Article

Why the Four P's of marketing no longer matter in retail

It's mobile influence, not mobile commerce, that retailers should be focused on.

April 17, 2013

By Bob Lord and Ray Velez

Authors of "CONVERGE: Transforming Business at the Intersection of Marketing and Technology"

Thanks to technological change, many tried-and-true practices that arise from the Four P's of marketing — product, price, promotion and place — have to be thrown out the window.

Product:The product now is an open book. The days when all you had to worry about was Consumer Reports are long gone. Customer reviews are ubiquitous and routinely impact how customers buy.

Pricing: Once easy to manipulate, pricing now needs to be transparent. Obfuscation won't work, and retailers have to be ready and willing to price-match and figure out a strategy for defeating showrooming.

Promotions: In-store promotions can’t just regurgitate the corporate line. They need to incorporate reviews and otherwise offer social proof of the value of the products for sale. Searching online is inherently social. More than 60 percent of users start their surfing behaviors with a Google or Bing search. Page rank algorithms depend on social to drive link strength and popularity. If your site isn't part of the conversation, folks won’t be finding it with Google.

Place:When it comes to place, or distribution, you have to do it all. Customers want to be able to order online and pick up in-store. They want to start a transaction on the website and finish it on the phone. They want it their way, and it’s more incumbent than ever on commerce providers to give it to them.

In the past, these four Ps were determined by the brand. Now, the consumer is in control, and not only does she know what she wants but the list of demands is a long one.

Showrooming, as the practice has been known, has become a constant subject of conversation in retail circles. comScore says about 4 in 10 shoppers check out products in-store and then buy elsewhere — especially online — for a cheaper price. As of last summer, almost half of U.S. consumers had smartphones and 58 percent of them had used the phone for store-related shopping, per a study by Deloitte. Macy's has said that 90 percent of its customers research online at least occasionally before buying in the store.

And once they begin doing that there's no turning back. Typical usage rate for in-store is 50 to 60 percent of trips, per Deloitte. Edgell Knowledge Network (EKN) and eBay Local researchers found that retailers are well aware of the problem and that 8 in 10 expected it to have a negative impact on sales during the 2012 holiday season, with an average of a 5 percent loss. Deloitte, meanwhile, found that about 5.1 percent of U.S. retail sales, about $158 billion, are influenced by mobile and predicted that this number would be 20 percent by 2016. Compare that to a projection of only $5 billion in mobile sales for 2012.

Deloitte ends up with the key insight that it’s mobile influence, not mobile commerce, that retailers should be focused on. Customers have a long list of expectations and at the top is a large amount of information before they make a purchasing decision.

This information-gathering process looks a lot different today than it might have just five years ago. Back then, there might have been a bit of online price shopping and surfing through some product reviews, and maybe a quick phone call to a friend or two if the purchase was large enough. Back then, retailers decided what messages would be in-store and felt safe in assuming that what they told a consumer about a product was the only thing the consumer would ever know about the product. Their signage, advertising, and point-of-purchase materials made up just about 100 percent of content a consumer would on path to purchase.

Pricing practices, especially, have been shaken up. The venerable practice of regional pricing, in which prices are adjusted based on pressures in individual markets, is made more difficult. The Internet, after all, knows no borders. The same is true of offering different prices to different customer segments. In the past, retailers could create one promotion for customers who didn't have strong buying intent without the risk of loyal or likely customers not catching wind of it. Those promotions could essentially be kept secret. Not anymore.

The consumer also expects more information from third-party sources — that's a new challenge for any retailer trying to drive unplanned purchases. They want social proof, that is, what friends and family or category experts think about product, and that's not something that most retailers are set to deliver at scale of 30,000 stock-keeping units (SKUs). Some, however, have tried. Adding reviews was part of an overhaul of the product fact tag, making the product description easier to read, with bullet-pointed key product features and including the average store rating. Putting raw consumers' reviews that aren't wildly positive testimonials on the store shelf is a major step for any retailer. Surely a few sales will be lost because of a low average rating, but the payoff is a deepened relationship with the consumer in-store.

This is the future — and if the stores don't provide peer feedback and information that customers want and are accustomed to getting, then they'll simply get it on their own. After all, it's just a click or two away.

(Photo by Stefan Kloo.)