From 4 Ps to 4 Cs to 4 Ts of Marketing mix
Abstract: To stress upon customer imperative and emphasizing on mega distribution Philip Kotler – the renowned Marketing Guru talked about shift from the 4 Ps of Marketing Mix to 4 Cs. In today’s ever-changing market scenario, which is challenging development and consolidation of businesses across various sectors of businesses, the marketing mix components are shifting from 4 Cs to 4 Ts.
The man behind the four Ps of marketing suggested that they be changed. Philip Kotler in an exclusive interview with Brand Equity of Economic Times talked about shift from the four Ps to four Cs. He expressed the customer imperative, the value challenge, and the increasing value of mega distribution. The skills and talents of the marketing manager recline in making the offer to customers in the most attractive manner. The Marketing Manager is no less than an artist; he has to proportionately add, subtract, replace, and centralize the elements of the mix – The Product, The Price, The Place and The Promotion. The marketing mix is a value-delivering tool of the marketing function.
One of the glaring challenges that most brands across the world face today face is of lowering brand loyalty from the consumers. The brands are ‘commoditized’ no sooner they enter markets. At the consumer level, on one hand we are seeing an increasingly more global entity – one who is tuned in almost real time to trends and aspirations across various countries and societies. Increased access to electronic and traditional media, the Internet, and more frequently (and more adventurous) travel outside the home frontiers are some of the factors that have led to the globalization of the average consumer. At the business level the most challenging development is consolidation across all kinds of industries – be it travel, education, health, transportation, telecommunication, banking, consumer durables, or retail. The consolidation is not limited within the traditional geographical boundaries but is increasingly becoming cross-national and cross-continent; as a result, local and national brands are struggling literally to retain their identities in the consumer’s mind share. Many brands are living a very short shelf life.
The market is determined by supply and demand.Creating and maintaining relationship with customers is become an inseparable part of business. The concept of CRM is viewed differently in different sectors of business. Customer relationship or customer care is not just being polite to them – it is looking at the entire customer experience – or walking in the shoes of the customers. This journey starts before you even meet your customer, the trick is to forget all that you know or think you know about the market. Start thinking why your customers would want to buy your product? How it would solve their problems? How the substitute product would satisfy their needs? How you product reaches them in time? With companies offering technology-based solutions for everything, customer care has become more important than ever before. Sales literature and indeed entire campaigns are based on describing the technology, usage, power of the product, marketing channel details, price points etc.
The most crucial challenge for businesses is to create new customers and maintain the old customers therefore, is to create the differentiation plank. And the differentiation should be uniquely different. Traditionally, successful branding has always served the purpose of creating and maintaining such differentiation to the benefit. However complexities in the market make the task formidable. A product needs the ability to dish up the local, regional, national and then the global market. It needs to act in response to each niche segment. Therefore, according to Kotler, the very important to be redefine the concept of marketing mix.
The four Ps remain as useful for organizing framework for marketing planning. He feels there is nothing wrong by adding some more Ps for emphasizing the crux of marketing such as Packaging, People, Personnel, Politics, Public opinion and passion etc. He further talks about a transition from the four Ps to four Cs, which are more customer–based. The four Ps are seller-based and 4 Cs are consumer-based. Kotler defines Product as Customer Value, Price as Customer Cost, Place as Customer Convenience and Promotion as Customer Communication. These C’s reflect a more customer-oriented marketing philosophy. They provide useful reminders to the marketer that without the customer the exercise is futile. The entire business processing should revolve around the customer’s convenience. The 4 Cs are customer centric. Whereas, the 4 Ps are more or less product-centric. The product concept rotates around marketer’s obsession for his product. Philip Kotler’s suggestion to shift from 4 Ps to 4 Cs is to show concern to the consumers, generating value satisfaction, creative selling and integrated action for serving the customer.
Peter Drucker had expressed once that that the aim of marketing should be to make selling superfluous; marketing means understanding of the customer’s mind and brand building should be tuned to the viewpoint of customer satisfaction. The basis of marketing is a value-creating and value-delivering process.
