Marketing needs 'the fifth P'—payment
Marketing needs 'the fifth P'—payment
Since the 1960s, the smartest of marketers have developed an offer taxonomy based on the four Ps—product, price, place, and promotion. For years these four Ps have helped us marketers measure, classify, and optimize different offers against one another based largely on these trigger points, allowing for an organized and optimized marketing mix that drives revenue with the most efficiency. And that taxonomy—or process of determining how all the offers from brands should be broken down into distinguishable pieces—has held its grip on the marketing industry.
The marketing mix was comprised of the four Ps—the age old decision-points in that taxonomy and the levers that each marketer must use to optimize sales when taking a specific product to market.
These offers (let's say within an email or banner ad) generally communicate parts of the various elements of the four Ps. What is it about the product and its features that make it of interest to me? What is its price, be it a retail price or a sales price. And does the specific pricing strategy include additional incentives like free shipping? Where can I get it, and at what times? And finally, how are the other elements of the four Ps being communicated, and perhaps more importantly, messaged to the desired customer through paid, earned or owned media? Over the years, many academics have attempted to expand on, modify, or completely change the marketing mix beyond the four Ps. A good overview on these efforts is outside the scope of this post, but can be found here. Until now, those simple Ps have reigned supreme—but should that change?
Recently, Ron Shevlin of the Aite Group, a respected colleague of mine, postulated in his great series of blogs, correctly entitled “Snarketing 2.0”, the need to add “payment” to the marketing mix. He argues that there is “growing evidence that the choice of payment methods available for a particular product can influence a customer's choice of product—regardless of the price. This would qualify payments as a lever—or fifth P—that marketers can manage.”
After thinking on this long and hard, I'd have to say that I generally agree with this, but for perhaps different reasons. Ron further states that “when the four Ps of marketing were conceived in the early 1960s, the choice of payment methods boiled down to cash, check, and credit card (and I'm not even sure how many people had a credit card back then).” The ever increasing number of payment options, like prepaid and gift cards, he says, is the actual revolution in payments.
The real revolution is happening not only in our payment options, but in how payments are made. In the early 60s, while people could use cash, check, or credit, they could really only pay using one method—a fixed point-of-sale terminal manned by a cashier. Now, not only do we have a choice of method of payment, but also how we pay. For example, when people pay a merchant that has Square attached to an iPad, they are still paying with a credit card. Yet they must also determine whether they trust that the Square-enabled transaction will be as secure as the “old” register method or whether they will still get their points, etcetera. So we have to look at payments as not only what method we pay with, but how that payment is being made.
We have many abilities to pay today with more on the way. Square and its competing devices from PayPal and Intuit, among others, are one type. The coming promise of Near Field Communications (NFC) is another. If our smart device is enabled with NFC, then the number of “devices” that will accept payment increase almost infinitely. NFC can be on another smart device, embedded in a poster to deliver movie tickets for example, built into the product itself, or even the uniform of the “cashier” accepting payment. Or, QR codes can be scanned with backend payment capabilities so that any QR code can actually complete the transaction.
Of course, the big iron cash register companies won't give up this “last mile” without a fight.
Finally, and perhaps most importantly, there is the looming battle to control the digital wallet—to be the one place where anything can be paid for, all loyalty programs can be tracked and managed, money can be gifted or loaned to a friend or family member, and banks deposits can be made using a picture of a check. Major players are forming to fight this battle. Obviously Google Wallet and Apple's Passbook immediately come to mind (both NFC-based). But wireless providers like AT&T are also banding together with credit card issuers under the Pay with This umbrella. Bay and PayPal have announced their digital wallet initiative, and Walmart has teamed with other major retailers to announce their own wallet, dubbing it the Merchant Customer Exchange (MCX).
Any marketer working on the marketing mix for his or her product line has to recognize that choosing among these several options will mean that many potential customers, who have opted into competing options, simply won't buy that particular product because of the chosen payments strategy.
That's why I believe the fifth P, payment, has enough complexity, variety, and risk to be considered a fundamental element of the marketing mix. Just as mistakes in product or price can kill a marketing effort, so now will be making those mistakes in payments as well.
Bob Fetter is senior vice president of Pluris Marketing.