Introduction to Marketing
Other Business & Marketing Philosophies...
The Marketing Concept is not the only philosophy of doing business. In fact, the Marketing Concept often is characterized as just one point on an evolutionary continuum of business philosophies. The marketing concept has evolved from earlier concepts and is itself evolving into others.
Exhibit 1 summarizes the major business philosophies ordered on an 'evolutionary' time line.' The time-line, begins, roughly, just before 1900 and extends through today. At the top is the production concept, the oldest of the business philosophies that we will cover. This philosophy eventually evolved into the selling concept of the 1930's The marketing concept, in turn, evolved from the selling concept in the early 1950's. Note that there are a couple of 'emerging' concepts that are rooted in the marketing concept. The societal marketing concept has been with us since about1980 and relationship marketing, a relatively new concept, has been around since about 1990.
The essential underpinnings of the production concept are highlighted in Exhibit 2. The basic premise (philosophy) of the production concept is that if we can build quality products at affordable prices, they will eventually sell themselves. As a result, the major objective of firms adhering to the production concept is to minimize costs, yet still maintain product quality. If costs can be reduced, prices can then be lowered. Costs are reduced by attempting to increase production and distribution efficiencies as much as possible.
Exhibit 3 illustrates the underlying philosophy of the production concept. The assumption with the production concept is that, by making the best possible product and pricing it affordably, "the product will sell itself." This is often refereed to as the "build the better mousetrap" philosophy. Surely, you've heard the old saying, "build a better mousetrap and people will beat a path to your door!"
One of the best examples of the production concept is Henry Fords Model T. Henry Ford is the father of the production line. By developing an efficient assembly line, Ford was able to bring the cost of the Model T down from around $800 to just under $300, putting affordable transportation into the hands of average consumers in the United States. The biggest secret to Fords assembly line is that he built one car --the Model T. There were very few variations on the basic structure and functionality of this automobile. One of the best known slogans of the time, which Ford himself coined, was "You can have any color you want as long as it is black." Clearly, this slogan embodied the fundamental business philosophy -- the production concept -- practiced by Ford at the time.
Henry Ford was very successful with the production concept for a period of time, Video One. He amassed quite a fortune by practicing the production concept. However, Ford forgot to track changing conditions in the market, and that eventually got him into trouble. After the automobile had been on the market for a period of time, consumer wants and needs with respect to cars changed dramatically. Consumers no longer wanted just basic transportation at an affordable price. The car became a major status symbol. It filled ego and social-communications needs for consumers. This translated into consumer demand for more body styles, different colors, different features, and a variety of new services.
Ford did not anticipate and never really acknowledged this change in demand. General Motors, however, did (as illustrated in Video 2). As a result, General Motors' sales by the end of the 1920s dramatically outstripped Ford's sales.
The example of the Model T illustrates one situation where the production concept can work --when a product is in an early stage of its life cycle, as were automobiles at the turn of the century. Under these circumstances, consumers' wants and needs with respect of the new product are very basic. Consumers were mainly interested in affordable transportation at the time of the Model T -- a very basic, fundamental need. In this situation, companies can get away with producing a limited range of product variants to maximize production and distribution efficiency. This keeps costs and, therefore, prices in line. Eventually, however, the market matures. As with cars, consumers want more than just the basic product. Often, status-related wants and needs emerge and become dominant. The company that forgets to track these changing wants and needs, and still continues to practice the same business philosophy, will get itself into trouble.
The production concept predominated business thinking until the early 1930s. At about that time, dramatic changes in supply and demand relationships came about as a result of the Great Depression. The supply of goods now far outstripped the demand for these goods. People just quit buying. The economy was at rock bottom as unemployment reached nearly 30% of the population. As a result, many firms turned to a different philosophy of conducting business:
|Products, even good ones, don't necessarily
Customers must be convinced to buy products.
Practitioners of this philosophy pursued the objective of maximizing sales revenue via very aggressive promotion in order to stimulate demand. In other words, the 'hard sell' became the basic philosophy of doing business. The assumption was that people were not going to buy the product unless they were forced to buy in some way. Believers in this philosophy began to really beef up their promotion programs. Firms pumped large sums of money and other resources into advertising, geared up larger sales forces, and retrained sales people to emphasize more aggressive selling techniques.
This cartoon on the right underscores everything we have talked about with respect to the selling concept. The characterization of the sales manager beating his fist on the desk strongly suggests that the customer's wants and needs are secondary, if thought of at all. The only thing of concern is to 'make that sale.' Customers must be convinced to buy -- heavy promotion is required to stimulate demand!