The brand building should be intrinsically linked to the very fundamental structure of the market. Many factors go into making a purchase decision, and some carry more weight than others. Consumers are frequently thought to buy products based primarily on emotional cue. However, the Internet gives more information than required by the consumer. Thanks to the spread of Internet. A good example I would like to give here is of P&G’s Crest toothpaste which hasnine variations suiting different segments of markets in the world. People don’t easily change their brand of toothpaste; the flavor, color, freshness in mouth, the fizz, the sensation on gums the whole thing matters. For P&G one of the primary driving forces behind the development of so many blends of Crest toothpaste is to cater to the oral health needs of the increase of the baby boomer generation, who are quite health conscious and obsessed with their oral hygiene.
Retailers like Tesco, Wal-Mart, Auchan and Carrefour are all itching up to venture out in India for the 1.27 billion population of this country. Now can you imagine what would be the scenario in the next five years? Assembling, packaging, pricing and logistics in short juggling with marketing mix are going to be hell of a task. These huge retail sharks have changed the style of doing business. And now it is unstoppable….
There is lot of benefit in it. As Warren J.Keegan – an international strategic marketing advisor puts it “a company that fails to go global is in danger of losing its domestic business to competitors with lower costs, greater experience, and better products and in nutshell, more value for the customer.” Driven by the omnipresent economic liberalizations, national economies are becoming more and more interdependent and integrated and the world economy is becoming more and more globalised.
In India, domestic players like Nirma had to fight competition from MNCs like Uniliver, P&G, and Henkel etc to retain its market share. Similarly, Ghadi detergent or Wagh Bakri Chai also had to fight the power of MNCs to retain their market shares in the domestic market. Firms in their own country have to face technological, financial, managerial, organizational, and marketing competition. No matter whether market is domestic or foreign in globalization marketers have to sustain competition, which is the unparalleled feature of business. Hence the shift in marketing mix will be from 4Ps – 4 Cs to 4 Ts.
Product becomes Trade: Globalization offers extensive opportunities for truly worldwide development. One of the major initiatives towards world trade and economic cooperation is the recent signing of the Uruguay Round (UR) of the General Agreement on Tariffs and Trade (GATT) is seen as the most comprehensive and ambitious of all rounds of talks among GATT-member countries. Economic “globalization” is a historical process, the result of human innovation and technological progress. It refers to the increasing integration of economies around the world, particularly through trade and financial flows. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. There are also broader cultural, political and environmental dimensions of globalization. Global markets offer greater opportunity for people to tap into more and larger markets around the world. It means that they can have access to more capital flows, technology, cheaper imports, and larger export markets. Why firms go international – there are two factors, which lead them to do so. One is pull factor, which is proactive. In this situation the companies opt for international markets for their attractiveness, widening the scope, relative profitability and growth prospects. The other factor is push factor, which refers to compulsion of domestic market, like saturation of the market, thrust of competition etc. Most of the push factors are for reactive reasons. Multinationals like Whirlpool, Samsung, LG and Electrolux are making their prominent presence in India and China. Two key points, which are driving them to these two Asian Countries, is the cost-effective manufacturing and R&D facilities. The Indian manufacturers besides Tatas, Ambanis, Godrej, L&T or Birlas a host of small and medium sized companies had to bring about highly commendable improvements in their business operations, living up to the dictum ‘survival of the fittest.’ These are the positive effects of globalization.
The Indian economy has grown rapidly over the past decade, with real GDP growth averaging some 5.5% annually, despite external shocks. Recognizing the important linkages between trade and economic growth, the Government has simplified the tariff, eliminated quantitative restrictions on imports, and reduced export restrictions. It plans to further simplify and reduce the tariff. To help counteract the anti-export bias, inherent in import and other constraints, export promotion measures have gained in importance. The Government has recently announced a further increase in these measures and pledged to reduce export restrictions. The policy has also suggested the creation and strengthening of enclaves such as export processing and special economic zones, which would “immunize” exporters from the constraints affecting the rest of the economy, such as infrastructure and administrative problems. The Government estimates that annual export growth of almost 12%. Hope the policy makers are listening. International trade has become the key word of the present era. It has grown phenomenally. So Product becomes Trade.
