Four P’s Analysis is a framework that may prove useful for solving consulting case questions.
It can be used to evaluate the marketing strategy for a product.
The pricing strategy that a company employs will affect its market share and profitability. There are three key pricing strategies to consider.
- Competitive pricing: How do prices compare with the competition? Is the pricing appropriate given the product’s quality and relative position within the market?
- Cost based pricing: What is the company’s cost structure? What percentage of costs are fixed and variable? A company that has high fixed cost and low variable costs will benefit from economies of scale and so may want to lower prices to increase market share.
- Value based pricing: Is the product a commodity or differentiated? Do different customer segments have a different willingness to pay? Are customers price sensitive (see “Price elasticity of demand”)? If prices are changed, how will this affect sales volume and product perception?
Is the product a low cost commodity or differentiated? Products can be differentiated where they differ in quality, features, availability or branding.
How does the product compare with what the competition is offering? Are their viable substitutes? Do customers face high switching costs?
How does the company promote its products (advertising, direct sales, indirect sales, trade promotions, public relations)? Is the company reaching its target customers? Can the company afford to increase its marketing budget?
Understanding the customer’s buying decision process can help a firm decide where to influence the customer’s purchase decision.
What markets and market segments does the company serve? How does this compare to the markets and market segments served by the competition?
What distribution channels does the company use to get products to the customer (mail order, online store, factory outlet, retail store, supermarket, department stores, or network marketing)?
Are existing channels consistent with the company’s overall strategy? Are there other channels that the company could use?
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