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The personalised marketplace: Beyond the 4Ps

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The personalised marketplace: beyond the 4Ps

Ronald E. Goldsmith
Professor of Marketing, College of Business, Florida State University, Tallahasee,
Florida, USA

Keywords the addition of three new decision responsi-

Marketing strategy, The traditional marketing mix bilities that must be integrated to form a
Marketing management,
Marketing mix, At the heart of most presentations of mar- coherent and effective services marketing
Relationship marketing, keting management lies the time-honored mix. By adding personnel, physical assets,
Mass customization concept of the 4Ps ± product, price, promo- and procedures to the marketing mix, form-
tion, and place ± the Marketing Mix ± that ing the 7Ps, services marketing theorists
Abstract staked out a new field of management theory
Theories of marketing manage- summarise key decision responsibilities of
ment and strategy need to evolve marketing managers (e.g. McDonald and and practice separate from the marketing of
and change to keep pace with Roberts, 1992). First formulated over 20 years tangible goods (Lovelock, 1996). This concep-
changes in the marketplace and in
ago by McCarthy (1975) as a pedagogical tool, tual advance has, in turn, caused a reeva-
marketing practice. As the next luation of traditional marketing management
century draws closer, it is appar- the concept of the 4Ps represents a parsimo-
ent that some marketing man- nious and comprehensive way to describe the thought by obscuring the boundary between
agers are basing their chief tasks of marketing managers. After goods and services, forcing the realisation
relationships with customers on
selecting a target market, marketing man- that many products consist of elements of
policies and procedures called both tangible goods and intangible services.
either ``individualisation'', ``mass- agers must develop a systematic plan to sell
to these customers and create long-term Our purpose is to present a reformulation
customisation'', or as we prefer,
``personalisation''. The core of this relationships (Doyle, 1995). The marketing of the 7P concept, retaining the basic princi-
practice involves tailoring goods
plan consists of decisions about product, ple, but reorganising the elements and
and services to the individual extending its scope to encompass many new
needs and wants of specific con- price, promotion, and distribution. These are
ideas that have appeared in the last ten years.
sumers, just the opposite of one- the major decision areas where marketing
size-fits-all. We propose that per- These come not only from services market-
managers allocate scarce corporate resources
sonalisation is so important to ing, but also from the movement champion-
to achieve their sales and profit goals. Little
marketing strategy that it should ing relationship marketing, mass-
become one of the featured ele- has changed in this presentation since
customisation as a manufacturing practice,
ments of the marketing mix, McCarthy's original statement. Most mar-
alongside product, price, promo-
from the growing field of database market-
keting texts still feature the 4Ps as the
tion, place, personnel, physical ing, and from recent statements of marketing
central, coordinating concept around which
assets, and procedures, to form a theory: Frederick Webster's (1994) Market-
new marketing mix, the 8Ps. the many other aspects of marketing practice
Driven Management: Using the New Market-
are organised.
ing Concept of Create a Customer-Oriented
The one major alteration to this approach
Company, Slywotzky and Morrison's (1997)
has come with the advent of services mar-
The Profit Zone, and Peppers and Rogers'
keting as a distinct managerial discipline
(1993) The One to One Future. We propose a
(Lovelock, 1996). Services marketing theor-
new area of decision-making responsibility
ists have taken great pains to distinguish and a competitive tool, personalisation, as
services marketing from product marketing one of the most crucial for marketers in
(e.g. Berry, 1980). A major portion of this today's and tomorrow's business environ-
The author would like to effort has focused on rethinking the market-
thank Eileen Bridges, ment. Thus, we suggest a new presentation of
Leisa Flynn, and Jon Freiden ing mix and showing how it is different for the marketing management mix, which we
for their helpful comments services. By demonstrating that the market- call the 8Ps, to carry marketing theory and
on a draft. ing of services requires different decisions practice into the next century.
