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Creative Arts HNC Music Business Music Industry Marketing DJ2P 34

Study Notes for Outcome 1 part 1


Introduction to the Marketing Concept
Companies that research their customers needs & wants and respond to this data to offer better products and / or services are said to be marketing oriented. Ultimately these companies will undertake a series of marketing research process in order to gain a competitive advantage over their rivals in the marketplace. This is The Marketing Concept. Marketing concept is the philosophy that an organisation should try to provide products that satisfy customers' needs through a co-ordinated set of activities that also allows the organisation to achieve its goals. Having established what the marketing concept entails for the modern businesses, we now take a look at how British business evolved towards a marketing orientation. We begin by examining the early days of the mass production in this country and at how business responded to the new, increased levels of demand. We trace these developments through to the early 1 930s and the period where the emphasis changed from production to selling. Finally, we examine some of the reasons why, by the 1960s, neither production nor selling-based philosophies were really relevant to competitive business in sophisticated markets. The intention is to discover why the marketing approach offered a real alternative, based on finding out what customers wanted before deciding what should be produced.

PRODUCTION ORIENTATION The Industrial Revolution began in the mid -18th century, and was well underway by the middle of the nineteenth century, fuelled by steam technology and the development of the railways, electricity, scientific management principles and the division of labour, automation and factory processes. A limited form of mass production was possible for the first time. This was an age of inventors, engineers and innovative production processes. It was also a time when the levels of goods demanded exceeded their supply. The output of the new industrial age was demanded by the new workers; the consumers were those who had moved to the new towns and cities looking for employment in the new mills and factories. These new consumers evidenced a strong new demand for manufactured goods in a time of scarcity. West College Scotland 2013 1|Page

Creative Arts HNC Music Business Music Industry Marketing DJ2P 34


It was commercially possible for manufacturers to concentrate first and foremost on increasing production and doing so as efficiently as possible, making more to sell at low prices. Firms relied on selling whatever they could manufacture. As a strategy, a purely production-orientation can be successful during periods of shortage and/or limited competition. It can work only if the company is so technically advanced that customers have to buy from them or not at all, or where the aim is to produce at the lowest possible cost. So the production-oriented period is characterised as an era where demand outstripped supply. The emphasis was on producing standard products (using mechanised processes) with little variation offered, with the aim of maintaining low unit costs. Companies aimed to benefit from the economies of scale that resulted from buying raw materials and component parts in bulk quantities and using the new mechanised processes to keep labour costs down. The more efficient production that resulted was due to the heavy emphasis on these economies of scale and resulted in large profits for those companies that could maintain them. The company bosses themselves could afford to ignore those people who did not want what they made; the level of demand for most goods was so high that they knew that someone would buy. The attitude that prevailed at the time can be summed up as a Take it or leave it! approach to business. Business practices of that time were based on the premise that consumers will buy if the goods are reasonably priced. Competitive advantage in this era of little competition derived from more efficient production processes, which in turn led to low prices. The period dominated by a Production Orientation focused on: manufacturing processes supply arrangements maintaining low unit costs achieving productivity profit through volume It de-emphasised: customer needs market requirements

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Creative Arts HNC Music Business Music Industry Marketing DJ2P 34


SALES ORIENTATION The stage, dominated by a focus on production, lasted until around the 1930s in Britain. Improvements in mass production technology meant that an even greater range of products (from cars to household equipment) could be produced relatively cheaply, but by an increasing number of competing suppliers. Eventually supply began to match and exceed demand, as the number of manufacturers grew. The Great Depression of the 1930s did not help; money was very scarce and demand needed to be fuelled by a more active approach. Selling activities proliferated. When production levels overtook demand, there was a change of emphasis towards sales. Promotional effort was marshalled to move the goods that the factories were making. Products were to be pushed in the marketplace, using a Hard Sell approach. This in itself failed to recognise that in the longer-term no amount of promotion will sell products that do not match customer need! During the period 1930 - 1960, the challenge for industry was to convert large-scale production into large-scale consumption, and for individual companies to increase their sales relative to the competition. In order to achieve these aims, the greatest emphasis was placed on the role of the sales force in helping to achieve success. As a result, it was often the case that the sales force informed production about what they should be making. Arguably, for the first time, customers were being offered a real choice in the marketplace. Production levels in many sectors continued to exceed sales. At the same time, consumers themselves were wealthier and more knowledgeable about the products they wanted, and they exercised the power that this choice gave them. The task of the sales force was to convince the customer, even if it was ultimately against his/her will! Customers were no longer naturally inclined to buy that which was on offer. Improvements in both production output and levels of competition rendered the consumer a more powerful player in what was becoming a buyers market. The only way that companies could conceive of retaining their competitive position was to keep prices low. This, in turn, demanded that their production volumes remained high and that what was produced was sold in volume. There was an increasing need to employ salespeople who would move the volume necessary to retain production efficiencies. These salespeople in their turn were heavyweights, concentrating 3|Page

