Understanding the production concept
Marketing textbooks usually describe five main eras, or philosophies, of how marketing evolved. The first accepted phase is the production era in marketing, which is based upon the assumption that consumers prefer available and affordable products. With this philosophy, broad distribution and cost leadership were winning strategy combinations.
This concept dates from the beginning of Capitalism in the 1920’s when most organizations concentrated their efforts and energy on producing products as efficiently as possible.
The Ford Motor Company
The Ford Motor Company had tremendous success with this strategy and it was soon copied by many other manufacturers. The underlying belief at this time was that consumers valued the price of a product over its quality. While this may seem strange today, it should be remembered that the average consumer was far less affluent and price would have been a more significant consideration.
Economies of scale benefits
The production concept is typically used in marketing when demand exceeds supply. Therefore, by concentrating on efficiency in the production process, an organization increases its profitability by generating economies of scale and learning curve benefits. In this situation, the needs and wants of the customers are considered secondary to the need to increase the volume of production.
The Industrial Revolution and the development of mass production through the use of machinery and steam power had played a major role in the development of the production concept in marketing. As a consequence, the need for large scale distribution had arisen and therefore mass-distribution organizations have been created and developed in this particular era.
Key features of the production era
The most important features of the production concept in marketing are:
- Production oriented businesses: a company that believes that mass production will increase its profitability
- High production efficiency: a company that aims to achieve high production efficiency through standardization and large scale production
- Low price: a company that believes that a low price is far more attractive to a customer than the quality of the product
- Mass distribution: a company that strives to make their products available and accessible on a large scale
Shift to the product concept
By 1930 most industrialized countries had more production capability than the demand of products and services. Therefore, the biggest issue for these organizations was finding a way to beat competition and gain new customers; companies started to evolve to the product concept.