The Transformation of the 4P’s


The concept that the 4P’s of Marketing in B2B are dead is not a new one.  However, it’s been on my mind a lot recently.  I think that might be because my client base has been a heavier in traditional distribution this year than my typical manufacturing focus. It’s a challenging time for distribution in B2B.  Online retail is changing the competitive landscape, logistics companies are getting more efficient and effective, and it is getting more and more difficult to defend the value of a sales representative and a warehouse full of widgets.  The role of traditional distribution in the supply chain is definitely changing.  Service innovation is getting more critical in both manufacturing and distribution.  The path to the consumer is much more complex and varied.  All this points to the fact that the role of “P” for placement is changing rapidly.

As a pricing expert, I admit, when I hear someone reference pricing as one of the 4P’s, my skin crawls.   To limit pricing as a sub-function in marketing is just naïve.  The fact is, companies that excel at pricing understand that it can be leveraged to support every function in an organization, with the possible exceptions of HR and IT.  In fact, when I start working with a new client, one of my first goals is to assess how well the pricing in the organization is aligned with product, commercial, AND financial objectives.  The product and commercial objectives may be argued to be the responsibility of the marketing function, but financial goals are definitely a function of operations.

The current state of the promotions “P” is an interesting one.  Days of the BOGO are in many cases long gone.  In many companies, a pricing leader has taken ownership of price promotions, marketing co-op dollars, etc. Rightfully so, these are all examples of pricing being called non-pricing names.  This shift in ownership has caused the “P” in Promotions to turn into something else completely.  It is the story telling function of the organization; the deliverer of brochures, the brand image, the online look of a company.

That leaves the “P” for product.  Let’s face it, products don’t sell anymore.  Product/service bundles do.  Customer experiences do too.  The “P” for product might as well be called “P” for package, because that is what customers are grading suppliers on, THE WHOLE PACKAGE.

What does this mean for the new organization?  These may seem subtle, but these small shifts in thinking are driving large profit results at enlightened companies.

1)      The exchange of the Product Manager role for the Value Manager.  Why?  Product managers manage widgets.  Value managers manage value creation from the customer’s vantage point, and that goes well beyond products to include services, logistics, quality, and innovation.  What if you don’t have a Product Manager role (Distribution I’m referring to you)?  By all means, skip right to the Value Manager, but staff something!  By the way, sales leadership is different than Value Leadership.  Companies need to stop pretending that their sales leaders have time to fill this role.

 

2)      Allowing the Pricing Manager to manage price.  What?  Doesn’t that already happen?  Actually no.  Not in most organizations yet.  The pricing function is still viewed as a support function in most companies, which just drives conflict, and leaves everyone frustrated and confused.  What does it mean to actually manage price?  Not only should the pricing function set price lists and retail prices, but also contracts, negotiation boundaries, and pricing policy.  I know this is not a popular stance with many sales organizations, but this is the future because it has been proven to correlate to higher profitability.  A great Pricing Manager will be able to quantify the value created, translate that into a price where a fair share of that value is given to the customer and a fair share is kept for shareholders, meeting financial objectives.

 

3)      Moving promotions under the pricing manager.  It’s the sane thing to do.

 

4)      Elevating marketing communications results by integrating the function with the Value Manager and Pricing Manager.  Make it their objective to tease out the “How” value is created from the Value Manager and the “How Much” from the Pricing Manager.  Allow them to tell a powerful story from that information.  The “How Much” is critical.  No longer should organizations accept marketing stories that look like ‘Highest quality products’.  The future stories include tangible statements like ‘Proven to drive 20% higher profits at our customers’.

 

5)      Finally, recognizing that the placement “P” is changing rapidly and deserves elevated attention.  Again, this should not be the role of a sales leader that is compensated on short term sales.  Companies that have a Channel Management function have a head start in this arena.  The focus should be in delivering value to the customer, whether it be directly or through a channel partner.

 

This all implies that the new 4P’s are subtly different.  The future of the 4P’s can be viewed as VPCD (Value, Price, Communication, and Delivery).  OK, so it is not a catchy acronym, but it certainly makes sense.

The focus of VPCD?  Create substantial customer value, quantify that value and share it fairly through the right price, communicate effectively how that right price is a win-win, and make sure that value is delivered to the specific customer for which that value exists.  A winning formula. Elegantly simple and perfectly logical.