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Creative Arts HNC Music Business Music Industry Marketing DJ2P 34


on selling rather than on discovering what people were prepared to buy. Companies spent huge amounts of money in an often failed attempt to hold onto sales levels. They ignored the underlying changes in the market and sought to push customers into purchasing. Selling became a critical function of the business, attracting increasing amounts of investment and spending as companies tried to buy their way out of trouble (with little real long-term gain). This was the time in commercial history when the commercial traveller and sales representatives emerged - many of them unscrupulous. They were people paid on a commission basis, designed to get results in the form of sales at any cost! The dogma of this period can be summarised in the phrase: Sell what you can make! The variety of Hard Sell methods used included an assortment of financial incentives to increase sales levels, discounting, money-off offers, aggressive (sometimes fraudulent) sales techniques, and the emergence of credit arrangements to spread the cost of purchasing. Advertising was widespread. Of course, these increased selling costs added to the unit casts of the products: so production costs were squeezed even further in the search for efficiency savings. As a result, this period also saw the sale of many sub-standard products. This era saw the early development of many of the marketing functions - advertising, promotion, and selling - while not embracing the marketing concept itself. The development of these functions, as we have seen, can largely be attributed to the fact that consumers did not value the products on offer and were not prepared to commit to them in the longer term. Sales-oriented techniques were (and still are to an extent) used extensively in the sale of one-off purchases such as encyclopaedias and insurance; their purpose in such cases is to break down the clients resistance and most consumers are naturally wary of such practices. As will be clear to you, companies were still not consulting consumers about what they wanted producers continued to make what they were able to make, and allocated substantial resources thereafter to trying to sell it!

MARKETING ORIENTATION Following on from the 1960s, we again saw a shift in emphasis- albeit a gradual and almost imperceptible one at first. 4|Page

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Creative Arts HNC Music Business Music Industry Marketing DJ2P 34


The overall aim of all companies has remained the same: to make profit and to increase that profitability over time. But in this final evolutionary stage, companies began to recognise that it is seldom possible to maximise profit and volume simultaneously. The 1960s were characterised as a time of higher standards of living than ever before, higher levels of income, spending power, and consumption. In the 1960s, with the advent of more and more luxury goods, and greater levels of competing companies vying to supply them, the American principles of marketing reached Britain. These principles, as you now know, are based on the notion of customer sovereignty. Companies began to accept that in focusing only on the production of large volumes of goods, or on selling activities necessary to move stock, they ignored the customers needs.

They began to accept that it made sense to first of all determine what customers wanted. Production could then be geared up to produce goods for which there was a demand, rather than waste time and money in producing goods without reference to customers, or spend scarce resources trying to persuade them against their will that they should buy. A more sophisticated approach to managing the exchange process had arrived! It was one which recognised that, although price is an important determinant of demand for many products, it is seldom the only one and often not the most important. Consumers had grown up. In market economies like ours, they brought many needs to bear on their purchasing behaviour. Companies which understood the complexities of what motivated consumers were positioned to be the most powerful and successful. Companies, weaned on the need to achieve economies of scale, had become bigger as a result, and were no longer in direct contact with their customers. Manufacturers relied on retailers to sell their goods for them, resulting in long chains of distribution which separated manufacturers from the ultimate buyers of the goods they produced. Market research techniques developed to bridge that gap, to allow the manufacturers to speak to and consult with consumers, to maintain relevance in their product ranges. 5|Page

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Creative Arts HNC Music Business Music Industry Marketing DJ2P 34


These same large companies saw themselves operating in a time of accelerated change. Constant reference to consumers and their needs was essential if the companies were to survive in a highly competitive business environment. Consumers themselves were then, and are now, faced with a huge selection of products, both goods and services. Most consumers, however, cannot buy everything they might want - they must make choices. Accelerated technology-driven innovation continues to fuel change cycles. As you would expect, consumers are naturally inclined towards those goods / services which most closely match their needs. Successful companies build in satisfactions by beginning the business process with a sound knowledge of their target customer group(s). The evidence is clear - if customers needs are ignored, the business will very likely fail!

Marketing-oriented companies MANAGE THE RISK of trading in highly sophisticated markets. They do this by: analysing and assessing markets incorporating the consumers views and opinions into the business process, to highlight customer BENEFITS rather than production processes paying attention to and reviewing all aspects of product policy, from branding, packaging, and new product development to product withdrawal when needs change (PRODUCT) pricing according to market knowledge, earning profit through reducing risk and ACTIVE competition (PRICE) distributing goods by the most appropriate channel(s) to match end user need (PLACE) selling and promoting products in a way which emphasises the benefits of ownership for the consumer and avoiding manipulation and hard sell approaches (PROMOTION)

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Creative Arts HNC Music Business Music Industry Marketing DJ2P 34


co-ordinating all these activities in a way that shapes the company focus, and maximises its ability to respond to the forces of the marketplace interacting with and integrating all other business functions - production, finance, research and development, physical distribution, personnel -- to make sure that they are all contributing towards the achievement of corporate goals which have been stated in marketing terms constantly researching levels of satisfaction, trying to improve on levels of service and, by so doing, developing valuable long-lasting exchange relationships with customers through, planning, organising, motivating, directing and controlling business effort.

The assessment you will undertake for Music Industry Marketing 1 outcome 1 part 1 will be a closed book in class test. The test will not feature any areas that have not been fully explored in class-time and as such these notes have been provided as reference material for you prior to the assessment date.

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