Price becomes Tariff:In today’s business the exchange of goods and services across international boundaries or territories is become normal. In most countries, it represents a significant share of GDP. Tariff refers to the duties or taxes imposed on internationally traded goods when they cross the national borders. Virtually all of today’s developed countries built up their economies using tariffs and subsidies (and many other measures of government intervention) throughout the 19th century and most of the 20th century (in particular, until the early 1970s). United States maintained average industrial tariffs at around 40 per cent, and never below 25 per cent except for brief periods, far higher than many other developed countries. During 1950-1973 the so-called ‘Golden Age’ the six fastest growing countries including America were high tariff countries Japan, Italy, Austria, Finland and France.
One of the most important features of the international trading environment is the proliferation of trade barriers. A country can have several reasons for imposing a tariff. For example, a revenue tariff may be applied to an imported product that is also produced domestically. The primary reason for this type of tariff is to generate revenue that can be used later by the government for a variety of purposes. This tariff is normally set at a low level and is usually not considered a threat to international trade. When domestic manufacturers in a particular industry are at a disadvantage, vis-à-vis imports, the government can impose what is called a protective tariff. This type of tariff is designed to make foreign products more expensive than domestic products and, as a result, protect domestic companies. A protective tariff is normally very popular with the affected domestic companies and their workers because they benefit most directly from it. India has had one of the highest tariff walls in the world. The Chellaiah Committee steadily reduced the peak level of tariffs from over 300 per cent in 1995 to 25 percent in 2003, excluding agriculture and dairy products. The organizations like WTO prefer tariffs to non-tariff-barriers (NTB) because tariffs are transparent and less regressive than NTBs. Thanks to WTO, there has been a significant replacement of NTBs by tariffs. Hence, Price becomes Tariff.
Place becomes transportation: Brilliant marketing logistics covers physical distribution plus managing marketing channels. The importance of transportation to economic growth and productivity is undisputed. Transportation confers place-utility and time-utility to products and services. At the macro level, progressive transportation modes contribute handsomely to the national economy. At the micro level, techniques have been developed and refined for determining the economic impact of transportation programs and projects. It has been observed that there is a shift in hiring services of contracted and third party transporters by many organizations. An increasing reliance on the use of externally contracted services eases out maintenance and logistics tensions. In transport terms, this is witnessed by the growth of the logistics and total distribution providers including express freight and logistics services companies. Economies of scale achieved within the transport sector by logistics providers act to reduce the costs of provision of the transport element of a business, together with increased complexity and benefit of using Intelligent Transport Systems (ITS) in the delivery of the logistics ‘product’. UK High street retailers including Marks and Spencer and Sainsbury regularly contract a majority of their distribution functions to third party suppliers, although Sainsbury maintains a small number of own account transport distribution facilities. Close home; the big retail organizations like Shopper’s Stop, Viveks, and Big Bazar also work on intelligent transportation logistics to achieve economies of scale. Key to the increasing globalization of industry is the provision of quality air transportation. Air services have a vital role in reducing travel times, increasing accessibility and therefore improving economic efficiency and productivity. Critical factors in companies’ decisions to locate near an airport include the need for rapid delivery of products (air freight) and for international business travel. Airports serve an important role in attracting inward investment, particularly from overseas, help to stimulate and sustain the growth of local businesses by opening up new markets and supply chains. Of course of particular importance for air transport is the level of services provided (e.g. direct flights to relevant locations at suitable times or good inter-connections) and surface access as well as the actual physical infrastructure.
A research shows that businesses in computing, software, research and development, biotechnology and some food manufactures as well as the banking, finance and insurance are heavily dependent on air freight and air services prefer to be located near the airports. Airports can promote the ‘clustering’ of businesses, whereby a number of interlinked manufacturing and service activities are concentrated in one place. Airports are frequently the focus of ‘clusters’ of businesses and services. It is important, to examine transport factors such as timing, reliability and perception of cost in the value chain. Sometimes, it can be as important as cost itself. Movement of goods both upstream and downstream of elements of the manufacturing process has become typified by inclusion within the wider production process. The transport elements of the production become internalized to the costs and pressures of the wider supply structure. Tighter control of delivery and use of stock, Just In Time (JIT) practices, and a demand for added value in components (part finished and partial component assembly) increases demands on the logistics elements of the supply chain. Demands placed on businesses and supply is also changing, in line with increased accuracy and flow of information, and in terms of consumer expectations. Multi-national and large firms have maintained and increased the complexity of their operations while reducing own account transport requirements, while many smaller sized companies have developed around geographical and technical clusters resulting in changed demand and reducing costs of transport provision. The changing pattern of logistics especially (but not solely) in manufacturing has potentially profound implications for the role and impact of transport upon employment location (consumer service companies are also greatly affected by logistics changes but front line premises are more dependent upon the best customer location, although warehousing may be affected by logistical changes). Transportation plays a pivotal role in making the goods and services available to customers – progressive transportation models help the businesses to become successful. So Pace becomes Transportation.
