Marketing Concept and Philosophy (Encyclopedia of Management)
The marketing concept and philosophy is one of the simplest ideas in marketing, and at the same time, it is also one of the most important marketing philosophies. At its very core are the customer and his or her satisfaction. The marketing concept and philosophy states that the organization should strive to satisfy its customers' wants and needs while meeting the organization's goals. In simple terms, "the customer is king".
The implication of the marketing concept is very important for management. It is not something that the marketing department administers, nor is it the sole domain of the marketing department. Rather, it is adopted by the entire organization. From top management to the lowest levels and across all departments of the organization, it is a philosophy or way of doing business. The customers' needs, wants, and satisfaction should always be foremost in every manager and employees' mind. Wal-Mart's motto of "satisfaction guaranteed" is an example of the marketing concept. Whether the Wal-Mart employee is an accountant or a cashier, the customer is always first.
As simple as the philosophy sounds, the concept is not very old in the evolution of marketing thought. However, it is at the end of a succession of business philosophies that cover centuries. To gain a better understanding of the thought leading to the marketing concept, the history and evolution of the marketing concept and philosophy are examined first. Next, the marketing concept and philosophy and some misconceptions about it are discussed.
EVOLUTION OF THE MARKETING CONCEPT AND PHILOSOPHY
The marketing concept and philosophy evolved as the last of three major philosophies of marketing. These three philosophies are the product, selling, and marketing philosophies. Even though each philosophy has a particular time when it was dominant, a philosophy did not die with the end of its era of dominance. In fact, all three philosophies are being used today.
The product philosophy was the dominant marketing philosophy prior to the Industrial Revolution and continued to the 1920s. The product philosophy holds that the organization knows its product better than anyone or any organization. The company knows what will work in designing and producing the product and what will not work. For example, the company may decide to emphasize the low cost or high quality of their products. This confidence in their ability is not a radical concept, but the confidence leads to the consumer being overlooked. Since the organization has the great knowledge and skill in making the product, the organization also assumes it knows what is best for the consumer.
This philosophy of only relying on the organization's skill and desires for the product did not lead to poor sales. In much of the product philosophy era, organizations were able to sell all of the products that they made. The success of the product philosophy era is due mostly to the time and level of technology in which it was dominant. The product era spanned both the pre-Industrial Revolution era and much of the time after the Industrial Revolution.
The period before the Industrial Revolution was the time when most goods were made by hand. The production was very slow and few goods could be produced. However, there was also a demand for those goods, and the slow production could not fill the demand in many cases. The importance for management of this shortage was that very little marketing was needed.
An example illustrates the effects of the shortages. Today, the gunsmith shop in Williamsburg, Virginia, still operates using the product philosophy. The gunsmiths produce single-shot rifles using the technology available during the 1700s. They are only able to produce about four or five rifles every year, and they charge from $15,000 to $20,000 for each rifle. However, the high price does not deter the demand for the guns; their uniqueness commands a waiting list of three to four years. Today's Williamsburg Gunsmith Shop situation was typical for organizations operating before the Industrial Revolution. Most goods were in such short supply that companies could sell all that they made. Consequently, organizations did not need to consult with consumers about designing and producing their products.
When mass production techniques created the Industrial Revolution, the volume of output was greatly increased. Yet the increased production of goods did not immediately eliminate the shortages from the pre-industrial era. The new mass production techniques provided economies of scale allowing for lower costs of production and corresponding lower prices for goods. Lower prices greatly expanded the market for the goods, and the new production techniques were struggling to keep up with the demand. This situation meant that the product philosophy would work just as well in the new industrial environment. Consumers still did not need to be consulted for the organization to sell its products.
One of the many stories about Henry Ford illustrates the classic example of the product philosophy in use after the Industrial Revolution. Henry Ford pioneered mass production techniques in the automobile industry. With the techniques, he offered cars at affordable prices to the general public. Before this time, cars were hand made, and only the very wealthy could afford them. The public enthusiastically purchased all the Model T Fords that the company could produce. The evidence that the product philosophy was alive and well in Ford Motor Company came in Henry Ford's famous reaction to consumer requests for more color options. He was said to have responded that "you can have any color car you want as long as it is black." Realizing that different colors would increase the cost of production and price of the Model T's, Henry Ford, using the product philosophy, decided that lower prices were best for the public.
The selling era has the shortest period of dominance of the three philosophies. It began to be dominant around 1930 and stayed in widespread use until about 1950. The selling philosophy holds that an organization can sell any product it produces with the use of marketing techniques, such as advertising and personal selling. Organizations could create marketing departments that would be concerned with selling the goods, and the rest of the organization could be left to concentrate on producing the goods.
The reason for the emergence of the selling philosophy was the ever-rising number of goods available after the Industrial Revolution. Organizations became progressively more efficient in production, which increased the volume of goods. With the increased supply, competition also entered production. These two events eventually led to the end of product shortages and the creation of surpluses. It was because of the surpluses that organizations turned to the use of advertising and personal selling to reduce their inventories and sell their goods. The selling philosophy also enabled part of the organization to keep focusing on the product, via the product philosophy. In addition, the selling philosophy held that a sales or marketing department could sell whatever the company produced.