The selling concept predominated in this country until the 1950s. At that point in time, consumers essentially rebelled. They were fed up with businesses trying to force products on them that they did not necessarily want or need. Consumers' discretionary incomes were rising, products were becoming more sophisticated, and the business environment was becoming increasingly complex and competitive. Consumers wanted businesses to be more responsive to their wants and needs. The marketing concept (Exhibit 5) as we know it began to emerge. Probably the first firm to formerly espouse the 'marketing concept' was General Electric. John McKitterick, then CEO at GE, announced that henceforth, GE's philosophy of conducting business would be one of filling the identified needs of its customers, rather than bending the will of the customer to fit the needs of the company.
Recall that the marketing concept begins with the customer. The most central premise of the marketing concept states that we should first find out what the customer wants and needs. We then strive to develop marketing program aimed at filling these wants and needs. There is a point to be made here --- proper implementation of the marketing concept requires sound research into what customers want and need. This means that carefully conducted and evaluated marketing research is an essential component of the marketing process. Only after a thorough understanding of the market is attained can consideration be given to alternative marketing programs (consisting of product, price, promotion, and distribution) to ascertain which programs offer the best potential for creating customer satisfaction.
Beginning in the early eighties, there emerged a school of thought that the marketing concept was becoming outdated. Academics and practitioner felt that it really did not go far enough to take into account dramatic social and cultural changes that were emerging. Out of this concern arose the societal marketing concept -- an extension of the marketing concept that challenges organizations to conduct their operations in a socially responsible manner. In other words, the core of the societal marketing concept asks firms to consider the ethical consequences of their actions and the collective needs of society at the same time they work to identify and satisfy customer needs. Of course, it goes without saying, that firms still need to remain profitable.
The emphasis with the societal marketing concept is still on profitably satisfying customer wants and needs. We should never forget that. However, our objectives shift just a little bit. We are also concerned with protecting societies long-term interests. Our marketing mix must be tempered with societal concern. We must take a close look at each element of the marketing mix and ask if what we are doing is consistent with the objective of protecting society's interests.
This re-examination of the firm's marketing activities may imply some rather extreme actions. It may mean refraining from marketing certain products in general, or dramatically changing how such products are promoted. Society certainly is questioning the continued marketing of tobacco products and alcoholic beverages. It may not be long before the manufacturers of these products are literally forced to remove them from the market place. As a minimum, these products probably will be promoted much differently in the future. For example, beer producers are now sponsoring ads that promote more responsible use by targeted customer groups -- "don't drive if you drink," "drink in moderation," "use a designated driver," etc. In addition, some products are aggressively being "de-marketed" (Exhibit 7). More and more ads are evident in a wide range of media that directly attempt to reduce the consumption of cigarettes, drugs, and alcoholic beverages.
I am not a big believer in government involvement in business activities. But, this is one place where I may think it is necessary. Federal, state and local governmental agencies must continue to mandate that marketers engage in certain responsible behaviors -- particularly de-marketing activities -- before businesses across the board in certain industries will jump on the bandwagon.
The 1990s is an era of relationship
marketing. Essentially, relationship marketing extends marketing
practice, and the philosophy of the marketing concept, to include:
|building stronger, long-term relationships with customers; and,|
|building relationships with our own business partners.|
The idea of building relationships with customers is not new. The same idea is, in my opinion, adequately encapsulated in the marketing concept. What is unique to relationship marketing is the idea of extending marketing relationships to business partners. The implication is that developing strong relationships with our business partners (suppliers and distributors) will lead to better channel arrangements, higher levels of cooperation, less conflict, and increased efficiency. If we can do this, everybody wins, particularly the ultimate consumer.
Stated somewhat differently, relationship marketing means that we treat everyone as if they are customers. This includes the people that supply us with goods and services, and the channel intermediaries that may buy goods and services from us for resale to their own customers. By relationship-building with all of these organizations and individuals, we can develop strategies that are in the best interest of everyone in the entire channel of distribution. As a result, everyone wins. Decisions are not made to optimize our own power and position within the channel; rather, decisions are made to optimize efficiency for the entire channel itself.
Relationship marketing is gaining popularity fast! However, it is viewed by some as nothing more than the latest 'management fad,' following in the wake of MBO, Theory Z, Quality Circles, Paradigm Shifts, and others. Its popularity is attested to by the increasing number of consultants (such as MISSION) and academics that make their livings preaching its tenets.
1Joseph P. Guiltinan and Gordon W. Paul (1994). Marketing Management. 5th Ed. New York: McGraw-Hill, Inc. pp. 5-6.
Page last modified: April 24, 2007