A few weeks back, I was arguing for the continued use of the 4P matrix as a valid tool for conceptualizing marketing, including in the online environment. My position was that as a system, they continue to be relevant, as long as we can understand how the definition of each component must be expanded to reflect the new realities.
In the case of products, I stated that the changed environment means a change in the process of facilitating the meeting between wants and needs and those who can service them.
Now comes PRICE. My thinking here is that price as a concept is just as relevant in the connected world as it was previously. As marketers, given the modern structures of communication, we just need to reassess our thinking of price on 3 scales.
1. The price versus purchasing power continuum
The question of whether customers will purchase a good or not is often decided by whether they can afford it or not. We are used to thinking of the available “out of pocket”, the impact of credit schemes, but the change brought about by the recession and economic crisis is in the time frame in which customers think about affordability. If consumer credit used to mean that something that we could not purchase now can become affordable by staggering payments (and paying a premium for that “affordability in installments”) customers now tend to think a lot more short-term about affordability. “Do I have the money now?” is increasingly used as a gauge of individual purchasing power.
When we think of purchasing power, we often refer to that of our niche target, which could be higher than the average. In the new, frugal, economy, I argue that the average purchasing power should become the reference, as our customers can very easily backslide or simply embrace the lifestyle of earning less as a precaution.
Finally, we need to think about the informational context that defines affordability. Customers can easily monitor the movement of prices across varied categories of goods and may time their purchase to take advantage of the fluctuations (see couponers and the evolution of Groupon and its clones). This is where our online world differs from the previous generation’s: in its ability to gauge better, quicker, easier when a product moves in or out of the range of our purchasing power.
2. The cost / value ratio
We all know this one, and we’re also told that it is a significant concern to generation Y, who expect more value for less cost. The shift here is, again, in the ability to assess that value. First and foremost is the increased communication, whereby more and more information about the value of a product to various people is available. Traditionally evaluated goods (such as movies, books or restaurants) are now just a few among millions of reviews of everything. More importantly, it’s not only the features and functionality, the usability and durability that are being assessed, but also the more intangible aspects of value such as the experience, or the status that possession provides (for example the “Likes” or other reflections of how others interact with your purchase). Therefore, your price must now be set by referencing a larger, wider concept and understanding of value.
3. Price comparison
We’ve always comparison-shopped, looking for the cheapest version of something we needed or desired. But today, that ability is infinitely scaled up. It is now inbuilt into many stores, especially online. It is now possible with the least amount of effort. If comparison shopping for DIY or furniture or groceries often entailed several trips is widely different directions, it does not anymore. Nor is the separation between our own prices (sale, outlet, etc., regional) possible, and even if trudging all the way to the other end of the country for a cheaper pair of shoes, or asking a friend to buy and ship them is not economically advantageous, the customer is still able to know and question your pricing decisions in regard to him.
This perhaps is the biggest change that the WWW has brought to price, but it does not eliminate the relevance of this second P among the 4. Sure, if you think of price only as your price point, that elusive combination of cost-covering, profit making, affordability, yet desirability at which customers and company are both satisfied, then yes, you are using the “matrix” wrong. But if you understand the new content behind the figure that you must advance, you will find that PRICE is still a whole lot of relevant.