Impact Pricing Blog

Question:  What do you think is the connection between pricing & marketing? I read that a lot of people say “pricing is part of marketing, because it is one of the 4 P’s”. I am no marketeer myself, but I would like to disagree with them. I think they (erroneously) mistake Pricing for Price. The difference lies in your much-used sentence: “pricing is a verb, not a noun.” As to give an opposing view, I would like to think that the Price (as part of the marketing mix) is a product of the pricing-process. And that the pricing strategy is bigger than “just a part of marketing”. What do you think about the relation between the marketing mix and pricing?  S.

 

Answer:  S, You are absolutely right.  Pricing is much broader than marketing.

The 4 P’s: Promotion, Product, Place, Price

First, as a marketing professor, let’s defend the 4 P’s.  If you think of marketing as the process of managing the touch points with buyers, those 4 P’s are pretty reasonable. Promotions or advertising are a valuable touch point. The product is crucial to what the buyers are buying. The Place, or distribution network, is the point of sale to the customer and is critical. Finally, Price is an equally important touch point.

Next, nobody says Product is a part of marketing any more.  Companies have Chief Product Officers. They have product management teams that don’t report into marketing. Anybody who uses the 4 P’s as a structure to organize their company will struggle.

 

Pricing: Customer Value and Infrastructure

Pricing is a verb, not a noun. I’d say 75% of pricing is creating, communicating and capturing value. To implement that 75% well requires product management, marketing and salespeople all to understand value and then do their best to enhance the market’s perception of that value.

The other 25% of pricing is probably infrastructure. This includes managing price books and setting up the IT systems to help quote and monitor pricing. Very important, but first a company needs a strategy for pricing.

 

To summarize, don’t worry about what people write as long as your company doesn’t read it.  People still write about cost plus pricing.  It doesn’t make it right.

 

 

**Note: Mark Stiving has an active LinkedIn community, where he participates in conversations and answers questions. Each week, he creates a blog post for the top question. If you have a question, head over to LinkedIn to communicate directly with Mark.