8.7: The 4 Ps: Price and Place
The Second P—Price
The second P in the four Ps of marketing is price. Naturally, a company needs to price its products in a way that allows it to operate profitably. However, pricing is far more complex than calculating the cost of goods and adding on an additional amount that will let the business meet its desired profit margin.
Price is the only element of the marketing mix that directly generates revenue for a company. It’s also the most flexible element, and it’s important to continuously monitor and revise it.
When determining price, marketers consider a number of factors, including:
- Customer value: How much are customers willing to pay for the product?
- Competitors: What competitors are charging for similar products?
- Supply costs: What are the costs of supplying the product?
- Seasonal discounts: What discount should we offer and when?
- Business model: How does the price fit with the company’s business model?
Marketers may also use pricing strategies like:
- Cost-plus pricing: Adding a fixed percentage to the unit cost to determine the selling price
- Competitive pricing: Adjusting prices based on what competitors are doing
- Price skimming: Starting with a high price and then reducing it as customer volume increases
- Value-based pricing: Basing the price on how much customers are willing to pay
- Penetration pricing: Starting with a low price to build a customer base
- Dynamic pricing: Continually changing prices based on market forces like competitor pricing and customer demand
Authenticity and Indigenous Products
Cultural artistic expression revitalizes and reaffirms the heritage of Indigenous peoples in Canada. The distribution of authentic arts and handicrafts is one way by which Indigenous populations can preserve their cultural identity. A global marketplace for Indigenous arts, handicrafts, and tourism has been built on the widespread interest in Indigenous cultures, which is a necessary tool for alleviating socio-economic hardship. Due to this rise in popularity of Indigenous products, an entire market segment has developed where inexpensive, inauthentic, and mass-produced items are being marketed as Indigenous. As non-Indigenous companies commoditize culturally-appropriated arts and handicrafts, they negatively impact authentic Indigenous producers. Kat Pasquach, the owner of Culture Shock Jewelry, offers her insight into the differences between cultural appropriation and appreciation. She further describes how the time, labour, and cultural expertise of Indigenous products warrant the demand for higher prices. The reclamation of culturally significant arts and handicrafts is a crucial endeavour; one that will lead to positive social, economic, and cultural outcomes for Indigenous populations around the world.
Watch the Indigenous Lifeways in Canadian Business “Authenticity & Indigeneous Products” video.
Transcript of “Authenticity & Indigeneous Products” video [PDF–New Tab]. Closed caption available in video player.
Source: “Authenticity & Indigeneous Products” by University of Windsor, is licensed under CC BY-NC-ND 4.0, available in Indigenous Lifeways in Canadian Business by Russell Evans, Michael Mihalicz, and Maureen Sterling, licensed under a CC BY-NC 4.0 license, except where otherwise noted.
The Third P — Place
In marketing, “place“ is the third of the “4Ps” of marketing and refers to where and how a company sells its products to consumers:
- Where: The physical locations or digital channels where a company will sell its products.
- How: The distribution channels, transportation, and storage methods a company will use to get its products to consumers.
- Goal: To reach the target audience and meet sales targets.
A lot is involved in getting a product to the place from which it is ultimately sold. If you’re a fast food retailer, for example, you’ll want your restaurants to be in high-traffic areas to maximize your potential business. If your business is selling beer, you’ll want it to be offered in bars, restaurants, grocery stores, convenience stores, and even stadiums. Placing a product in each of these locations requires substantial negotiations with the owners of the space and often the payment of slotting fees (an allowance paid by the manufacturer to secure space on store shelves).
Retailers are marketing intermediaries that sell products to the eventual consumer. Without retailers, companies would have a much more difficult time selling directly to individual consumers, no doubt at a substantially higher cost. Many retailers do not fit neatly into only one category, for example, Walmart, which began as a discount store, has added groceries to many of its outlets, also placing it in competition with supermarkets. Similarly, IKEA is a furniture retailer but also provides a place to eat, the “IKEA Swedish Restaurant” within the store, placing it in competition with restaurants.
The logistics of place are all the activities required to move a product from the production line to the end user. This includes transportation, warehousing, inventory management, order processing, and selecting distribution channels. Effective logistics requires strategic planning and coordination to deliver the right product to the right place, at the right time, in a suitable condition, and at the correct cost.
The only element of the marketing mix that directly generates revenue for a company.
The third of the "4Ps" of marketing refers to where and how a company sells its products to consumers.