The Ford Motor Company is also a good example of the selling philosophy and why this philosophy does not work in many instances. Ford produced and sold the Model T for many years. During its production, the automobile market attracted more competition. Not only did the competition begin to offer cars in other colors, the styling of the competition was viewed as modern and the Model T became considered as old-fashioned. Henry Ford's sons were aware of the changes in the automobile market and tried to convince their father to adapt. However, Henry Ford was sure that his standardized low-price automobile was what the public needed. Consequently, Ford turned to marketing techniques to sell the Model T. It continued to sell, but its market share began to drop. Eventually, even Henry Ford had to recognize consumer desires and introduce a new model.
The selling philosophy assumes that a well-trained and motivated sales force can sell any product. However, more companies began to realize that it is easier to sell a product that the customer wants, than to sell a product the customer does not want. When many companies began to realize this fact, the selling era gave way to the marketing era of the marketing concept and philosophy.
The marketing era started to dominate around 1950, and it continues to the present. The marketing concept recognizes that the company's knowledge and skill in designing products may not always be meeting the needs of customers. It also recognizes that even a good sales department cannot sell every product that does not meet consumers' needs. When customers have many choices, they will choose the one that best meets their needs.
MARKET CONCEPT AND PHILOSOPHY
The marketing concept and philosophy states that the organization should strive to satisfy its customers' wants and needs while meeting the organization's goals. The best way to meet the organization's goals is also by meeting customer needs and wants. The marketing concept's emphasis is to understand the customers before designing and producing a product for them. With the customer's wants and needs incorporated into the design and manufacture of the product, sales and profit goals are far more likely to be met.
With the customer's satisfaction the key to the organization, the need to understand the customer is critical. Marketing research techniques have been developed just for that purpose. Smaller organizations may keep close to their customers by simply talking with them. Larger corporations have established methods in place to keep in touch with their customers, be it consumer panels, focus groups, or third-party research studies. Whatever the method, the desire is to know the customers so the organization can better serve them and not lose sight of their needs and wants.
The idea of keeping close to the organization's customers seems simple. In reality, it is very easy to forget the customer's needs and wants. Sometimes the management is so involved with the product that their own desires and wants begin to take dominance, even though they have adopted the marketing concept.
Yet it is easy for managers to forget the marketing concept and philosophy. For example, many years agoefore there was a Subway on every corner college student opened a small submarine sandwich shop near his university's campus. The sub shop was an immediate success. By using the marketing concept, the young entrepreneuer had recognized an unmet need in the student population and opened a business that met that need.
Unfortunately, the story does not end at this point. The sub shop was so successful that it began to outgrow its original location after about three years. The shop moved to a larger location with more parking spaces, also near the university. At the new sub shop, waiters in tuxedos met the students and seated them at tables with tablecloths. Besides the traditional subs, the shop now served full meals and had a bar. Within a few months the sub shop was out of business. The owner of the shop had become so involved with his business vision that he forgot the customers' needs and wants. They did not want an upscale restauranthere were other restaurants in the area that met that need, they just wanted a quick sub sandwich. By losing sight of the customers' wants and needs, the owner of the sub shop lost his successful business.
MEETING CUSTOMER NEEDS WHILE MEETING ORGANIZATIONAL GOALS
Sometimes in the zeal to satisfy a customer's wants and needs, the marketing concept is construed to mean that the customer is always right. However, the marketing concept also states that it is important to meet organizational goals as well as satisfy customer wants and needs. Satisfying customer needs and organizational goals may involve conflicts that sometimes cannot be resolved. The organization that adopts the marketing concept will do everything in its power to meet the needs of its customers, but it must also make a profit. Sometimes the wants of the customers may include a low price or features that are not attainable for the organization if it is to make a profit. Consequently, the organization must hope for a compromise between what the consumer wants and what is practical for the business to provide.
CRITICISM OF THE MARKETING CONCEPT
Interpreted literally, the marketing concept only advocates discovering consumers' wants and needs and satisfying them. Critics assert that consumers may not be aware of all of their wants and needs. In the 1950s, were consumers aware of a need to cook their food by sending microwaves through their food? In the 1960s, were consumers aware of a need to have personal computers in their homes? Critics argue that the marketing concept's concentration on consumers' wants and needs stifle innovation. Organizations will no longer concentrate on research and development in hopes that one product in ten might meet with consumer acceptance, and will less likely come up with innovative products such as microwaves and personal computers.
Supporters of the marketing concept have contended that it does not stifle innovation and that it does recognize that consumers cannot conceive of every product that they may want or need. However, need is defined in a very broad sense. In the microwave and personal computer examples, the need was not for the specific product, but there was a need to cook food faster and a need for writing and calculating. The microwave and personal computer satisfied those needs though the consumer never imagined these products. The marketing concept does not stifle creativity and innovation. It seeks to encourage creativity to satisfy customer needs.
The marketing concept is a relative newcomer as a philosophy of doing business. However, its evolution started before the Industrial Revolution. As time progressed, customer and business needs also evolved. The product and selling philosophies eventually evolved into the marketing concept and philosophy. Today, the marketing concept and philosophy stands as a formula for doing business and many believe it is a prescription for success. It aims to satisfy customers by guiding the organization to meet the customers' needs and wants while meeting the organization's goals.
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