The 4P Framework is a powerful tool to set the right marketing mix within a case study

Use the 4Ps to align the products of a company with the right price, place and promotion

The right product

The product must meet the needs of customers. This category also includes packaging, as well as services and guarantees, which could come with the purchase. The key area in this framework is to understand the distinctive characteristics of the product in comparison to the competitor’s products (see benchmarking).

The right price

Generally 3 different approaches are used to set the price of a product:

  • Cost-Based Pricing
  • Competitive Analysis
  • Value-Based Pricing

The “right” price is the one, which maximizes the revenue. To sell the greatest amount to the best price possible, we need to know how people value the product; therefore a value-based pricing is usually recommended.

The right place

Place refers to the PLACEment of a product in the market rather than just the point of sale. This dimension includes the whole distribution system: transportation, storage, and choice of distribution channel to the point of sale among others. To choose the right place you need to focus on the customers’ needs, wants and behavior.

The most effective promotion

Promotion bundles all communication activities with the customers. Ideally, the information of a product is presented in such a manner that it raises awareness of the target group and convinces them to purchase the product. Promotional costs often represent a sizable proportion of the overall costs.

Example: Starbucks

  • Product: variety of caffeinated drinks and a distinct ambience unavailable prior to starbucks in the US
  • Price: premium price because of the uniqueness in the American market and willingness of people to pay
  • Place: establishing themselves as a coffee-to-go place, therefore they set up coffee shops in places with a high frequency of walk-in customers
  • Promotion: Starbucks is one of the most recognized brands today. Starbucks addresses its modern clientele using various kinds of advertisements such as mobile apps, social networks and other types of viral marketing.

Key takeaways of the 4P Framework

  • Classical marketing tool
  • Key elements: product, price, place and promotion
  • Helpful framework for the introduction of new products
5 Comment(s)
April 14, 2015 10:49 -
Gustav

I don't like the way place is explained here, I learnt the 4Ps from one of the most renowned Professors for Marketing in the world and he always said, calling it place is just to make it a nice 4P structure. For me place is perfectly fine, as it is not about the actual place of sale (as you say yourself) but about PLACEment of a product in the market, so how is the product placed in the market, I.e. Distribution channel... This is what you say as well, but I think this way of explaining it is more logical

November 19, 2014 11:37 -
ritika

Hi Gero,
Revenue = Price X Quantity. Thus, if you have a "right price" specifically in this case, a price such that same number of units will be sold even if the price was slightly lower, you would maximize revenues. In other words, if you can charge a price equal to highest amount a customer is willing to pay, you will maximize revenue.
You are correct in saying that ultimately, you want to charge a price that would "maximize profits", the optimal spot where bottom line is maximized, but that ultimately depends on the case problem. Does the case problem asks you to maximize sales or does it ask you to maximize profits?
We just gave an example that shows how to maximize sales by charging the right price in this case.
In general though, a company would like to maximize profits by charging the right price. We will correct the wording above to reflect this idea better. I hope this was helpful.

November 18, 2014 23:03 -
Gero

If anything, the "right" price maximizes profit, right? Revenue and profit maximums are not directly linked, although they might coincide.

August 05, 2014 04:37 -
Fernando

Hi Gabriel, sorry for this confusion. What we meant is that before Starbucks, very good coffee was not very easy to find in the US.

August 02, 2014 03:08 -
Gabriel

Starbucks is an American company based in Seattle.
How is it possible to not be available at the US at first place?