Anyone that has ever taken a marketing class will remember learning the marketing four P’s: Product, Price, Place, and Promotion. These four pillars of the marketing mix are the foundations for any marketing degree. They’re at the root of what any marketer should consider when creating a marketing strategy.

It seems, however, that when companies get into the nuts and bolts of their marketing, many marketers lose sight of the basics. Companies perhaps too heavily focused on promotion, lose sight, or even relinquish control of the remaining three P’s to other parts of the organization.

This oversight is extremely myopic for any company, but especially counterproductive when trying to build a brand.

The consumer establishes a brand’s value on the market. Consequently, a brand’s effectiveness directly determines the success of its promotional efforts. The importance of promotion, therefore, rarely eludes most companies when it comes to brand development.

What is less obvious is the role that the other 3P’s play in creating brand value. Influencing consumer brand perception relies on the strategic decisions made regarding product, price, and place.

Below are three strategic insights that marketers should consider when creating a brand.

Beyond the Core Product

While teaching a “Principles of Marketing” course, I discovered fresh insight into Phillip Kotler’s three levels of product. Unlike Kotler’s viewpoint, this new strategy perspective describes product offerings as follows:

1. Core Product: represents the solution for sale — the form/function utility that creates the set of benefits that allow it to fill a need.
2. Expanded Product: includes the mix of tangible attributes and intangible product support.
3. Product Concept: describes the product in terms of the market niche to be served, the life cycle it will experience in the marketplace, and the impact of manufacturing and selling it on the company itself.

Most, if not all, companies understand the core product concept. Beyond that is this idea of the expanded product: What does the product include that allows it to stand out or differentiate itself from other products in the same category?

These factors could be anything that adds either tangible or intangible value, such as the type of packaging used to warranties or even just the ease of possession by the consumer (e.g., payment plans and delivery options).

Again, many companies understand this aspect and apply it to their product marketing strategy.

Even more broadly, however, is the product concept perspective. This strategic choice is where brands truly start to differentiate themselves in the branding process.

It can be especially powerful if the brand can create a new product classification as a result — think Apple iPhone’s creation of the smartphone category. Another great example is how Smartwool created the performance merino wool outdoor sock category.

Smartwool started back in the early 1990s, founded by a couple of ski instructors. They wanted to make better ski and hiking socks (Core Product).

To differentiate, they chose New Zealand Merino wool. Merino wool offered not only the traditional properties of wool (insulating even when wet), but unlike coarser wool, it was not itchy.

Additionally, they used shrink-treated yarn, which allowed consumers to dry their socks in a dryer (Expanded Product).

What ultimately set them apart was the premium price they charged. At $20/pair, Smartwool challenged the conventional wisdom at the time, the idea that consumers would not spend that much on a pair of wool socks.

Indeed, the outdoor industry scoffed at this when the brand introduced itself at the Outdoor Retailer trade show in 1995. Yet after retailers discovered the value that consumers would receive with Smartwool, the brand took off.

As a result, Smartwool had created a new outdoor sock category — Premium Technical Performance Socks (Product Concept).

Twenty-five years later, the brand maintains a greater than 50% market share for socks in the outdoor specialty retail channel. Today, multiple premium outdoor sock brands are competing in this category, including brands like Darn Tough, Point6, Fox River, and Farm to Feet.

Make Sure the Price Is Right

Perhaps the easiest way for many companies to determine price is by marking up product costs with a target profit margin. Most marketing professionals, however, will state that’s not how you create a pricing strategy.

A detailed discussion on pricing strategy is a separate topic itself with countless articles on pricing that demonstrate how this approach risks leaving money on the table.

Marketers must recognize that price impacts branding. As a result, they need to consider three primary issues: reference pricing, strategic objective, and pricing strategy.

All consumers maintain a reference price for most goods and services. This comparison typically manifests itself as a range of acceptable prices. Brands entering an existing category need to be sensitive to this and ensure that their offering falls within that range.

Consumers may draw premature conclusions about the brand if the offering price is at the extremes. If too low, then quality and value may be questioned. In contrast, if too high, consumers may not even consider the offering.

Perhaps the rare exception to this is if the brand can create a new category as Smartwool did with socks and Apple did with the iPhone.