than goods marketing requires, these thin-
kers present services marketing as a unique
and distinct type of marketing. The services Services marketing: a revolution in
Marketing Intelligence & marketing mix differs chiefly from the 4Ps by marketing strategy
Planning
17/4 [1999] 178±185 The well-documented and gradual evolution
The current issue and full text archive of this journal is available at
# MCB University Press of many advanced economies away from
[ISSN 0263-4503] http://www.emerald-library.com
manufacturing and toward services has
[ 178 ]
Ronald E. Goldsmith
The personalised
marketplace: beyond the 4Ps
Marketing Intelligence &
Planning
17/4 [1999] 178±185
entailed new ways of thinking about mar-
keting. Marketing practice in the service
industries has certainly benefited from the
work of many managers and researchers who
have sought ways to improve service deliv-
ery. Less obvious, however, has been the
reciprocal influence of services marketing
thought on traditional goods marketing. The
services marketing emphasis on customer
satisfaction and long-term relationships with
customers have influenced goods marketers
to think differently about their businesses
and their customers. Many marketers,
whether of goods or services, are now aware
of the elements shared by both types of
products. They also realise that all marketers
should place more emphasis on satisfying
customers, preventing defections, and build-
ing long-term relationships (Webster, 1994).
For marketing theory, the result of this sea
change in marketing practice and philosophy
has been to change the way marketing
management is taught. Managers of all types
of businesses are encouraged to think about
the 7Ps. Managers are being forced to recog-
nise that no matter how they conceptualise
their product, its marketing and manage-
ment probably contain at least some service
elements, whether this is called ``customer
service'', or the ``service department'', or
even when left unrecognised. Just forcing
managers to see that at least part of their
business, and not necessarily the least part,
consists of service-type relationships with
customers, has benefited many businesses
(Taylor, 1998). Raising levels of overall cus-
tomer satisfaction with the firm by adding or
improving the service elements of the total
product results in customer satisfaction and
greater profits. As more and more companies
realise this, far-seeing companies will look to
the next new idea for ways to compete
aggressively. We argue that the most impor-
tant new idea in marketing is personalisa-
tion. Moreover, we propose that personal-
isation should become a standard part of the
marketing mix, thus forming the 8P para-
digm (see Figure 1).
Personalisation: the new
marketing responsibility
Techniques of mass production, ideals of
standardisation, operating efficiencies, and
the one-size-fits-all production mentality
have led in the past to a philosophy of
business that stresses selling a standard
product to as many consumers as possible
(Lampel and Mintzberg, 1996). Marketers
who seek to identify and reach consumers
more and more precisely have exerted an
opposite pull. Thus, there has been a gradual
move in marketing thought and practice:
mass marketing ± market segmentation ±
niche marketing ± micro-marketing ± mass-
customisation ± personalisation. Since the
heyday of mass marketing in the 1950s,
through the decades to the twenty-first cen-
tury, marketing thought has pushed for
smaller and smaller groups of consumers as
market targets (Schiller, 1989). Now, all these
strategies exist side by side, giving managers
a choice of strategic options. This multi-
plicity of customer approaches will charac-
terise future marketing practice. Managers
will create a blend of strategies, some tar-
geting relatively large segments, others
directed toward niches. Part of this portfolio
will be personalisation, where some custo-
mers are targeted individually in a set of one-
to-one relationships (Logman, 1997; Peppers
and Rogers, 1993; Taylor, 1998).
The crux of our argument is that in
addition to the need to make decisions and to
create strategies regarding product, price,
promotion, and place, managers should rou-
tinely consider the elements of:
. personnel involved in delivery of the
product;
. the physical assets that accompany and
surround the product; and
. the procedures by which buyers acquire
and use the product.
Finally, managers must consider the extent
to which they should:
. personalise the product, making it unique
for each individual buyer.
This practice is growing in many product
fields (Woodyard, 1998). For instance, The
Wall Street Journal (1998) recently noted that
``fed up with department stores that don't
offer enough selection or service, more older
and affluent shoppers turn to custom-made
clothing''. This and other examples of current
marketing practice suggest the time is right
to reformulate the marketing mix to include
these new practices. In fact, we contend the
Personalisation decision is so important that
it should be among the first decisions man-
agers make so that the degree and nature of
product personalisation should guide subse-
quent marketing decisions as suggested by
Figure 1.
The traditional marketing mix proposed
that managers had to decide first on the
product they hoped to sell to consumers.
