Some general models and concepts useful in arriving at such decisions are presented. Functions relating-sales, profits, and advertising expenditures are discussed in general and as they relate to different media. The use of a payoff matrix and game-theory concepts in setting advertising budgets, and problems of measuring advertising effectiveness, are examined. Advertising is viewed as a concomitant of modern society, an essential ingredient of an economy of abundance. Both advertising’s role in achieving expressed economic and social goals and criticisms of advertising is presented. Advertising should be assessed from the standpoint of its contributions to social and economic well-being in a highly industrialized society. The test is not whether there are some abuses in advertising or whether advertising costs money. Rather, it should be whether an economic system, either lacking advertising or having advertising and heavy governmental regulation, gives people a better choice in the marketplace than a system with our advertising situation and limited regulation.
Companies must not lose sight of the ultimate purpose of their business -to satisfy the wants and needs of consumers. Following Bettman (1970), companies are ultimately guided in their industrial purchasing decisions by household consumers (370). This is not to deny that there are significant differences between the two types of buyers; students should become aware of them. Industrial goods and services, those used by organizations to produce their own products and services (whether the organization is business or government), are certainly significant factors in total sales. According to Duncan and Moriarty (1998), the marketing mix has a great impact on our economic well-being, and the direction of our lifestyle (5). The largest purchaser of all, the Federal Government, is an industrial consumer. Industrial goods include major installations and equipment (blast furnaces and rolling mills), light equipment (trucks), accessories (typewriters), components (gears), raw materials (coal), and supplies (paper). It is not only product characteristics that distinguish industrial from consumer goods, for paper, light-bulbs, etc. maybe both. Rather, it is mainly the status and motive of the purchaser, supplemented by such factors as the quantity purchased and the price paid (Zettelmeyer 1998, 76).
Actual and potential consumers are the basic component of markets and the hub of marketing action. That the consumer is a king or that the consumer guides businesses are a tenet of a market system. Marketing endeavors to fuse consumer wants and needs with the operations of a business organization, which to survive and grow in a keenly competitive, ever-changing environment, concerns itself with the mechanisms of corporate adjustment. In a free-enterprise economy, consumers are relatively free to purchase what they please, limited, of course, by income, socio-economic status, legal business forces, and geographic setting. Following Wernerfelt (1996), manufacturers, wholesalers, and retailers thus find that ultimately they are governed by consumer reactions in the marketplace (241). In a sense, consumers “dictate” to the marketing system the goods and services they want, the prices they are willing to pay, and how, where, and when they desire to purchase. Over time, profits are tied inextricably to the satisfaction of consumer wants. Consumers provide the economic rationale for business and marketing activity (Wernerfelt 1996, 242). The products and services offered for sale, the manner in which they are offered, the distribution channels employed, the methods of advertising and personal selling, and every other factor of marketing are all molded by consumer preferences, opinions, habits, beliefs, wants, needs, and desires. In this way, the total business system attempts to meet the desires of consumers. It is essential, therefore, that we analyze the antecedents of consumer behavior, the behavior itself, and the consequences of consumer reactions.
Adaptation and standardization of messages, execution, appeal, media, and promotion mix elements are crucial for the success and reduction of advertising budgets. Changes in lifestyles and market environment have had a direct impact on goods and services produced, expenditures, and the consumption process. For example, the effect of increased leisure time, suburban living, shopping centers, automatic vending machines, automobiles, television, and widespread geographic shifts on consumer wants and needs is pronounced (Expanding to the Internet 2000, 292). The shift from rural to urban populations, the growing number of women employed in industry, the decrease in the length of the workweek, increasing productivity, and higher incomes all shape consumer behavior and, hence, market opportunity. Purchasing decisions are affected by the customer’s living space. The living space may be segmented into action and orientation space. The action space refers to the arena and methods by which transactions take place, including organizational constraints imposed by business. The orientation space includes numerous economic, psychological, and source factors influencing buyer behavior (Vinson et al 1977, 48).
The purchasing process and the related acts of accumulation and consumption are means of achieving goals both of the purchaser and those he represents. The acts of accumulation and consumption indicate the differences between consumers and purchasers, and between consumption. In the household, performing purchasing activities to satisfy all the wants of one’s family and friends through the evaluation of an overwhelming array of available goods and services is an impossible task (Vinson et al 1977, 48). Within a family unit, wants and needs are not directly known. Usually one decision-maker, the wife, purchases for the group. She acts as a household purchasing agent with the responsibility of maintaining and improving the family’s stock of goods in order to provide for the wants and needs of members of the household. The housewife, therefore, must anticipate consumer needs and try to obtain the best value for the money. Uncertainty exists in the purchasing-consumption cycle since present purchases are made for future consumption. The consumer purchasing agent (housewife) is constrained by limited resources and information. Somehow estimates must be made of the values expected by a variety of people from future consumption of goods purchased currently. This includes evaluating a myriad of products and services, translating them into purchasing decisions, and doing so efficiently. This process may even be more complex for some industrial goods. Following Mohr and Nevin (1990), it is impossible to determine precisely future needs for each member of a group; it is even more difficult to determine how valuable various desires are to each member, and then to arrive at a rational means of making total purchasing decisions (36). The role of a household purchasing agent is at best a difficult one to play. Yet it is the core of the consumption process and determines the value that consumers ultimately derive from the expenditure of their resources. These decisions direct our marketing process. Customers are a heterogeneous group subjected to a multiplicity of forces that affect their attitudes, opinions, motives, desires, wants, needs, and, ultimately, buying behavior. They are individuals and groups, grownups and children, producers and users, families and businesses (Bettman 1970, 374). Although each customer is a unique individual, marketing managers must think in terms of groups of “average consumers” or prototypes that comprise a more or less homogeneous market segment. Products and services must be developed that appeal to a mass of individuals.
References
Bettman, James R. Information Processing Models of Consumer Behavior. Journal of Marketing Research 7 (1970): 370-376.
Duncan, Tom and Sandra E. Moriarty. A Communication-Based Marketing Model for Managing Relationships. The Journal of Marketing 62 (1998): 1-13.
Expanding to the Internet: Pricing and Communications Strategies When Firms Compete on Multiple Channels. Journal of Marketing Research XXXVII (2000): 292–308.
Mohr, Jakki and John R. Nevin. Communication Strategies in Marketing Channels: A Theoretical Perspective. The Journal of Marketing 54 (1990): 36-51.
Vinson, Donald E. Jerome E. Scott, Lawrence M. Lamont. The Role of Personal Values in Marketing and Consumer Behavior. The Journal of Marketing 41 (1977): 44-50.
Wernerfelt, Birger. Efficient Marketing Communication: Helping the Customer Learn. Journal of Marketing Research 33 (1996): 239-246.
Zettelmeyer, Florian. The Strategic Use of Consumer Search Cost. Haas School of Business, 1998.