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The Beginning of Marketing

Introduction

Though marketing practice could be traced way back to 7000 B.C, marketing as a distinctive discipline developed around the start of 20th century. As marketing gained impetus, and developed during the early and the mid 20th first century, to the main focus was placed on transactions as well as exchanges. Nonetheless Kotler (1997, p, 47) notes that development of marketing as a distinctive field and practice is still going through a re-conceptualization in its focus from transactions in previous years to relationships in current business world. This paper seeks to give a historical account of development of marketing since the Great Depression and the end of World War II. To begin with, market will be define and described for academic understanding. Then the paper will proceed by reviewing details the development of marketing, highlighting on various major periods, that includes, simple trade period, the production period, the sales period, the marketing department period, the marketing  company period and lastly the relationship period.

What is marketing?

Some people imagine that marketing entails deceptive, high-pressure schemes to make people to buy a product or a service that they actually do not require. However, such people are wrong. Whereas marketing normally entails advertisements or direct

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selling, marketing in its correct form ought not to attempt and get individuals to buy what they do not require. Neither should a marketer apply deceptive schemes to make people buy. Indeed, marketing is actually the processes of developing products and services to satisfy the customer through correct promotion, distribution and prices.

The main objective of marketing is to create satisfaction for the client. Satisfied customers have been found to be much more important than customers who are deceived to by something they really did not want to.  For instance, a customer who is satisfied is more likely to purchase more products in future. In addition, those customer who are satisfied with a product, will speak well about the product and the company to their friends or acquaintances, this could increase the chances they their friends, will later buy products from the company. In facts, as Kotler, Philip 1997, p, 48) observes that, marketing is actually the process of creating and keeping long-lasting business relationships. Nonetheless, organizations have not all the time practiced this concept. The next section of this paper describes how marketing began after the Great Depression and World War II to the present day. Before delving deep into how marketing began after the Great Depression and World War II, short background information of evolution of marketing will be offered. According to Keith (1960, p, 48) this period when   marketing began to shape up was referred to as simple period.

Background of marketing evolution: The simple period

Before the industrial revolution, individuals made most of their own things that they needed to use. Any surplus housed products could then be sending to the market or town and exchanged for other products. This kind of economy was commonly called pure subsistence economy, in this kind of economy, there is no much for marketing (to assist trade), because every household produces what it uses.

Nonetheless, with the beginning of industrial revolution, business instead of households started to produce various kinds of products. When those producing the products are not the same people using those products, exchange of these products must occur. Therefore, hard thinking concerning the exchange processes, which implies marketing. Thus, marketing started at the advent of industrial revolution. Consequently, the evolution of marketing as an important function in business in many companies was first acknowledged in 1960, by Robert Keith who was an executive at Pillsbury. Accordingly Keith (1960, p 48), he argues that marketing developed into what it is today within Pillsbury in the course of four distinctive eras starting after the simple trade period. Keith (1960, p, 24) named these period, the production period, the sales period, the marketing period and lastly, the marketing company period.

How marketing began after the Great Depression and World War II to the present day.

Production period

According to Keith (1960, p, 49), the production period is the era during which companies’ major priority was to reduce the cost of production. Companies believed that trade or exchange could be promoted simply by reducing the cost of manufacturing goods. This could then be passed to the consumers by lowering prices of products.

This production period that began in the 1920s was driven by some milestones like Henry Ford’s innovation of the assembly line as well as better efficient work principle formulated by Fredrick Taylor’s scientific management group (Haber, 1964 p 26). The two innovations resulted in business managers realizing that mass production led to sharp declines in unit cost production. In the end, the reduced the reduced amount of unit production created a chance to make more profit.

The logic of mass production appeared to be sound during that period. As Kotler (1997, p, 49) explains, reduced cost of production can result in lower selling prices; this attracts a large section of customers. Sadly, tumultuous economic situations associated with late 1920s onwards to 1940s , such a the Great depression and Second World War , resulted in a lot of companies closing down despite the fact that they had adopted this kind of production-cantered concept. Consequently, companies started to look for some other ways to enhance the exchange process.

Sales period

The next period of marketing development is refereed to as sales phase. This is because during this period a lot of companies changed their priorities. The main objective this time was to sell their products and ensure that they products were moving several techniques were employed. During this period, companies presumed that they could improve their sales through using various promotional methods formulated to inform the potential customers about various products of the company. The approaches as well include using persuasion so that customers could buy. This kind of approach was initiated because of the economic situation during that period.

When in 1928, Herbert Hoover was elected as the president of America; the mood of American public was that of optimism as well as confidence in American economy. Less people had any doubt that prosperity in American economy would stop. During his acceptance speech, as the Republican presidential candidate, Herbert Hoover announced “We in America today are nearer to the final triumph over poverty than ever before in the history of land. The poor-household is vanishing from amongst us” (Schultz, 1999).