These decisions involved chiefly the features
the product would have, its benefits for
consumers, the level of quality offered,
quantities, and package forms, etc. Based on
expertise, intuition, innovative insights, or
systematic market research, product
[ 179 ]
Ronald E. Goldsmith
The personalised
marketplace: beyond the 4Ps
Marketing Intelligence &
Planning
17/4 [1999] 178±185
Figure 1
The marketing mix
[ 180 ]
decisions deal with the product itself, what it
is like, and what it does for customers. Once
they develop the product, managers draw up
a marketing plan detailing how it is to be
priced, delivered, and promoted. The mar-
keting concept, a widely discussed philoso-
phy of business (Webster, 1994), has always
stressed the need to integrate the decisions in
these four areas to form a unified strategy.
We feel that personalisation is such an
important element of the overall marketing
strategy that it should be addressed in
conjunction with product development, and
that decisions regarding the nature and
degree of personalisation should help guide
product development. As managers develop
the product they should build into it the
degree of personalisation they intend to offer
to the market. This consideration could affect
the way the product is manufactured through
mass-customisation (Anderson et al., 1997;
Kelly, 1996; Oleson, 1998; Pine, 1993) or how
individualised a service should be (Lovelock,
1996, p. 42). Many subsequent marketing
decisions will be influenced by the persona-
lisation decision.
In the case of a service product, managers
should decide whether each customer gets
exactly the same service (e.g. public bus) at
one extreme of the continuum, or whether
each customer gets a completely different,
custom service (e.g. taxi), at the other end
(see Lampel and Mintzberg, 1996). Services
marketers already face this problem to some
extent. As they design the service, they
decide how much of the service can be
``industrialised'', to use Levitt's (1976)
immortal term, and how much must be
customised. A bank might treat every check-
cashing activity exactly alike to the point
that a machine, an ATM, can conduct these
transactions mechanically. Loans, however,
require a great deal of individual attention so
that the total process of applying and receiv-
ing a loan is a personalised experience. How
much personalisation is required is a func-
tion of consumer preferences, operating effi-
ciencies, and deliberate strategy.
The same paradigm might hold true for
other services. We can discern the use of
personalisation in different companies' mar-
keting strategies. McDonald's, for instance,
pioneered a highly standardised food pro-
duct, with personal choices available in a
limited menu, but every hamburger identi-
cal. Burger King, in contrast, told consumers
to ``have it your way''. McDonald's has long
been the market leader, and remains so
today, but Burger King remained competitive
and has even been making substantial sales
gains, suggesting that consumer preferences
may be changing as they turn more and more
to the personal and away from the standar-
dised. McDonald's now appears to be devel-
oping a more individualised hamburger to
compete with the Whopper (Gibson, 1997a, b).
Marketers have sought to meet individual
consumer preferences through line exten-
sions, offering seemingly endless size, flavor,
and package varieties of core brands side-by-
side, so consumers have greater choices
while remaining customers of the same
company. This approach, however, has
proved only partially successful for many
firms, as is evidenced by the high failure rate
of so many line extensions (Doyle, 1995).
These variations on a core brand often seem
to do little more than cannibalise the demand
for the original, bringing in little additional
revenue offset their additional costs. They
reduce operating efficiencies, clog channels
of distribution, increase distribution costs,
confuse many consumers, and still fail to
satisfy many of the wants consumers feel,
Ronald E. Goldsmith
The personalised
marketplace: beyond the 4Ps
Marketing Intelligence &
Planning
17/4 [1999] 178±185
thereby actually diluting brand equity (see
Ries and Trout, 1993, Ch. 12). Some line
extensions are successful; a judicious use of
this strategy can improve customer satisfac-
tion as well as corporate profitability. Diet
Coke is an example. Overuse betrays a lack of
imagination by many marketers and a mis-
guided approach.
Companies may want to consider persona-
lisation as a philosophy of doing business
that treats each customer as an individual
rather than as a member of a target segment.
Companies should learn about individual
consumer needs and wants, design, make,
and deliver a customised product (Hof, 1998).
They should engage in a genuine dialogue
with customers to get their input before,
during, and after the product is consumed.
This personalisation approach stresses a
genuine interest in and concern for consu-
mers as individuals. It is more than the one-
way street of conventional relationship mar-
keting where consumers are asked for loy-
alty, friendship, and repeat respect, but none
is given in return (Fournier et al., 1998). It is
more than lip-service avowals of concern for
customers and requires real actions. It means
a real two-way flow of information where
consumer input is not only solicited, but also
acted on. Information about consumers is
used to help them, not harass them (see
Taylor, 1998).
