7Ps Marketing Mix: Importance and Components

What’s it: 7Ps is an extended marketing mix by considering the specific characteristics of services. The 7Ps marketing mix consists of:

1. Product 
2. Price
3. Place 
4. Promotion
5. Physical evidence
6. People
7. Process 

7Ps components

7Ps are important. It provides the company with variables to create value and generate a competitive advantage in marketing. In the conventional marketing mix, marketers use four variables: product, price, place, and promotion. Then, they added 3 other variables to consider the service market’s characteristics: physical evidence, people, and processes.

Product

Product refers to something to satisfy consumer needs. That we call goods to refer to tangible products. Meanwhile, we call those who are intangible as services.

To satisfy consumers, the company designs a unique selling value proposition. It is the uniqueness with which the company strives to satisfy customer needs and differentiate its products from competitors’ products. For example, it may be a low price or high quality.

The mass product offers a standardized product and is relatively similar to other products on the market. However, to attract customers, companies offer them at a lower price, so consumers spend less money to buy.

On the other hand, some companies offer differentiated products to accentuate high quality. They offer uniqueness, whether in terms of features, performance, style, or even packaging, as a way to entice people to buy. With this uniqueness, the company hopes consumers are willing to pay a higher price. That way, the profit margin per unit is higher than the standardized products.

Price

Setting the selling price is an important decision for the product to be successful in the market. Companies consider the customer’s willingness to pay. They measure the maximum price that a customer is prepared to pay for the product (we call this the reservation price).

Price represents the product’s monetary value, which consumers see as the cost of satisfying their needs. If consumers perceive the product as having low value, they are reluctant to buy or choose alternative products. Conversely, if the consumers’ perceived value is higher than the price, they are willing to buy and are satisfied.

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Under mass marketing, companies charge low prices to attract purchases. They offer standard quality products. Products have a low-profit margin per unit. Thus, to generate the total targeted profit, they are trying to generate high sales volume.

Meanwhile, under differentiated marketing, firms charge high prices. They offer uniqueness, so consumers are willing to pay more. Products have a high-profit margin per unit. Thus, to achieve the same total profit as mass products, the company only needs a lower sales volume.

How low or how high the company sets the selling price requires in-depth research. Whether for mass products or differentiated products, too-high prices will cause customers to switch to competing products. Conversely, a too-low price will result in a less than optimal level of profit.

The company considers various factors to carry out a pricing strategy, including:

• Production costs, covering variable costs and fixed costs per unit
• Consumer profile, for example, whether they are quality conscious or price-conscious consumers
• Types of product, for example, whether a mass product or a differentiated product
• Target market, for example, is it a new market or an existing market
• Competition in the market, including the number of competitors and their strategies
• Price elasticity of demand, how sensitive is the consumer if the company changes the price.

For example, some companies may consider production costs more to determine the selling price. They add a percentage of profit (mark-up) to the average cost to produce the selling price. This method is more straightforward than other pricing methods, such as value-based pricing and competition-based pricing.

Promotion

Marketers take advantage of promotions and communication channels to inform products, influence consumer perceptions, and encourage them to buy. Promotion strategies can take forms such as advertising, sales promotion, public relations, and direct marketing. They are often referred to as the promotion mix.

There are several specific objectives of promotion, including:

• Attract potential customers in the existing market to purchase products
• Communicate and encourage consumers to try new products
• Increase the number of consumers by targeting audiences in new markets
• Inform consumers about product quality improvements
• Influencing consumers to prefer the company’s products over competitors’ products

Place

Place is not just about sales locations. It is broader, namely ensuring the product is available at the right location and time when consumers need it. For goods, selling near the target consumer’s location is one way. Another way is to develop effective distribution channels, both internally and by collaborating with external distributors or retailers.

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Meanwhile, service companies have unique characteristics. They do not rely on distributors or retailers to provide services. Instead, they provide it directly through face-to-face interaction or special devices such as software.

For some service businesses, finding a strategic location for customers and the company is critical. Fine dining chooses a busy city center where a large number of potential customers are available. For customers they are comfortable because it is close to where they live or work.

Physical evidence

Physical evidence refers to tangible elements that consumers can enjoy when interacting with companies. It may be the physical environment in which the company provides services. Or, it might be where the company sells products like retail space.

Layout, lighting system, or interior design is one way to provide comfort for consumers. They influence the consumer’s emotion when the interaction is taking place. For example, a messy interior design makes consumers uncomfortable. It creates an unpleasant atmosphere, thus giving consumers a lousy experience. Finally, they are reluctant to transact or visit the same location at a later date.

Person

People may refer to staff or salespeople who work for businesses and interact with consumers. When they serve customers, in effect, they are building relationships and trust with customers. If they are proficient, they create a positive impression in the eyes of consumers. Ultimately, consumers are willing to buy and, perhaps, recommend to others.

The quality of human resources determines the success of a company. Education and skills are determining factors. Another factor is attitude and motivation. So, for example, sales staff know what they sell and how to sell it. And they also have to show a good appearance, body language, facial expressions, and compelling speech.

Process

The process represents a series of actions or steps in selling products and providing services to consumers. Right processes allow companies to provide the same standard of service to all customers. Right processes also save time and money by increasing efficiency.

The process includes how companies interact and meet consumer demands. It is at the core of activity in the service sector. In purchasing furniture at a traditional retail store, for example, might include the process of selecting products, interacting with sales staff, paying at the checkout, and delivering the goods home. Because the process is the point of contact between the company and the customer, it is essential to achieve a competitive advantage in the service business.

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Processes will vary depending on the nature of the company’s business. However, what is certain is that companies have a unique or special way of serving their customers. Take the restaurant, for example. Some restaurants provide open kitchen facilities. Visitors can see the process of making the food they ordered.