Nonetheless, 29th October, 1929 (“Black Tuesday”) marked the start of Great Depression. Schultz (1999) reports that, this day was the most destructive financial day ever reported in the history of the New York stock market.  Just after a few hours after the opening of the stock market, prices slumped so much that they wiped out all the stock gains that had been achieved over the past year. Because the stock market was seen as main indicator of American economy, the effect was that, public confidence was completely destroyed. From 29th October to 13th November, 1929 (the time when stock pries were at their lowest point), over $30 billion were lost from American economy. This amount was almost equivalent to what America had spent when it was involved in First World War.

The amount of discretionary as well as disposable income, which consumer had to buy necessities and luxuries goods also reduced considerably owing to unemployment rate that was nearly 25%.Comapines realized that they could not continue selling all the goods that they had manufactured, a lot of companies formulated sales forces and depended on direct or personal selling. In addition companies also relied on, advertisement signs, as well as signing radio commercial to “move” the manufactured products. As Theodore Levitt (1960, p, 46), a well-known marketing researcher has observed, these companies wee not essentially concerned with customer satisfaction, rather their aim was to sell they products.  This concept of sales –centered ruled business practice from 1930s up to the Second World War, when many companies’ manufacturing plants were modified to manufacture machines Ana equipments used in the war. Indeed, the war greatly altered the environment in which business was being carried out. This in turn, changed the companies’ concepts of carrying out business.

The marketing period

At the end of World War II, the manufacturing capabilities of many of the industrialized countries that were involved in the war were destroyed except for the United States. Thus, the American companies once more found it considerably simple to sell their products because there was very little competition from foreign countries. Using the sales principles formulated during the sales period together with new production capabilities as well as big research and development departments that had been developed during that war, companies recognized that they could manufacture numerous new and varied products.

Companies also realized that they required a set of standards to determine which kind of products would be produced and which products should not be produced. In addition companies understood that they required new management roles that would integrate various related roles for instance, procurement, advertisement and sales to be in one department i.e. marketing department. Keith (1960, p 38), explains that it was during this period that a lot of companies recognized that the company’s objective was not to continue producing various products, rather it was to satisfy the needs of customers.

According to Kotler (1997, p, 50)  the transformation of company objective or thinking from that of producing various products to that of aiming to satisfy customers was really revolutionary and caused a lot of implications. Companies that view themselves as producers of products apply selling concepts that are concerned with converting these products into money. But, companies that view themselves as markets center on satisfying the requirements of its customers though the product that they buy. Such companies also focus on functions related with product development, distribution of the product to the consumers, and using of the product. In general, selling centers on requirements of the seller; marketing centers on the requirements of the buyer.

Levitt (1960 p, 54) has explained that, Henry Ford’s advancement of the assembly line indicates the difference between companies that center on production (production oriented) and those that center on customers (customer oriented). Henry Ford is famously acknowledged as production genius for his innovation of assembly line. Levitt (1960 p, 55) points out that a lot of people wrongly think that the reduced production cost resulting from the assembly line made it possible for Ford to sell several millions of cares at $500,  ( production oriented approach). But, Levitt (1960 p, 55) disagrees and explains that Fords thoughts were in fact the reverse. Ford invented that assembly line since he made a conclusion hat millions of car buyers would be ready to part with $500 for a car that is customer oriented (Levitt (1960, p,56). accordingly, his main objective was to cut down manufacturing costs in any way possible,  in order to sell cars at $500 and continue to make profits. Hence, this resulted in the innovation of the assembly line, but it was the cause of the low price.

As Ford himself says, we initially lower the price to the amount where we believe that it will result in to increased sales. Then afterwards, the company goes a head and attempts to create those prices.  The cost of production should not be minded, the set new price will force the cost to go down. Ford ask, what is the use of knowing the cost of production if that cost tells one  that he/she can  not produce a product at a price at which an item can be sold? He adds that more important is that, even though a person may compute what the cost, no body knows exactly what the cost should be.  However, one way of knowing the actual cost of production is naming a very low price so that everybody will be forced to very efficient (Ford, 1923).

In summary, during the marketing period, a lot of companies transformed their thoughts or objectives from focusing on production to being concerned with satisfying the customer needs. Companies that were customer-oriented, attempted to produce satisfying products required by the customers, starting in 1960s various companies had put into practice customer-oriented concepts to the level whereby the marketing department formulated the strategy for the whole company. These kinds of companies were known as marketing companies.

