matches and exceeds expectations.

The human capital element in the marketing mix refers to the employees and the customer service, whether in-house or outsourced.

The benefits of a product or a service and how new and existing customers perceive them are enhanced by the attitude and behavior of the people who offer them.

Skilled and competent sales associates and knowledgeable customer service can help customers with queries and assistance.

A good gauge for the success of a company's products and services is the reviews of customers. Therefore, the digital selling channel that is part of the overall marketing strategy should use customers’ reviews as feedback.

Good reviews signal that the quality of the product, its delivery, ease of use as well as the support of the customer service have met the client’s expectations.

Conversely, poor reviews show areas for improvement and that changes need to be executed before impacting the company’s operations and profitability.

The attitude of the people who sell their products contributes to the image of the business, and over the mid and long term, this will positively influence bringing more revenue and clients to the firm.

Ethical behavior, whether the firm is in the financial services industry or not, is also essential as it helps build trust in customer relationships and win business.

Unethical behavior from employees, such as the bribery revelations about Goldman Sachs staff in the 1MDB scandal, can result in negative consequences, including but not limited to loss of employment, fines, and reputational damage.

Free Resources

To continue learning and advancing your career, check out these additional helpful WSO resources:

• Market Planning
• Market Positioning
• Organic Growth
• Organizational Analysis
• Profit Model