The implications of personalisation
Segmentation and positioning
One of the first and most important jobs of
marketing management is to segment the
mass market into relatively homogeneous
subsegments and then select one or more of
these groups as target markets. This process
helps the marketer to understand the struc-
ture of the market and to identify who the
customer is or should be. Personalisation can
play a role in this analysis as the marketer
can examine target segments and determine
which of these potential buyers would like an
even more personalised version of the pro-
duct. Thus, new, more precise, market seg-
ments can be created within the larger target
segments already served by the marketer. In
addition, personalisation may open the ave-
nue to acquiring new market segments
unhappy with mass produced competitive
products and seeking more personalised
versions for themselves.
If segments can be identified that seek the
personalised product, and if these are suffi-
ciently large, distinct, profitable, reachable,
and perhaps growing, a natural positioning
strategy would be to offer the firm's product
as the personal alternative to the mass
produced competitors. Personalisation lends
itself to a unique positioning strategy, where
the brand can be given a distinctive image to
separate it from competitors. By connecting
the personalised product to the individual
needs of consumers, the brand can be pre-
sented as a symbol of individual personalities
and lifestyles. After the market has been
successfully segmented, target segments
selected, and positioning strategies created,
the marketer needs to proceed with develop-
ment of the marketing mix.
The marketing mix
As marketers make the product decision,
they should consider the degree and type of
personalisation to implement as part of the
product. Not all products will lend them-
selves equally to this marketing tactic, but
many products can achieve a degree of
consumer personalisation. This will deter-
mine the extent and type of customisation
required by the manufacturing process.
Moreover, as personalised products are
developed, they have many ramifications for
subsequent marketing decisions as an inte-
grated strategy is crafted.
Many manufacturers now offer persona-
lised products (Horovitz, 1998). In addition to
the obvious examples of special ordered cars
and food items, clothing and shoes can be
personalised for individual customers (Gil-
more and Pine, 1997). The music industry is
developing techniques and procedures to
allow customers to create ``customised'' CDs
containing a selection of the songs (from
different artists) they want to own (Bauder,
1997). Cosmetics such as lipsticks can be
custom blended to match a consumer's
clothing or hair. A product such as a home
computer is built to the specifications of
individual consumers. This is common prac-
tice among the major home computer com-
panies: Dell, Gateway, and Compaq. General
Nutrition Centers (GNC) has put machines at
12 of its Live Well stores that custom mix
daily vitamins, shampoo and lotions (Wood-
yard, 1998). The Internet now has many types
of news programs that are not only highly
specialised, but also can be customised by a
user to automatically deliver news reports on
specific topics as they become available.
Entertainment can also be personalised by
computer users as they tap into Internet
networks devoted to specialised type of music
and other forms of entertainment (Sandberg,
1998).
Personalised products may imply persona-
lised prices. Marketers of custom clothes, for
instance, command higher gross margins
(Woodyard, 1998). Pricing schedules could be
[ 181 ]
Ronald E. Goldsmith
The personalised
marketplace: beyond the 4Ps
Marketing Intelligence &
Planning
17/4 [1999] 178±185
[ 182 ]
developed so that customising the product
entails a higher selling price. This may be
especially feasible where the personalised
segment is less price sensitive (Doyle, 1995).
Moreover, although many would not think it
likely, opportunities exist for companies to
personalise the prices of their standardised
products. Most consumers are familiar with
negotiated prices for cars and houses that
represent a personalised price. But can the
prices of fast-moving consumer goods be
personalised? Coca-Cola Co. thinks it is
possible. By linking ``smart'' vending
machines to Coke's internal computer net-
work, prices for cans of Coke could vary by
time of year or even temperature. Spreading
communications networks and computerised
information distribution via the Internet
make it more likely that consumers will
gather product information, including prices,
and use this information to command the
prices they wish from manufacturers (Kutt-
ner, 1998). Some even forecast a revolution in
prices: ``In the future, marketers will offer
special deals ± tailored just for you, just for
the moment ± on everything from theater
tickets to bank loans to camcorders'' (Cor-
tese, 1998).