The marketing company period

This period witnessed companies that were merely having a market department, which followed customer orientation transforming these marketing departments to direct the company’s business direction. Such companies were referred to as marketing companies. In such companies as Kotler (1997, p, 52) explains, the marketing department formulate the entire company’s operational policies, including research and development, production, procurement, advertisement and sales. The following press release obtained from Two-Ten News Network (1998) illustrates the business plan for a marketing –driven company:

Atlanta-AGGO Corporation, one of the leaning international designers, a manufacturer as well as distributor of agricultural tools and equipments, today carried out management appointments aimed at strengthening and expanding its global marketing as well as sales functions. As stated by Robert Ratliff, the chairman of the Board, and also the CEO of AGCO, the appointments made will be able to strengthen AGCO’s status as a marketing-drive company. He added that, marketing is the main function, which has defined AGCO’s global profitable growth and success. AGCO’s business strategy is to aggressively expand the company’s sales and marketing power globally whilst carrying out vigorous cut downs to cost of manufacturing to change to industry situations. These appointments show AGCO’s commitment to continue expanding the company’s market leadership globally and retain its profitability (Two-Ten News Network, 1998)

As we can observe from AGCO Company, marketing is the main motivating driver for all other activities in the organization. Starting from finance department, to production and sales, the company depends on marketing with the aim of satisfying the requirements of its customers. Companies that implement this concept of brining all other departments together aiming at satisfying the needs of their customers can be said to be carrying out marketing concept.

Marketing concept outlines that supposing all the functions of the organization are centered on customer requirements, the company can achieve its profit through satisfying these requirements. This satisfaction of customer requirements could be achieved through product modifications, pricing changes, improved customer service, advanced distribution changes, and many more modifications.

Presently, some companies add one more step on the marketing to further create a long lasting company-customer relationship. This new marketing concept is what is called the relationship marketing.

The relationship, marketing period

Kotler (1997, p, 37) explains that relationship marketing is whereby a company creates long –lasting satisfying relationship with its customers. This is undertaken so that the company can keep the customer’s loyalty to the company, in order for the customer to continue buying the company’s products. Kotler (1997, p, 53)  further explains that the need for a company retaining its customer is illustrated in the reality that the cost to attract a new customer is approximated to be five times higher than the cost of retaining a present customer happy with the company.

A good example of a company that has implemented relationship marketing to keep its customer loyal to it is Saturn. Melissa Heron (1996) clearly explains that Saturn has managed to retain 69% of its customer, implying that the company gets 60% repeat sales. Herron (1996) adds that Saturn achieves relationship marketing through taking a very different viewpoint of what it sells. Customarily, car manufactures sells cars, however Saturn enlarged its product line to encompass the whole experience, creating a shopping experience, a buying experience and most of all an ownership experience. Even though cars from Saturn could be less better compared to its competitors’, Saturn decide to make the whole buying as well as consumption experience would be far better in their company.

This principle is clearly stated in the company’s mission statement and in its values. Accordingly Saturn Company values entails commitment to customer passion, commitment to outshine, working as a team, showing trust and respect to the customers and others, and continuously endeavoring for improvements. The company’s mission statement as well supports their principle of relationship marketing by stating that:

Get the loyalty of the owners of Saturn and develop our family through developing as well as marketing American produced vehicles, which are world class in quality, price and customer passion through incorporation of people, expertise and business structures.

Saturn relationship-focused strategy is also very clear in the company’s advertisements and its pricing strategy. For instance, many car adverts outline the car’s attributes such as, “it’s speedy and sexy” or “safe and comfy”. However, in Saturn adverts, as Greg Martin one of the Saturn executive explained, the car is less important. While other companies focus on the features of the car, Saturn adverts tell a person that he/she is going to have a nice car, and a good customer treatment. The relationship between the company and is customers is improved through respect, trust and high quality products (Heron, 1996).

In short, relationship marketing approach enhances the marketing approach further through establishment of long-lasting, trusting, respectful and win-win relationships with customers. This is done so that a company can satisfy the needs of customers, build customer loyalty and promote repeat buying from these loyal customers.

Conclusion

This paper has given an historical account of the development of marketing in America, from the era of the Great Depression and the Second World War to the present day. In summary companies have illustrated that, for an organization to remain successful, it has to change and focus much on the external environment rather than the internal. This approach in company way of thinking has developed to the level where numerous organizations view themselves as long-lasting associates of heir customers. With advancement in information technology, marketers would be able to be more deeply aware of what their customer requires and be able to respond faster and offer goods as well as services that satisfy those requirements.

Reference:

Ford Henry: My Life and My Work: – New York; Doubleday; Page and Company ;( 1923)

Haber Samuel:  Efficiency and Uplift: Chicago; University of Chicago Press (1964), p 26

Herron Melissa: Masters of Marketing; Saturn:  Enthusiasm Sells: – Builder Retrieved on 16/3/2009 from: http://209.143.248.128/monthly/1996/sep/marid.htx (Sep, 1996).

Keith Robert:  The Marketing Revolution: – Journal of Marketing; (1960); 25:34-37

Kotler Philip: Marketing Management: – Analysis, Planning, Implementation, and Control: 9th edition: Upper Saddle River, NJ; Prentice-Hall. (1997), 46-53

Levitt Theodore: Marketing Myopia: – Harvard Business Review July-August; (1960), 44-56.

Schultz Stanley: The Crash and the Great Depression: – Retrieved on 16/3/2009 from: http://us.history.wisc.edu/hist102/lectures/lecture18.html. (1999).

Two-Ten News Network Retrieved on 16/3/2009 from: http://releases.twoten.press.net/releases/date/1998/09/22/BUSINESS-Agco.html  (9/22/1998)

 

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