Next, brands need to determine their strategic objective regarding pricing decisions. Most marketing literature details two specific pricing strategic objectives:

• Profit Maximization — the aim is to generate the highest net income over time. All sales need to ensure that acceptable profit margins are maintained.
• Volume Maximization — the primary objective is to generate as much sales volume (and revenue) as possible. This objective creates cash flow at the risk of lowering profits or operating at a loss.

Volume maximization may be appropriate for commodity offerings in which narrow profit margins are the norm for the category. Yet, I would argue that most brands are seeking long-term growth, which requires investment to increase brand awareness, market penetration, and growing brand loyalty.

The best strategic pricing objective, therefore, is maximizing profits.

There are multiple pricing strategies out there. Some brands employ skim pricing, charging a high price to attract a particular consumer or to exhibit a specific value to consumers. This approach primarily works for luxury or premium brands.

Other brands go with a price penetration strategy, which is employed to generate sales. In this situation, the company is more likely seeking volume maximization.

A new brand looking to compete in an existing category, though, should consider neutral pricing — aligning your price with the competition. Brands using this approach are less likely to turn away potential consumers by being too expensive or leave money on the table at a lower price.

📷📷ID 117047040 © Ognyan Chobanov | Dreamstime.com

Beyond matching competitors’ prices, neutral pricing requires two critical steps before implementation. The first is that the brand’s differentiation has to be crystal clear. Next, brands need to research the market and determine its positioning among the competition.

These two steps, coupled with price parity, allow brands to offer a unique selling proposition to consumers. This competitive differentiation provides your potential customers with more value at the same price. Without it, consumers are less likely to consider your offering.

When I was VP of marketing for Farm to Feet, we applied a neutral pricing strategy. Our goal was to be a premium sock brand with a 100% American made value proposition.

We set our prices on par with our closest competition by evaluating brands such as Smartwool and Darn Tough. Pricing our products on par with existing premium outdoor performance wool socks allowed us to leverage the current perception of these known brands.

Ultimately, Farm to Feet justified its premium pricing using the brand’s competitive difference, securing its place in the category.

Place Is Not Just a Location

Traditionally, many people think that place, from a marketing perspective, refers to the sales channels or specific “retailers.” And for a long time, that was probably the prevailing mindset or thought.

Today, however, marketing courses are teaching that place refers to the overarching value chain. More and more, companies are including both the product’s supply chain and the distribution channel in the marketing mix. Brands seeking to be more transparent with their customers recognize the value of this approach.

For some companies, the product’s supply chain is an essential branding attribute. Choosing the right suppliers can be as important or, in some cases, more important than the distribution channels in creating brand value. Being aware of that can improve the brand’s image.

The brand Icebreaker provides an excellent example of employing the value chain in the company’s branding. Icebreaker is a Merino New Zealand based apparel brand, now owned by VF Corp.

Using New Zealand Merino wool, Icebreaker created a whole line of apparel, including everything from base layers to outerwear and accessories.

For several years, they included what they called a “Baacode,” a distinct number on every product package. Using this code, customers could enter the code on the brand’s website, and learn about one of the Merino wool ranches in New Zealand.

Currently, their website provides a robust supply chain story. This commitment to transparency results in the product supply chain becoming an essential part of the Icebreaker brand image.

The 3P’S of Branding

A well-executed marketing mix is critical for any company’s strategy. Equally important is recognizing the role the 4P’s have in branding, and to not lose sight of how they fit into a brand narrative.

Consumers ultimately dictate a brand’s value in the marketplace, which in turn determines how powerful its promotion will be. To sustain this, companies need to make strategic marketing decisions regarding the other 3P’s to influence their brand identity.

Successful brands understand that product requires thinking beyond their core product. Competitive differentiation stems from also creating an expanded product perspective as well as developing a product concept. Ideally, brands that position their offering with a product concept that creates a new category can become a market leader.

Brands that effectively use price neither turn customers away nor leave money on the table. Neutral pricing is an optimal approach for new brands to consider, especially when trying to compete in an existing category. To be effective, however, a unique selling proposition is required.

Finally, brands need to consider the entire value chain when developing its place strategy. A transparent supply chain allows brands to be more authentic, which increases the value consumers will bestow on your brand’s image.

This article was originally published by Dave petri on medium.