Product delivery for many products could
be personalised as it often is for home
computers. Consumers could be given a
choice of how they wish to receive a product:
by mail, home delivery via a specific delivery
service, store pick up. Information products
can also be delivered in personalised ways:
``Instead of being limited to off-the-shelf
choices, consumers now can buy customised
publications, from greeting cards to books,
that are literally hot off the press'' (Wood-
yard, 1998). Through kiosks in malls or stores
(Weimer, 1997) or off the Internet (Cronin,
1997), consumers can buy published materi-
als individualised just for them. The prolif-
eration of Internet sites that deliver
personalised news and entertainment to
subscribers is another example of this trend
(Hof, 1998).
Promotion is another area where persona-
lisation could make a big difference in the
design of marketing strategy. Greater perso-
nalisation in the form of individualised
marketing communications should be more
effective than mass communications
(Peppers and Rogers, 1993). Internet adver-
tising can be personalized for individual
consumers (Hof, 1998). In the long run it will
be possible to direct individual ads to specific
TV sets (Ono, 1998). Peppers and Rogers
(1993) describe many feasible techniques of
interactive communications between consu-
mers and companies via fax, e-mail, and
video. Marketers should also take into
account the situations in which consumers
learn about, buy, and consume products as
these elements may increase the potential for
personalisation (Foxall, 1992). By opening
dialogue with customers, promotion can be
made more personal; and it has other benefits
for the firm by yielding useful information
about consumer needs, wants, specifications,
and new ideas. This information, in turn, can
be used to customise existing products and
develop new products.
The personnel dimension of the marketing
mix refers to the employees who actually
perform the service for customers. They
could also work in the customer service
department of a tangible goods company.
Services marketing theory places a heavy
emphasis on hiring, training, supporting,
evaluating, and rewarding service personnel.
It is recognised that the service cannot be
separated from the service provider (Love-
lock, 1996). While many services are natu-
rally personalised, that is, each customer gets
an individualised service product, other
services seem to benefit from a standardisa-
tion or industrialisation design (Levitt, 1976).
A services marketer who wishes to offer a
service personalised for individual custo-
mers must design the personnel selection,
training, and supervision system so that it
prepares personnel to customise their beha-
viours to fit the individual needs of custo-
mers.
Of course, personalising service products
requires not only trained personnel but also
the procedures designed so that a persona-
lised service product can be created, if the
managers choose to follow this competitive
strategy. Marketing managers may need to
think of ways to design their service products
to be as individual as possible, even if the
basic service is the same for all customers.
Obviously, information technology is a key
ingredient in this effort (see Peppers and
Rogers, 1993). Finally, marketers may even
personalise the physical assets in their
marketing mix to correspond with the overall
personalisation strategy.
New product development
One of the most exciting aspects of the
personalisation concept is the idea that as
marketers seek to develop new products, they
should systematically try to visualise these
market offerings as personalised products
(see Foxall, 1984). It may be easier to develop
a personal version of an existing product
than to develop a wholly new product. New
products come in five versions: product
improvements, line extensions, brand exten-
sions, new brands, and new-to-the-world
innovations (see Peter and Donnelly, 1997,
Ronald E. Goldsmith
The personalised
marketplace: beyond the 4Ps
Marketing Intelligence &
Planning
17/4 [1999] 178±185
p. 125). Personalisation as a philosophy may
guide new product development in all of
these areas. The next ``new and improved''
version of a product could be a version with
more personalised features. The product line
could be extended to include a personalised
version (e.g. along with standard seed pack-
ets, a seed company could offer a persona-
lised seed mix). The firm could take its
expertise in a personalised product in one
category and expand into a new product
category keeping the same brand name, but
benefiting from the equity and good reputa-
tion it has in the original category (Amazon
books has expanded to Amazon CDs). A
wholly new brand could be developed that is
totally oriented around the personalisation
philosophy, but kept distinct from a firm's
original, less customised brands. Finally,
marketing managers should think system-
atically about developing new, personalised
products. What consumer problems are
poorly solved using existing market offer-
ings? Would a personal product solve these
problems better? Can the marketer attain the
all-important goals of consumer satisfaction
and value creation via personalisation?
(Doyle, 1995). Standard new product develop-
ment techniques such as focus groups,
brainstorming, need analysis, and dimen-
sional analysis should be supplemented by a
personalisation dimension to take advantage
of this opportunity.
