Behavioral Economics: Moving From Four P’s to Five

LEVI KRAFT

Associate Consultant

Gallup Consulting

levi_kraft@gallup.com

gallup.com

Topic: Open Column

When companies create products, marketing theory says that in order for that product to be successful, companies need to place, promote, and price the product where it can deliver a competitive advantage in the marketplace. This model of marketing has served businesses well, and many successful Minnesota brands have flourished under this old model. But the opportunity to add an equally important fifth P – people – to the marketing mix is now.

The Current Situation

Companies strive to give their customers a consistent brand message. Hotels design rooms to look the same across cities; hamburgers are flavored to taste the same across countries. With global competition strong, companies must look for key differentiators to gain a competitive advantage – adding the “people” element is that key differentiator. Distinguishing your brand requires a strategic focus on those who actually deliver your brand. People are your “brand ambassadors,” and they are the most critical variable in your company’s financial success.

Fulfilling your brand promise takes place at the point where consumers interact with employees: at the department store, bank branch, or hotel. Managers often view cashiers, tellers, and doorkeepers as “warm-body” roles that require little talent. Consumers and Gallup, however, don’t share this narrow view. Friendly, engaged employees – those with the talent to fulfill your brand promise – are where lifelong relationships are won and lost.

Gallup’s research shows 22% of all consumers can be identified as fully engaged, and only 29% of the working public is fully engaged. Fully engaged consumers are more loyal to your brand, deliver a 23% premium in spending, and are your most passionate advocates. Trillions of dollars in GDP are sacrificed annually by companies failing to engage their employees and consumers.

It is important to note that consumers don’t encounter brands one “P” at a time. Competitors can quickly copy nearly every brand characteristic, whether it be a product attribute, a promotional approach, or a distribution method. The traditional four-P marketing mix can quickly become table stakes. Brands can only distance themselves from their competition after integrating the fifth P into the mix.

A Fix for the Future

The fix seems simple, but organizational rigidity stands in the way. Adding the fifth P to the equation demands that a CEO insist on a permanent program between high-level HR and marketing, which accounts for people in the marketing equation. Corporate structure tends to separate the brand management component from the HR component. The fifth P consistently falls between the cracks and a misalignment of the brand promise frequently results. Marketing and HR leaders need to meet regularly to share their strategies and ensure the brands they manage and the people responsible for fulfilling that brand promise are aligned.