Promotion becomes transformation: The dictionary meaning of the world transformation means to put into simpler terms, to change from one form, function, or state to another; convert or transform. Promotion keeps the product in the minds of the customer and helps stimulate demand for the product. Promotion involves ongoing advertising and publicity (mention in the press). Activities like advertising, translating message to the consumers and transforming the business with profitable sales are often considered aspects of promotions.
The advertising industry is passing through one of the most frantic periods in history due to diversity in media channels. The stalwarts are unable to handle more curious and aware customer. Diversity is the central issue of the global village. The multicultural and multilingual effects of society reflect on media diversity. Television networks, which once upon a time were the best option of reaching the mass audience, are no more a favorite of advertisers. It does not attract the same amount of viewing anymore. Digitalization is taken over. Could computing is adding to the diverse media habits of both marketers and consumers. Change in TV-viewing habits is however; only part of a much wider shift in the way media is consumed. People are spending less time reading anything, they prefer reading and writing on their mobile handsets. But, they are going more to cinemas listening more to the FM radios, people are turning in ever increasing numbers to the Internet. This shift is due to escalating need of the consumers to access information easily. The technology bust is changing the media habits of the people like never before.
Getting trendsetters to buy new product or service is no great idea. The scene is changing. Everett Roger’s innovators and early adopters are no more the favorites of the markets, instead now they look forward to pursue the prosumers. Prosumers can be defined as professional consumers. A large chunk of marketers are of opinion that this group is much powerful. They are not impulse driven like the innovators and early adaptors; they go slow and steady but once they accept a product they support it. They are serious buyers in sense they do a lot of research before their buying decision. From a high-tech product like a camera, a VCD, a computer to not high-tech product like clothing or a professional course the prosumers venture to buy these only when they are satisfied with their self-study. This group of consumers is proactive in nature. Euro RCGC, a world renowned market research agency recently completed their prosumers survey spanning over nine countries in the world. The study concludes that prosumers represent 20% or more for any category of products. They can be found everywhere in the world, they are vanguard of consumerism movement. The prosumers often reject traditional ads and invariably use the Internet to research for what they are going to buy and how much they are going to buy for what price etc. They don’t trust companies and brands, which are not advertised on Internet. Companies have to be extremely open about providing information on net to attract these prosumers.
Prosumers are by definition early adopters but they are also much, much more: They are proactive in seeking out information and opinions; active in sharing their views and experiences with others; ahead-of-the-curve in their attitudes and behaviors. Early adopters tend to be more “one dimensional”, i.e., they tend to be defined by the particular behavior of adopting early. The prosumers demand transparency and authenticity from the marketers. Transforming them into consumers requires a different ball game altogether.
Traditional marketing is changing; customers are getting more sophisticated and price sensitive. They expect products and services to be delivered faster and more conveniently and they have no qualms about switching to competitors. Competition is making firms edgy, with customers responding swiftly to any new development, irrational rivalry among products, harsh price wars, and industry is changing at a rate that is hard to predict. Innovation is the key for sustenance. Promotion therefore becomes Transformation.
The market was and will always remain indefinable. Customer is the KING. Give him what he wants. Companies survive on the strength of their brands; marketers must be ready with strategies if brands fail. Some time companies suffer due to unclear objectives, myopic view of markets can spoil the entire strategy. When products reflect corporate desire rather than customer needs it portrays ‘Marketing Myopia’ of the company; respond fast by shifting from 4 Ps to 4 Ts.