The 4 p’s of marketing were proposed in the form they are known today by Jerome McCarthy in 1960. For more than 20 years this was the framework for marketing until in 1981 Boom’s and Bitner proposed an update to the model adding People, Process and Physical Evidence. Since then focus has shifted slowly to the ‘Consumer-centric C’s’. Price has become a necessary evil and an ever-growing resignation that it is dictated by the ‘wider’ market.
Research from Iris Pricing Solutions shows that a 1% price increase can drive a 12-15% increase in profit. In the FMCG category that means three times the profit increase without selling one more product. The message is clear: Every price change will have an impact on profits. Whereas some marketing initiatives need weeks, months or even years to pay off, pricing can have a direct impact, today.
Here I’ve picked two ways (of many) in to tackling the pricing challenge;
(1) “Why Pay More” is one of the questions that can help businesses shape and improve their brand perception
(2) With the changes technology brings, price-elasticity is increasingly important. For example, on some days Amazon changes prices of all products on their platform
The good news for marketeers is that consumers’ perceptions of pricing are fundamentally irrational. Behavioural economics studies show that when you flip the context, rebundle your output andshift the focus from price to value through added layers of experience, consumers are willing to pay disproportionately more for it. The blurry pricing propositions of Dollar Shave Club or M&S ‘Dine In’ deals show how consumers’ perceptions of price can be hacked. Insight led, creative thinking drives effectiveness in pricing just like it does in every other element of marketing.
By combining data-led pricing strategies with the creativity and behavioural science of a modern agency, brands can dramatically outperform the competition in a commoditised market. “Why Pay More” is an important question to start bringing pricing strategy back into the marketing conversation. Moreover, it is then important how this strategy is being carried out. Technologies and business who can set dynamic pricing are upcoming, one of these innovative companies is Omnia Retail (Google-partner) who work with online retail companies like Fonq and Bol.com. It won’t be long before companies like Omnia Retail are helping manufacturers drive their own pricing strategies, trading in prices like stock brokers trading on the stock market.
In conclusion, previous points prove price setting is no longer the sole job of the finance department. There are many opportunities and responsibilities here for marketeers too. According the article “Going to Market” in the Harvard Business School Press (1988) the ‘P’ of Price turns all marketing efforts of the other ‘P’s’ into the ultimate reward; cash!’. One thing is certain the ‘P’ of Price is more important now than ever.