Conclusion
The strategy and practice of market segmen-
tation have always focused on dividing large
heterogeneous markets into smaller more
homogeneous segments to improve customer
satisfaction and marketing efficiency and
effectiveness. The years have witnessed the
evolution of market segments from rather
crude divisions based on simple demo-
graphics and product usage to more sophis-
ticated schemes using consumer lifestyles,
values, attitudes, and perceptions. Using
database marketing has pushed the precision
of market analysis much further, grouping
consumers by zip codes or other geodemo-
graphic characteristics (Berry, 1994; Fran-
cese and Piirto, 1990; Thomas and Kirchner,
1991). Database marketing opens the possibi-
lity for treating each consumer as an indivi-
dual target (McDougall, 1995; Peppers and
Rogers, 1993). Recommendations regarding
market segmentation and targeting consu-
mers are converging on a new paradigm
(Pitta, 1998). The emphasis on relationship
marketing (Fierman, 1994; Peppers and
Rogers, 1993; Vavra, 1992), building long-term
relationships between firms and customers,
almost demands a one-to-one market seg-
mentation program for information market-
ers (see Freiden et al., 1998).
The 1990s have witnessed two seemingly
contradictory managerial trends. One move
has seen manufacturers, chiefly in packaged
goods, trimming their product lines to reduce
the number of choices and offer fewer brand
variations, but concentrating on the more
profitable items (Narisetti, 1997; Nielsen,
1992; Schiller, 1996). Marketers have also
become aware that traditional marketing
strategies targeted toward groups of consu-
mers have become more expensive and less
effective (Taylor, 1998). The second move has
been increasing customisation (Gilmore and
Pine, 1997; Lampel and Mintzberg, 1996; Log-
man, 1997). In fact, both strategies can be
pursued simultaneously. Many companies
need to reduce costs, and only by trimming
the product line can this be achieved. How-
ever, offering fewer versions of brands is not
incompatible with a strategy that targets
those customers who will respond positively
to the personalised brand. Personalisation
may be a way for branded goods manufac-
turers to fight encroaching own-label com-
petition. In addition to marketing their own
non-branded versions of the product, cou-
poning, cutting prices, and increasing
advertising, they may opt for offering a
personalised version of the brand to draw
customers put-off by the lack of individuali-
sation inherent in non-branded products or
store brands (Therrien et al., 993).
The prototype of personalisation is of
course the World Wide Web. The power of the
Internet is to tailor itself for each of its users,
and recent reports suggest that personalised
Internet shopping yields improved sales and
profits to the firms that practice it (Hof, 1998).
The Net allows consumers to shop and buy in
a one-to-one environment, and many of the
information products sold through the Net
lend themselves to personalisation. For
instance, consumers can create a ``personal
store'' for a variety of products (books, CDs,
for example) and shop online within this
individual environment (see Hof, 1998 for
specific examples). Virtual shopping also
opens up the possibility of individualising
pricing for consumers as the latter increas-
ingly shop around looking for the best deals
on comparable goods (Wysocki, 1998). This
may be the only way Internet marketers can
avoid competing solely on price, a develop-
ment that turns their brands into commod-
ities (Slywotzky and Morrison, 1997).
While the personalisation strategy seems a
natural feature of Internet commerce, it is
applicable to many other product fields, but it
[ 183 ]
Ronald E. Goldsmith
The personalised
marketplace: beyond the 4Ps
Marketing Intelligence &
Planning
17/4 [1999] 178±185
[ 184 ]
will not be applicable to all product cate-
gories. If consumers are not willing to pay
the additional costs for personalised pro-
ducts, demand will not warrant their manu-
facture and distribution. Even in this
instance, however, advertising and pricing
could be personalised if these proved to be
profitable strategies; so some degree of per-
sonalisation of the other elements of the
marketing mix may be possible, even thought
the product itself is not. Sometimes persona-
lisation requires consumers to reveal perso-
nal information in order for the process to
work. If customers resist doing so, they will
not be able to join the personalised segment.
Some products will resist being personalised.
Constraints imposed either by manufactur-
ing, distribution, or competitive behaviour,
may limit the marketer's ability to persona-
lise his brand. Some products benefit from
mass production, so that the most attractive
product offering is an identical copy of all the
others. Nevertheless, many marketers in
many product fields seem to be finding ways
to design, engineer, and produce products
personalised for individual consumers who
are willing to pay for this added benefit.
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