How to define an (online) proposition?
The 4 Ps of the Marketing Mix
Traditionally a proposition (also called the Marketing Mix) can be defined using the four Ps (see also: https://en.wikipedia.org/wiki/Marketing_mix):
- Product: What are/should be the (in)tangible benefits of the product(s)? Do these benefits meet or outperform those of competitors? A product life cycle analysis can help to determine what new products should be introduced while other products may have to be removed out of the assortment.
- Price: For what price should the product(s) be offered? Should the product(s) be sold at a discount price or be moved towards the premium segment? If multiple products are offered, what should be the difference in price? What discount model should be offered (for example, what prices apply if the customer buys 5, 25 or 100 items)? An analysis of the price lists used by competitors helps to determine the price and so does a price elasticity study among customers.
- Promotion: Promotion covers the messages and the methods of communication used to attract, convert, close and delight costumers.
- Place: Where can the product be bought? This starts with the question whether the company wants to sell its product directly to the intended user or use the sales power of resellers/retailers. Next, the intensity needs to be determined. Various strategies exist, such as intensive distribution (selling everywhere), selective distribution (only to a limited set of resellers/retailers), exclusive distribution (only via one partner).
The proposition may differ per product and country as the external environment differs (other customer needs, other competitors, etcetera).
The 7 Ps of the Marketing Mix
Over the years the 4P model has been adopted in many different ways. The 7P model adds three additional aspects to make it more relevant for companies that offer a service and for retailers:
- Physical evidence: The evidence which shows that a service was performed, such as the delivery packaging. A great example is the way in which products can be packed (YYY). Some consumers even put their “unboxing” experiences online.
- People: The employees that actually sell, deliver, implement and offer after-sales services to clients. Where would you buy more frequently: a shop where the sales staff only sits behind the till to finalize the transaction or where a store associates helps you select the right product?
- Process: The processes and systems needed to offer the products and/or services.
The figure below illustrates how a proposition can be defined using the 7P model.
The 4C model
The 4C model is an adaptation of the 4P model and is considered more suitable for defining an online proposition. The 4Cs are cost, convenience, consumer value and communication.
This can be used instead of price. Instead of looking at the price companies charge to consumers, you can also consider what the actually cost are for the consumer. The costs can include delivery costs for an online order or maintenance and insurance costs when buying a car. Companies should not only look at their own price, but at the total costs of the product or service they offer.
Some examples of new ways to look at costs are:
- Private lease of, for example, a car or even a private jet (Nicholas Air), where a product is paid for on a monthly basis and includes all costs (insurance, maintenance), except for gasoline.
- Subscription commerce, where the product is no longer bought once but customers can subscribe to an automatic replenishment service, e.g. voor razors (Dollar Shave Club).
With the rise of online, the location is becoming less important. You can order products anywhere using the Internet. Ease of use is considered a more important criteria. Part of ease of use is that you can buy products via several channels (such as online, on the road and in stores). Companies should facilitate the entire customer journey (see: also usability, yyy).
Some examples of new ways to look at convenience are:
- The one-click buy button of Amazon Dash, which makes it easy to re-order products with a single push on a button. In addition, machines increasingly use the Internet to automatically order refills without any human intervention.
- The Albert Heijn (a Dutch supermarket chain) mobile app, which prefills your mobile grocery list automatically based on previous orders. You can take the grocery list to your supermarket but you can of course also select pick up or let the entire list be delivered at your home.
Increasingly, the product itself is not the real added value perceived by the customer. A customer does not want a laundry machine; he wants clean laundry with the least effort required.
Some examples of new ways to look at consumer value:
- Fixables offers a coffee experience with a great cappuccino and the possibility to read the newest magazines, use the free high-speed wifi service or watch television while your mobile phone is being repaired. As a result, customer no longer experience the pain of waiting for their phone to be repaired, Instead they can use the time to relax or work.
- Tesla upgraded its car software in October 2015 with new features, among which the option to allow the car to drive itself (the driver still has to hold the steering wheel).
- KLM, an airline company, offers customers when they check-in online the option to determine where they sit based on their Facebook, Google+ or LinkedIn profile.
Instead of promotion that implies communication is one-sided and pushed towards the customer, modern promotion is about interacting with the customer. As a result, communication goes both ways.
Some examples of new ways to look at consumer value:
- Fashion retailers increasingly show off their new designs to their (selected) customers, for example via Facebook. Based on their feedback (thumbs up) the actually number that has to be produced is determined. The customer becomes part of the design process.
- Harley Davidson has created an offline community of bike lovers fostering the creation of local biker groups. The social gatherings increase the value of owning a Harley Davidson bike.